HOUSE OF REPRESENTATIVES
TWENTY-NINTH LEGISLATURE, 2017
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO HOMEBUYER ASSISTANCE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that homeownership creates strong communities through economic growth. Homeowners have a greater sense of security, continuity, belonging and pride in their communities. According to the United States Department of Housing and Urban Development, with careful loan underwriting, homeownership helps lower income households build wealth even during tough economic times.
In a recently released national housing survey sponsored by Fannie Mae, the most cited reasons for wanting to own a home were to have a good place to raise children, a safe place to live, more space for family, and control over one's living space. These factors have been linked to better physical and psychological health, including greater satisfaction — with life, one's home, and one's neighborhood. Homeowners viewed their communities as stronger, safer, and more stable than did renters and were more likely to report that they felt connected to others, knew their neighbors, and were civically engaged.
The legislature further finds that one of the major barriers to homeownership is the lack of availability of down payment assistance. Even small amounts of down payment assistance increase the probability of moving first-time buyers into homeownership. Although about one out of five first-time homebuyers receives such help from their families, low and moderate income households are less likely to have this option available. The late Edward Szymanoski, former United States Department of Housing and Urban Development associate deputy assistant secretary for economic affairs, said that "First-time buyers often lack cash to pay the down payment and closing costs charged by conventional lenders and would otherwise have to defer homeownership for many years."
The Hawaii housing finance and development corporation's downpayment loan program was established in 1995 to assist eligible first-time homebuyers earning up to 120 per cent of the area median income with down payment loans. While there has been a continuing need for down payment assistance, this program has not realized its full potential due to funding and outdated programmatic constraints.
The purpose of this Act is to modernize the downpayment loan program and to establish a downpayment loan loss reserve program to assist low and moderate income households to become first-time homebuyers.
SECTION 2. Chapter 201H, Hawaii Revised Statutes, is amended by adding to part III, subpart F, two new sections to be appropriately designated and to read as follows:
"§201H- Downpayment loan program, fees. The corporation may establish, revise, charge, and collect fees, premiums, and charges as necessary, reasonable, or convenient, for its down payment loan program. The fees, premiums, and charges shall be deposited into the housing finance revolving fund established in section 201H-80.
§201H- Downpayment loan loss reserve program. The corporation may set aside and provide funds to serve as a loan loss reserve for financial institutions that make down payment loans to eligible borrowers. In the event a down payment loan defaults, the loan loss reserve shall cover a percentage of the second mortgage loan pool or a percentage of each individual second mortgage in default, as determined by the corporation. The corporation may secure the services of nonprofit organizations, as defined in section 454F-1, to operate the loan loss reserve program."
SECTION 3. Chapter 201H, Hawaii Revised Statutes, is amended by amending the title of part III, subpart F, to read as follows:
"F. DOWNPAYMENT LOAN ASSISTANCE PROGRAM"
SECTION 4. Section 201H-161, Hawaii Revised Statutes, is amended to read as follows:
Downpayment loans. (a) The corporation may make [ direct]
downpayment loans, either directly, or through a nonprofit organization as
defined in section 454F-1, to eligible borrowers who qualify for loans
under section 201H-162. The downpayment loan to any one borrower shall not
exceed [ thirty] fifteen per cent of the purchase price or
appraised value of the residential property or [ $15,000,] $60,000,
whichever is less. In no event shall the loan amount and purchase money
mortgage amount exceed one hundred per cent of combined loan-to-value ratio.
The interest rate on the loans may range from [ zero] one per cent
to eight per cent, depending on the buyer's income.
(b) The repayment of every downpayment loan shall be secured by a duly recorded second mortgage executed by the borrower to the State on the residential property purchased with the downpayment loan.
(c) The principal of the downpayment loan, together with accrued interest, shall be due and payable upon the sale, transfer, or refinancing of the property, or shall be repaid by the borrower in installments as determined by the corporation; provided that the corporation may provide a period in which payments may be waived. The period over which the principal and interest shall be paid need not coincide with the period over which the loan from the mortgage lender for the balance of the purchase price must be repaid. The borrower may repay the whole or any part of the unpaid balance of the downpayment loan, plus accrued interest, at any time without penalty.
(d) The corporation may secure the services of nonprofit organizations, as defined in section 454F-1, to originate the downpayment loans, on behalf of the State, for an origination fee not in excess of the prevailing loan origination fee amount.
(d)] (e) The corporation may
secure the services of the mortgage lender who loans to the borrower the
balance of the purchase price of the residential property or the services of
any other mortgage lender doing business in the State to collect, on behalf of
the State, the principal and interest of the downpayment loan and otherwise to
service the downpayment loan, for a servicing fee not in excess of the
prevailing loan servicing fees.
(e)] (f) The corporation shall
adopt rules pursuant to chapter 91 to carry out the purposes of this
SECTION 5. Section 201H-162, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:
"(a) No person shall be qualified for a downpayment loan unless the person:
(1) Is a citizen of the United States or a resident alien;
(2) Is at least eighteen years of age;
(3) Is a bona fide resident of the State;
(4) Will physically reside in the residential property to be purchased for the term of the loan;
(5) Is accepted by a mortgage lender as a person to
whom it is willing to lend money for the purchase of the residential property
provided the required downpayment is made; [
(6) Provides a portion of the downpayment which shall
be equal to at least [
three] five per cent of the sales price[ .];
(7) Has successfully completed a homeownership counseling program provided by a housing counseling agency approved by the United States Department of Housing and Urban Development."
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect upon a date to be determined.
Downpayment Loan Assistance Program
Expands the Downpayment Loan Program to provide greater assistance to low and moderate income first-time homebuyers. (HB530 HD1)
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.