This week’s award for Blithering Idiocy in California goes to the state legislature for passing Assembly Bill 1840, which makes undocumented immigrants eligible for a state program that provides up to $150,000 in down payment assistance to first-time homebuyers.
The program is run by the California Housing Finance Authority and is called the California Dream for All Shared Appreciation program. It was launched in 2023 with $300 million of funding and ran out of money in 11 days.
That’s when CalHFA abandoned its first-come, first-served model and switched to a lottery system. Every applicant who met the program’s qualifications was entered in a drawing. Lucky winners received a voucher, and they had 60 days to use it.
Only people who meet the CalHFA income limits for the county in which they are purchasing a home are eligible. CalHFA’s income limit for 2024 is $155,000 in L.A. County, $189,000 in San Diego, $154,000 in Riverside and $204,000 in Orange.
According to BankRate.com’s home affordability calculator, on an income of $204,000, assuming a $150,000 down payment and a 7% fixed-rate, 30-year loan, a buyer can afford a home priced at $865,464, with a maximum purchase budget of $1.24 million. The monthly payment would be between $4,760 and $7,310, not counting property taxes, insurance, homeowners association fees, or “ups and extras” such as electricity and water.
What’s going to happen to the lucky voucher winners after they close escrow and have to make those payments every month?
According to the analysis of the bill that was prepared for the state Senate, Assemblyman Joaquin Arambula, D-Fresno, the author of AB 1840, said “homeownership is a fundamental tool for wealth building, as it fosters financial stability.”
That’s true, but only if the payments are made on time. Otherwise the lucky voucher winners could face foreclosure, long-term damage to their credit rating, and even a tax bill for the “forgiven” debt when they walk away from the loan.
The Dream for All program is actually a second mortgage to provide down payment assistance up to $150,000. When the home is sold, the lucky winner must pay back the down payment assistance loan in full, and also must pay the state 15-20% of the “shared appreciation” of the property. That cuts into the “wealth building” considerably.
It’s possible that undocumented immigrants won’t qualify for the program regardless of this legislation. In addition to the requirement that applicants must be first-time homeowners and at least one borrower must be the first person in his or her family ever to own a home, the borrowers must obtain a first mortgage that meets the underwriting goals of the Federal National Mortgage Association, also known as Fannie Mae. Those standards require a valid Social Security number or an Individual Taxpayer Identification Number (ITIN).
The bill analysis states, “The author’s office notes that individuals who are able to obtain an ITIN are generally those who have achieved Deferred Action for Childhood Arrivals (DACA) status.”
That is completely false. ITINs have nothing to do with DACA. According to the Internal Revenue Service, “An ITIN is a nine-digit number issued by the IRS to individuals who are required for federal tax purposes to have a U.S. taxpayer identification number but who don’t have and aren’t eligible to get a social security number.”
Undocumented immigrants can use an ITIN to file a federal tax return and claim some tax benefits, including the American opportunity tax credit, the premium tax credit, the child and dependent care credit and the credit for other dependents.
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To obtain an ITIN, applicants must submit IRS form W-7 and present documentation to “establish your identity and your connection to a foreign country.” Original documents or certified copies, stamped with an official seal by an agency, are required.
Suppose an undocumented immigrant meets all the requirements, finds an affordable home on the market and decides to apply for a voucher from the Dream for All program.
The voucher program is closed to new applicants. KCRA’s Ashley Zavala reported that the Department of Finance confirms that the program has no money.
That’s how AB 1840 won this week’s Blithering Idiocy in California award. If Gov. Gavin Newsom signs it, it might win twice.
Write Susan@SusanShelley.com and follow her on Twitter @Susan_Shelley
