The California Housing Finance Agency (CalHFA) has initiated or threatened foreclosure on approximately 200 CalHFA borrowers because they are no longer living in the homes, as required by state regulations, according to the Senate Office of Oversight and Outcomes. Some of the borrowers have rented out their homes to cover the mortgage payments and moved to more affordable properties.
According to the Senate report, the borrowers, who owe more on their mortgages than their homes are worth, are reluctant to sell the properties because they would lose much of their investment.
CalHFA finances its $4.2 billion worth of low-interest mortgages through the sale of tax-free bonds. U.S. Internal Revenue Service rules specifically prohibit that money from the sale of bonds be lent to home buyers who do not live in their properties, CalHFA Marketing Director Ken Giebel said.
The agency makes some exemptions for clients who have suffered severe economic problems, such as losing their jobs, but in 21 cases, CalHFA foreclosed on borrowers who rented out their homes without permission, something that is specifically prohibited by loan document disclosures, Giebel said.