The California Housing Finance Agency (Cal HFA) provides financial assistance for poor and working-class first-time home buyers. The agency, located in the Business, Transportation and Housing Agency, awards loans to qualifying families at low interest rates, provides assistance making down payments and insures mortgages. It also participates in the rental market through loans to developers building multifamily housing. The agency is financed through the sale of tax-exempt bonds, and it is self-supporting, as it sets interest rates just high enough to cover costs. L. Steven Spears has directed CalHFA since December 2008.

The agency was commissioned as a state-run affordable housing bank in 1975, as a major recession in the United States was coming to an end. Originally known as CHFA (pronounced Cha-Fuh), the agency focused almost entirely on home loans in the early years.

In 2002, officials changed the popular name of the agency to CalHFA as part of a rebranding effort. Surveys found that the agency’s name recognition was, low even though a large majority of people appreciated having a state agency dedicated to affordable housing. At that time, CalHFA announced a plan to extend its reach by increasing partnerships with counties, nonprofits, developers and local housing agencies.

During the financial crisis that began in 2008, CalHFA has focused most of its attention on helping people avoid foreclosure, rather than on assisting new home buyers. The agency was awarded nearly $2 billion in federal funds for the effort, called Keep Your Home California. As of early 2011, the weak bond market had forced CalHFA to downscale its assistance to new home buyers, while the federal monies funded four programs to aid existing home owners.

The agency is divided into four main departments:

Asset Management: Directed by Margaret Alvarez, the asset management division oversees construction of multifamily housing developments funded by the agency. Staff members monitor compliance with state and agency regulations.

Multifamily Programs: Directed by Robert L. Deaner II, the multifamily programs division provides financing for acquisition and new construction of multifamily housing developments.

Home Ownership: Directed (on an acting basis) by Gary M. Braunstein, the home ownership division oversees low-interest rate loans and down payment assistance to low- and moderate-income first-time home buyers.

Mortgage Assistance: Directed by Diane Richardson, the mortgage assistance program (known as Keep Your Home California) funnels federal funds in awards of up to $3,000 a month for six months to home owners in danger of foreclosure.

Individual home buyers or homeowners are the primary beneficiaries of CalHFA. However, developers of multifamily residential buildings can benefit if the agency buys their buildings (although CalHFA usually pays below market price, limiting the profit to developers). Construction contracts are awarded to the lowest bidder.

Problems With Banks

After Keep Your Home California was created in early 2011, problems among CalHFA, borrowers and banks arose. Banks generally will only accept single, full mortgage payments, meaning that a homeowner with a $3,100 mortgage could not combine a $3,000 check sent directly to the bank from CalHFA with a $100 personal check. And because CalHFA is not set up to receive money from individuals, homeowners with the mortgages of more than $3,100 cannot take advantage of the agency funds even if they qualify. CalHFA officials said they hope the banks will reconsider their policies on partial payments, but the problem has not been resolved.

Furthermore, most financial institutions did not initially agree to accept CalHFA payments on homes that are “underwater,” or worth less than the mortgage. As of February 10, 2011, only one of five major mortgage servicers signed on to the plan. Preeti Vissa, community reinvestment director for the Greenlining Institute, called lender involvement "pretty dismal."

Pay Raises Questioned

In 2007, then-executive director Theresa Parker increased her own pay by 45 percent, from $138,000 to $200,000 and bumped up two senior managers’ pay 43 percent. The raises were pushed by then-board chairman John Courson, whose home loan company was involved in millions of dollars worth of contracts with CalHFA. After then-Gov. Arnold Schwarzenegger raised concerns about Parker’s salary, she reduced it to $175,000–a sum still higher than California’s lieutenant governor or secretary of state. One board member resigned in protest. An internal report recommended that the executive director and any board members who hold agency contracts be removed from the compensation process, a regulation that has since been enacted. Parker left in December 2008 and Courson shortly thereafter.

Conflict of Interest?

In 1990, a Los Angeles Times investigation found that the agency was using significant chunks of its funds to help families with incomes too high to qualify to buy homes, particularly in and around Fresno, the home region of then-director Karney Hodge and State Senate Republican Leader Ken Maddy. The state Legislative Analyst’s Office found that 42% of those taking advantage of the first-time home buyer loans had incomes too high to qualify as moderate-income, and the agency was criticized for not doing enough to help working-class Californians. A 2001 report echoed concerns about who was benefiting from the program.

Low-Cost Housing Agency Aids Its Chief's Hometown (by Paul Jacobs, Los Angeles Times)

Analysis of the 2001-02 Budget Bill (Legislative Analyst’s Office)

Concerns about who receives CalHFA aid have dogged the agency for much of its existence, even though officials increased the number of working-class families that received loans after a 2001 report from the state legislative analyst. Still, some would like to see additional restrictions so that loans are limited to truly poor people.

Another focus of the 2001 report was a recommendation to spend more money in areas of the state with the highest real estate costs (primarily the Bay Area, Los Angeles and San Diego) instead of in the Central Valley, where most CalHFA beneficiaries lived.

Partnership With the Federal Government

Because home ownership has long been intertwined with the notion of the American Dream, there has been little opposition to CalHFA’s work. Furthermore, the agency is self-supporting, limiting outcry about its budget. Many members of Congress opposed President Barack Obama’s stimulus plan in response to the recession, of which funding for Keep Your Home California is a small part, but there was no debate about the agency itself.

CalHFA is the major player in mortgage modifications through the federal Home Affordable Modification Program, or HAMP, an Obama creation that has been controversial with some members of both parties. Although the program is designed to cut down on the number of foreclosures, banks may still reject borrowers’ loan modification requests for any reason and put their houses on the auction block. That has led House oversight committee chairman Darrell Issa (R-California), among others, to say the program is a waste of money and may actually hurt homeowners.  

Some critics of the California Keep Your Home initiative argue that the effort is a scheme to “funnel billions to banks.” They ask, “Is it helping families if you keep them in property they can't afford?” They maintain that the plan is to provide banks with funds so they can “maintain their shadow inventory by keeping delusional loan owners in place.”

Mission Accomplished?

Governor Arnold Schwarzenegger appointed John Courson chairman of the CalHFA board of directors in February 2004. Although acknowledging the agency’s stated mission was to provide housing assistance to low- and moderate-income families and first-time buyers, Courson maintained that its role had changed. "The private market has stepped in and taken over most of what the agency's mission had been--serving first-time and low- and moderate-income borrowers," Courson said. Despite that assertion, the stated mission of the agency has not changed.

Claudia Cappio, 2011-2014

A 30-year planning veteran in local governments, Claudia Cappio was appointed executive director of CalHFA by Governor Jerry Brown in April 2011. She left to become director of the California Department of Housing and Community Development in June 2014.

Cappio received a bachelor of arts degree in urban studies from Ohio Wesleyan University in 1976. She began her career as an assistant and associate planner for the town of Corte Madera from 1980-1985, before becoming Albany planning director from 1985-1995, and Emeryville planning and building director from 1995-2000.

Cappio, a Democrat, was Brown’s director of planning, building, major projects and the Oakland Base Reuse Authority from 2000 to 2007 when the past and future governor was mayor of Oakland. While Brown and Cappio were credited with aggressively redeveloping long-abandoned parts of the city, critics complained of developer-friendly deals that skirted environmental and zoning restrictions by streamlining the approval process and pushing aside city officials who disagreed with the approach.

She left government when Brown moved on to become state attorney general in 2008, forming Sparticles LLC, a planning and development consulting firm. She served on Oakland Mayor Jean Quan’s transition team in 2010.

Cappio is active in the lesbian, gay, bisexual and transgender (LGBT) community and her selection as CalHFA executive director brought to eight the number of LGBT members appointed to top posts by Brown. Cappio is also certified as a Wilderness First Responder by the Wilderness Medical Institute.

Governor Brown Taps LGBTs for Senior Posts (by Matthew S. Bajko, Bay Area Reporter)

Gov. Brown Appoints Claudia Cappio to Lead State Agency (by Blanca Torres, San Francisco Business Times)

As Mayor, Brown Remade Oakland’s Downtown and Himself (by Zusha Elinson, New York Times)

Profile – Claudia Cappio (by Roger Cruzen, California Real Estate)

L. Steven Spears, 2008-2011. Spears, acting director until Claudia Cappio was appointed in 2001, attended Southern Missionary College (now Southern Adventist University), graduating with a degree in accounting in 1975. He earned an MBA from the University of Tennessee in 1976 and a law degree from the University of the Pacific in 1987.

After gaining his MBA, Spears worked for two years as an accountant with Robert C. Davis, CPA, and two more years as an instructor at Pacific Union College. From 1981 to 1984, he was an assistant professor at Southern Adventist University.

From 1985 to 1990, Spears was a senior manager for the accounting firm of KPMG Peat Marwick. He then served as a senior legislative consultant to Republican state Senator Rebecca Morgan. Spears then worked as legal counsel to another Republican, Matt Fong, while Fong was vice-chairman of the State Board of Equalization. When Fong was elected California state treasurer in 1994, he chose Spears to be deputy state treasurer.

After Fong left office in 1999, Spears became managing director for Metropolitan West Financial and Strategic Services, a position he held for four years. In 2003, he became principal consultant for the SAER Group, a Sacramento consulting firm specializing in public finance that was a division of Kahl/Pownall Companies.

He was named chief deputy director of CalHFA in December 2006, after working as an independent contractor to the agency since January. Spears was promoted to executive director, first on an acting basis in December 2008, then permanently in April 2010.

Theresa Parker, 1997 – 2008. Parker began work for the state in 1975 as a student assistant in the Department of Benefit Payments. She held various positions in government, including positions in the Department of Finance and the California Health and Welfare Agency, before being appointed director of CalHFA in 1997.