CalHFA seeks $100 million disaster rebuilding fund to expand construction loans for survivors

CalHFA presented a proposal to the Senate Budget and Fiscal Review Subcommittee No. 4 for a $100 million Disaster Rebuilding Fund aimed at expanding access to construction financing for homeowners whose properties were damaged or destroyed in qualified disasters.

Ellen Martin, director of homeownership at the California Housing Finance Agency (CalHFA), said the fund would combine loan‑loss guarantees, interest rate buy‑downs, and other tools to reduce lender risk and lower borrower costs. “The proposed disaster rebuilding fund would combine best practices from recent hardship programs,” Martin said, describing a model that uses private capital alongside state support to help survivors bridge the gap between insurance proceeds and rebuilding costs.

CalHFA told the committee the capitalization would include $56,000,000 in General Fund financing allocated to a loan‑loss guarantee and about $44,000,000 drawn from existing national mortgage settlement funds to support interest rate buy‑downs.

Legislative Analyst’s Office staff and several senators questioned whether the trailer bill language and budget change proposal provide adequate alternatives and legislative oversight. The LAO said the proposal “contains no other alternative” and warned that leaving program design primarily to CalHFA in trailer bill language could limit the Legislature’s role in shaping eligibility, tools used, and prioritization criteria.

Senator Cabaldon and others pressed for more detail on the mechanics and on how the initial reach — estimated at 500 to 1,000 homeowners in early years — was calculated. CalHFA said the loan‑loss guarantee is expected to leverage roughly $500 million in construction lending and that the guaranteed funds would recycle as projects complete, allowing the program to serve additional homeowners over time.

Committee members raised equity and consumer‑protection concerns. Senator Smallwood Cuevas asked how the program would ensure lenders participating in the program are not predatory and how homeowners who lack traditional credit profiles or face the digital divide would access benefits. CalHFA said it would establish lender application and onboarding criteria and would set homeowner eligibility standards based on income and residency to target assistance.

The LAO also flagged fiscal context: the $56 million General Fund request is part of roughly $1 billion in new discretionary proposals in the May Revision, and the LAO urged the Legislature to weigh this spending alongside broader budget trade‑offs and to consider statutory clarity if it wants a substantive legislative role in program design.

The subcommittee held the item open and asked CalHFA and Finance to provide more detail on program design, alternatives considered, lender eligibility criteria, and consumer protections before the next hearing.