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A shared appreciation loan program that was created to provide down payments for first-time homebuyers in California has proved so popular that it’s run out of funding less than two weeks after launch.
The California Housing Finance Agency (CalHFA) launched the Dream For All Shared Appreciation Loan Program on Monday, March 27 — nearly two years after state lawmakers empowered the California State Treasurer’s Office to develop the program.
On Friday, CalHFA put out a bulletin alerting lenders that all of the program’s seed funds could be fully committed as soon as April 10. All loans must be rate-locked before the funds are committed, and no later than 3 p.m. April 12, 2023 — whichever comes first, the bulletin said.
On Monday, a CalHFA spokesperson told Inman that the program did in fact ran out of money on Friday.
“The $300 million in Dream For All funding currently available to CalHFA is expected to help more than 2,300 low- and moderate-income Californians purchase their first homes,” the agency said in a statement. “CalHFA is extremely proud of this successful program and pleased to make such a profound difference in the lives of so many Californians who have achieved the dream of homeownership.”
The Dream for All shared appreciation loan program provides loans for down payments that homebuyers don’t have to repay until they refinance or sell their home. Instead of paying interest on the second mortgage, borrowers repay the original balance plus a share of the appreciation in the value of their home.
Example of shared appreciation loan. Source: CalHFA presentation.
If the Dream for All fund provides a loan for 20 percent of the home purchase price, the homeowner pays back the original loan plus 20 percent of any appreciation in the home’s value. So the effective interest rate on a shared appreciation loan is equal to the average annual appreciation in the home’s value.
Authorized by California lawmakers in 2021 through the passage of AB 140, the Dream for All program was officially established and funded in the 2022-23 state budget. The revolving loan program is expected to evolve over time to be self-sustaining utilizing private investments.
Editor’s note: This story has been updated to note that the Dream For All Shared Appreciation Loan Program ran out of funds on Friday, April 7, according to a CalHFA spokesperson.
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