Historic $25B loan fund to rescue cash-strapped California homebuyers is approved but nobody knows how it works

Californians have approved a new homebuying assistance program that will let people purchase newly built homes with just 3% down instead of the standard 20%.The Associated Press called the vote for Proposition 37 Tuesday night after 60% of Californians voted “Yes.”The ballot measure would have the California Housing Finance Agency borrow as much as $25 billion from private investors and loan it to middle-class Californians who can afford the monthly payments to buy a home but don’t have the cash for a 20% down payment.The biggest news, opinion and culture shaping California right now.

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Never miss a story The program would provide fixed-rate mortgages covering up to 17% of a home’s purchase price.Buyers would have to put at least 3% down, and the home would have to cost less than about $1.5 million.The agency would borrow the money from private lenders by selling them bonds and then re-lend that money to homebuyers.

When the homebuyers repay those loans, the money would go back to the bondholders with interest. However, there are still questions about how it would work and be administered.Opponents of the measure, including the League of Women Voters of California and Reform California, argue that the state should not be involved in mortgage lending.They also say that the program would not address the underlying reasons that are making housing expensive in the Golden State.The proposition doesn’t make just any Californian eligible to get assistance through the agency.

First, there’s a price cap.The home has to be less than about $1 million in inland California and up to $1.5 million in Los Angeles, Orange County, and the Bay Area. Second, the home has to be newly built or newly converted into housing.

In other words, the borrower has to be its first occupant.Then comes the income cap.

Only people e...