1

HOUSING FINANCE AGENCY INNOVATION FUND FOR 

THE HARDEST HIT HOUSING MARKETS 

Submission of the California Housing Finance Agency

PART ONE

Executive Summary

Soaring foreclosure rates are adversely affecting California’s families, neighborhoods and 

property values. Unemployment, declining property values, severely underwater mortgages and 

unsustainable adjustable rate mortgages are among the main contributing factors. Based on 

current economic forecasts, the California Housing Finance Agency (referred to herein as 

“CalHFA”, “we”, “us” or “our”) anticipates further adverse consequences as elevated foreclosure 

rates continue. In an effort to help mitigate the contributing factors associated with foreclosures 

and assist California families, CalHFA has been working on an ongoing basis with lenders, 

servicers, homeowners, loan counselors, and insurers to identify and develop solutions to reduce 

the number of foreclosures and where possible, enable borrowers to remain in their homes. 

Access to federal funding through the Housing Finance Agency Innovation Fund for the Hardest 

Hit Housing Markets (“HHF” or “Hardest Hit Fund”) established by the U.S. Department of the 

Treasury (“U.S. Treasury”) will enable qualified California homeowners to receive additional 

financial support – support that in most cases will go directly toward their home loans, through 

programs that CalHFA has designed in response to program guidelines announced by the Obama 

Administration on March 5, 2010. After several weeks of consultation with a number of 

CalHFA’s constituencies, including the U.S. Treasury, California state officials, local 

governments, loan counseling agencies, Fannie Mae, loan servicers, lenders and the general 

public, CalHFA has identified several programs that it believes will efficiently and responsibly 

deploy HHF monies allocated to California. 

As a condition to receiving these federal funds, CalHFA has prepared this Proposal which 

outlines four distinct programs. Three of these programs are specifically designed to increase the 

probability that qualifying California households will remain in their homes without the ongoing 

threat of foreclosure. The fourth program is intended to promote community stabilization by 

providing assistance to homeowners that participate in a short sale or deed-in-lieu foreclosure 

and transition into stable and affordable housing. These programs, while important, will not 

eliminate the foreclosure crisis affecting California. Instead, the programs described in this 

Proposal should be viewed as innovative and complementary tools to programs already 

announced by CalHFA, California Governor Arnold Schwarzenegger and the federal 

government under its Financial Stability Plan. These programs include the initiatives under the 

Making Home Affordable Program, Home Affordable Modification Program (“HAMP”), 

Second Lien Modification Program (“2MP”), Home Affordable Refinance Program (“HARP”) 

and the Home Affordable Foreclosure Alternatives Program (“HAFA”).
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Establishment of an Eligible Entity

In accordance with the HHF Guidelines published by the U.S. Treasury, each recipient of 

funding from the HHF must qualify as an “Eligible Entity.” This is defined as a “financial 

institution,” as that term is defined in the Emergency Economic Stabilization Act (“EESA”). 

Since CalHFA is an agency of the State of California, it may not be considered an “Eligible 

Entity” for purposes of the HHF. Thus, CalHFA will be forming the CalHFA Mortgage 

Assistance Corporation, a California nonprofit public benefit corporation which will be taxexempt under Section 501(c)(3) of the Internal Revenue Code. Draft copies of the Articles of 

Incorporation and By-Laws of the Eligible Entity are being submitted with this Proposal.

PART TWO 

a. General Overview of Programs

Data analyzed by CalHFA revealed that the severity of California mortgage defaults are based on 

two primary causative factors: (i) financial hardship impacting the ability to make mortgage 

payments due to a reduction in or loss of income, change in household circumstance such as

death, illness or divorce, or other factors such as a recent or upcoming increase in a monthly 

mortgage payment and (ii) severe, unprecedented statewide devaluation of homes that prevents 

successful modification, sale or refinancing by financially impacted borrowers. An additional 

factor is the large number of “strategic defaults” by borrowers who can not reach an equity 

“break-even” for many years, and make an economic decision to no longer pay their mortgage 

payments.

The mortgage crisis in California is different from other states, both in the sheer magnitude of 

the problem and in the statewide severity of home value decline. The solutions that may work in 

other states may not make a meaningful impact in California because of the limited dollars 

available to help this large segment of the California population that is affected.

As CalHFA began to develop programs for the HHF initiative, it became apparent that a variety 

of comprehensive and sustainable solutions to a borrower’s loan default would be required to 

address the full range of causes associated with a household’s financial problem. CalHFA also

recognized the importance of leveraging and improving existing foreclosure prevention 

programs, including ways to target low-to-moderate income homeowners. CalHFA is proposing 

a flexible approach that employs specific solutions to a borrower’s default where funds can assist

a borrower through more than one program. A central component of this Proposal is the goal to 

have lenders, servicers, borrowers and insurers, to the fullest extent possible, assist in matching

the financial contribution made by CalHFA’s federally-funded HHF monies when modifying and 

restructuring delinquent loans. Implicit in this Proposal is the need to leverage current loss 

mitigation processes and related federal government-sponsored programs as well as 

servicer/lender proprietary programs to maintain the continuity with CalHFA’s proposed 

programs.

As a general matter, CalHFA envisions a maximum benefit of $50,000 (maximum benefit cap) 

per household, which, if eligible, may be used on an individual program or in conjunction with 

other programs in this Proposal.
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Further hardest-hit analysis performed by CalHFA demonstrates that a significant number of 

borrowers throughout California have been impacted by the compounding effects of severe home 

value decline and/or protracted unemployment. (See Exhibit 1.b(i) on page 10). Additionally, 

data supplied to CalHFA also revealed that the foreclosure problem is pervasive throughout the 

entire State. In recognition of these facts, CalHFA has developed four comprehensive programs 

designed to address the needs of a borrower’s specific situation rather than targeting certain 

regions or counties.

Program Objectives

As described in more detail below, the CalHFA HHF programs (the “HHF Programs”) being 

proposed are aimed at the primary objective of preserving homeownership for low-to-moderate 

income homeowners in California by reducing the number of avoidable delinquencies and 

foreclosures. All of the HHF Programs have some shared characteristics, but each was designed 

to independently address one or more aspects of the current foreclosure crisis, including:

· Helping low-to-moderate income borrowers retain their homes if they either: (i) 

have suffered a financial hardship such as unemployment; (ii) have experienced a 

change in household circumstance such as death, illness or disability; or (iii) are 

subject to a recent or upcoming increase in their monthly mortgage payment and

are at risk of default because of this economic hardship when coupled with a

severe decline in their home’s value.

· Creating an administratively simple, programmatically effective way to get 

federal funds to assist low-to-moderate income homeowners who meet one or all

of the objective criteria described above. Speed of delivery will be balanced with 

fulfillment of the specific program’s mission and purpose. 

· Creating programs that have an immediate, direct economic and social impact on 

low-to-moderate income homeowners and their neighborhoods. 

· Creating programs that minimize the need for extensive buy-in which has led to 

the lack of consensus among lenders, servicers or other third parties with other 

programs and negatively impacted their success. 

· Leveraging the HHF dollars allocated to California by requiring, in most 

instances, that lenders, servicers, insurers and borrowers contribute financially to 

meet the dollar-for-dollar matching component.

Even with the breadth of the HHF Programs described herein, the actual financial allocation of 

resources from the HHF Fund to CalHFA will require that it impose certain eligibility criteria 

such as first lien mortgage loans, low-to-moderate income homeowners, maximum current first 

mortgage loan amounts, eligible first mortgage loan-to-value ratios (LTV) and other determining

factors.
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HHF Program Descriptions

The HHF Programs are designed to provide flexibility to CalHFA, loan servicers and lenders 

when addressing a borrower’s individual situation. Subject to U.S. Treasury approval, loan 

servicers, counseling agencies and lenders will work closely with CalHFA to identify and target 

eligible homeowners and effectively deploy program funds. The features applied to each 

program are intended to follow the parameters of and comply with EESA. CalHFA notes that in 

each HHF Program, it is not offering incentives to servicers who participate in one or more of 

these programs. CalHFA concluded that the incentives currently being offered to servicers under 

existing federal programs are sufficient to motivate servicer/lender participation when coupled 

with the financial contribution of the HHF funds.

Based on a review of existing and potential program structures, and a broad range of input

received by CalHFA in numerous stakeholder meetings, the following are the proposed initial 

programs CalHFA would seek to implement with its allocation from the Hardest Hit Fund:

1. The Unemployment Mortgage Assistance (UMA) – CalHFA will provide temporary 

financial assistance in the form of a mortgage payment subsidy of varying size and term to 

unemployed homeowners who wish to remain in their homes but are in imminent danger of 

default that could lead to foreclosure. These funds would provide up to 6 months of benefits, 

with a monthly benefit of up to $1,500 or 50% of the existing total monthly mortgage payment

(consisting of principal, interest, taxes, insurance and HOA dues), whichever is less, with a 

financial contribution from the lender, servicer and/or borrower. The UMA program benefit cap 

is $9,000 per household. These funds would be used either as a stand-alone program or as an 

extension to federal funds allocated from HAMP unemployment program or other proprietary 

loss mitigation programs. For a comprehensive overview of this HHF Program, please refer to 

the UMA Term Sheet at Annex 2.a.1. The UMA Term Sheet also contains information 

describing the interaction of the UMA program with other HHF Programs, as well as with 

HAMP.

2. The Mortgage Reinstatement Assistance Program (MRAP) - CalHFA will provide 

financial assistance in the form of funds to reinstate delinquent mortgage loans that are in arrears 

to prevent potential foreclosures. These funds would provide benefits of up to $15,000 per 

household or 50% of the past due arrearage amount, whichever is less, with a dollar-for-dollar 

match contribution goal from the lender, servicer, insurer and/or borrower. Application of funds 

under MRAP would most likely be used in conjunction with a loan modification that generates a 

positive outcome for the homeowner and the lender. For a comprehensive overview of this HHF 

Program, please refer to the MRAP Term Sheet at Annex 2.a.2.

3. The Principal Reduction Program (PRP) – CalHFA will provide capital on a matching 

basis with participating financial institutions to reduce outstanding principal balances of 

qualifying borrowers with negative equity to market levels needed to prevent avoidable 

foreclosures and promote sustainable homeownership. The PRP can also be used in conjunction 

with a loan modification that generates a positive outcome for the homeowner and lender. Funds 

would be available up to the benefit cap of $50,000 per household or the program balance 
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remaining if the borrower has utilized either one or both of the UMA and/or MRAP programs. 

The goal of this program is to have a dollar-for-dollar match by the participating lender. In the 

event that there is less than a 100% match by the participating lender, the assistance will be 

structured as an interest-free, subordinate loan that may be forgiven over a three-year period. 

CalHFA will require that the current first mortgage loan-to-value (LTV), after principal 

reduction, does not fall below 120%. For a comprehensive overview of this HHF Program, 

please refer to the PRP Term Sheet at Annex 2.a.3.

4. The Transition Assistance Program (TAP) - CalHFA will provide eligible 

homeowners with transition assistance when it is determined that they can no longer afford their 

home. CalHFA’s Transition Assistance Program will be used in conjunction with servicer/lender

short sale and deed-in-lieu of foreclosure programs to help borrowers make a transition to new 

housing. The benefits of TAP will not only aid in borrower transition to more affordable 

housing, but will assist the community by helping to avoid protracted foreclosure proceedings 

and allowing these home to be marketed and reoccupied in a streamlined manner. Borrowers 

would be required to occupy and maintain the property until the home was sold or returned to the 

lender as negotiated. Funds would be available on a one-time only basis of up to $5,000 per 

household, net of HAFA assistance and previous HHF Program assistance, and may be used or 

layered with other CalHFA HHF Programs. No funds will go directly to the borrower. All funds 

will be sent to the Servicer subject to Servicer / Investor approval of short sale or deed-in-lieu.

The Servicer is required to follow HAFA guidelines for allowable costs. Funds will also be 

available for counseling services to assist in the housing transition. CalHFA envisions that these 

monies would be used to complement other federal or lender programs designed specifically to 

assist borrowers who have suffered a financial hardship, and as a result, are no longer financially 

able to afford their mortgage payments. For a comprehensive overview of this HHF Program, 

please refer to the TAP Term Sheet at Annex 2.a.4.

To illustrate the HHF Programs outlined above, the dollars available to eligible borrowers may 

be deployed in the following manner:
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Unemployment Mortgage 

Assistance

$9,000 Cap; 6 month benefit; $1,500 

a month or 50% PITIA whichever is 

less

Principal Reduction Program

Up to Maximum Benefit Cap of 

$50,000 net previous HHF benefit 

received by homeowner

Transition Assistance Program

$5,000 or up to Maximum Benefit 

Cap net previous HHF benefit 

whichever is less

Mortgage Reinstatement 

Assistance Program

$15,000 Cap or 50% PITIA or up to 

Maximum Benefit Cap net previous 

HHF benefit whichever is less

Maximum Benefit Cap

$50,000

Eligible

H

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er

A detailed flow chart for each HHF Program and their respective components is attached to this 

Proposal as Annex 2.b.1 through Annex 2.b.4. These process flow charts track a borrower’s 

prospective participation in each HHF Program from initial intake through closing, and all 

pertinent steps in between.

Local Innovation Fund Allocation

In addition to the programs described above, and in response to the U.S. Treasury’s request for 

innovative approaches to foreclosure prevention, CalHFA will establish a competitive proposal 

process to encourage a variety of alternative and innovative solutions to the foreclosure problem.

During the development of this Proposal, CalHFA received numerous suggestions for mitigating 

the foreclosure crisis from local governments, counseling agencies, financial advisors and the 

public. These proposals offer unique approaches to help impacted borrowers, and their respective 

components may be applicable to other programs and approaches.

Examples of the proposals include:

· Equity sharing with borrowers utilizing a partial write-down or forbearance of principal.
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· Negotiating the partial payment of principal debt based on the expected net present value 

of loan in relation to property value, coupled with local targeting.

· Aiding seniors through a modified reverse mortgage structure.

· Targeting local government home-buyer assistance programs to retain homeownership 

and target impacted neighborhoods.

· Leverage Neighborhood Stabilization Funds (NSP) in conjunction with homeownership 

transition programs in this Proposal.

Given the timeframe to submit this Proposal, there was insufficient time to evaluate fully any of 

these proposals and further budget HHF monies. With the limited HHF funds available, it is 

reasonable that monies in this program be allocated based upon a competitive proposal process 

submitted by interested parties to CalHFA. CalHFA will utilize a Request for Proposal (RFP) 

process with some general program parameters (including a requirement that any proposed 

programs comply with requirements under EESA) that is sufficiently flexible to encourage 

innovation and local solutions to the foreclosure problem. Contingent on the proposed programs 

being approved by Treasury, CalHFA and Treasury will determine the level of funding for the 

Treasury-approved programs. The total allocation of HHF Program monies for the Innovation 

Fund will be determined after responses to the RFP are evaluated; funding will be limited to no 

more than 5% of the total allocation after administration expenses (approximately $32 million).

State and Local Governments

While some of the HHF Programs described herein require lenders to participate financially, 

programs designed by state and local agencies in California have legal and program limitations 

that make such participation difficult.

By way of background, first-time homebuyer programs developed by state and local agencies in 

California are often financed in whole or in part with the sale of bonds which are tax-exempt

under IRC section 143. Such bonds are subject to a variety of public purpose restrictions 

imposed by federal tax law. In addition, the bond indentures in which these loans are held may 

contain terms which are substantially different from the securitizations found in the commercial 

market. The combination of those tax rules and unique indenture terms may make it far more 

difficult for a tax exempt public issuer to modify the loans. These restrictions may directly affect 

the ability of some public issuers to implement certain program terms required of private lenders, 

particularly with respect to matching principal reductions.

For example, most CalHFA single-family home loans are financed under the 1982 Home 

Mortgage Revenue Bond indenture (HMRB). The HMRB indenture contains many terms which 

are both different from those in standard private securitizations, as well as terms found in more 

modern public issuer indentures. Modifications to HMRB terms require the consent of 60% of 

bondholders, a standard that is currently not practical to achieve. 

By way of example, HMRB requires that 50% of the unpaid principal balance of the loan be 

insured by mortgage insurance, a standard much higher than the commercial marketplace. Thus, 

bondholders have an expectation that the top 50% of any loss will be absorbed by the insurer. 

This greatly limits the ability of the Agency to modify loans to reduce principal, because the 

insurer, not the bondholder, would be expected to absorb that loss in most cases. Bond counsel 
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has advised the Agency that many such modifications would require CalFHA’s MI reinsurer to 

contribute significantly to the principal reduction, which may not be possible.

These bond issues also have specific durations, generally coincident with terms of the originated 

mortgages, and defined interest rates. Bond investors have a legal right to repayment based on 

the interest rate and maturity date of the bonds and their underlying mortgages. In situations 

where the term of a mortgage extends past the term of the bond series, CalHFA would be forced 

by indenture terms to retire that related portion of outstanding bonds from sources other than the 

repayment of the mortgage. In addition to the issue of maturity, reductions in interest rate also

impact CalHFA investors who are expecting cash payments based on their stated coupon rate, 

and CalHFA would likely need to expend additional Agency cash to make up any shortfall in 

interest payments caused by a loan modification required interest rate reduction. Such funds are 

not available. Principal reductions for delinquent loans also presents difficulties for CalHFA, as 

these mortgages are whole loans and are not securitized whereby investors do not have any 

guarantee of scheduled payment of principal and interest outside of the covenants of the bond 

indenture.

In addition to these financial considerations, public issuers of tax-exempt housing bonds are 

required by federal law to make loans meeting high public purpose objectives of federal tax law.

Loans are limited to first-time homebuyers meeting certain income and sales price limits. 

CalHFA and other lenders issuing tax exempt single family housing bonds are limited by law to 

extremely thin margins that keep the cost to the borrower low and prevents such issuers from 

making the large profits that subprime and other lenders were making. CalHFA and other such 

lenders were not subprime lenders, and made loans with borrower-friendly, public purpose 

terms. CalHFA and other public purpose lenders should not be required to economically damage 

their programs to rectify the excesses of subprime and private lenders.

For these reasons, and to preserve the investment of state and local governments in their 

respective homebuyer programs, CalHFA is proposing that the matching requirement for the use 

of federal dollars available in this program not be required for state and local government 

programs. While this request may be perceived as an enrichment of eligible lenders, the 

preservation of the benefits to first-time low-to-moderate income homebuyers under these 

various programs outweigh that consideration. If matching is required for public purpose 

lenders, many borrowers from such lenders simply will not be served under this program. As 

discussed below, these borrowers also are not eligible to participate in the federal government’s 

Making Home Affordable Program.

More specifically, any matching requirement under the HHF Programs contained in this Proposal 

would be waived for first mortgage loans:

1. Held within an indenture that contains loans financed in whole or in part by bonds that 

are tax-exempt under IRC section 143, and made by a state or local public agency, including 

joint powers authorities. Loans receiving mortgage credit certificates issued by public agencies 

under section 143 would also be eligible. Such section 143 financed loans are presumptively 

eligible as meeting the low-to-moderate income requirement because federal tax law requires 

that those borrowers be low or moderate income persons.
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2. Made in conjunction with subordinate loans provided by a qualifying state or local 

program to provide financial assistance to first-time homebuyers as approved under CalHFA’s 

Affordable Housing Partnership Program (AHPP) or other government based program approved 

by CalHFA pursuant to this Proposal.

Government entities under this exemption would be expected to identify any distressed borrower 

in their respective programs and contact the servicer (or originator/investor) of the first mortgage 

to facilitate the process of involving the borrower in the appropriate loss mitigation program 

described in this Proposal. Funds from this program would be disbursed to the servicer. Where 

necessary, a partial write-off of a subordinate loan by the government entity may be required if 

there are combined loan-to-value (CLTV) restrictions related to the modification.

b. Population Served and Allocation Methodology

In response to the U.S. Treasury’s proposal guidelines that require CalHFA to identify the 

population served and the allocation methodology, CalHFA collected data from a variety of 

sources including major lenders, loan servicers, mortgage loan data repositories, the State of 

California’s Employment Development Department and the Federal Reserve Bank of New York. 

CalHFA used this information to analyze and demonstrate the extent to which California 

homeowners have been impacted by the foreclosure crisis. 

Exhibit 1.b(i) shown on the following page illustrates the diversity and depth of California’s 

“hardest-hit” unemployment, house price decline and mortgage delinquency problem.

Exhibit 1.b(ii) shown on page 11 illustrates how CalHFA’s HHF Programs can be used to target 

hardest-hit borrower conditions, regardless of where they reside, to help prevent avoidable 

foreclosures.

Exhibit 1.b(iii) shown on page 12 illustrates CalHFA’s HHF Program funding assumptions for 

three years beginning in October 2010. The average assistance to homeowners, whether 

participating in one or more HHF Program, will not exceed $50,000 per household.
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Exhibit 1.b(i)

CalHFA

Unemployment, Housing Price Decline and Mortgage Loan 

Delinquency Data – By California Counties

Unemployment

Housing

Decline Delinquent Loans

County

Rate by

County

Unemployment 

Ratio

Price

Decline Delinquent

Loans

Pct. 

Delinquent

Delinquency

Ratio

Alameda 11.5% 0.92 -42.7% 16,663 11.0% 0.77

Alpine 11.6% 0.93 -24.5% 17 5.6% 0.39

Amador 14.1% 1.13 -45.7% 525 11.9% 0.84

Butte 14.9% 1.19 -27.5% 1,981 10.3% 0.72

Calaveras 16.8% 1.34 -44.2% 839 12.0% 0.84

Colusa 27.6% 2.21 -55.8% 302 16.2% 1.14

Contra Costa 11.7% 0.94 -56.1% 17,716 13.6% 0.95

Del Norte 13.6% 1.09 25.9% 132 8.0% 0.56

El Dorado 13.2% 1.06 -35.7% 2,945 11.3% 0.79

Fresno 18.5% 1.48 -46.7% 13,233 16.1% 1.13

Glenn 18.2% 1.46 -39.1% 293 15.1% 1.06

Humboldt 12.2% 0.98 -18.0% 809 6.7% 0.47

Imperial 27.2% 2.18 -55.2% 2,611 22.7% 1.59

Inyo 10.4% 0.83 -20.4% 75 6.0% 0.42

Kern 17.4% 1.39 -53.0% 14,865 19.9% 1.40

Kings 18.2% 1.46 -39.6% 1,622 15.7% 1.10

Lake 19.3% 1.54 -49.2% 839 14.6% 1.02

Lassen 16.8% 1.34 -17.8% 358 11.4% 0.80

Los Angeles 12.3% 0.98 -37.9% 117,557 14.8% 1.04

Madera 16.6% 1.33 -56.2% 2,513 19.0% 1.33

Marin 8.4% 0.67 -22.0% 1,526 4.7% 0.33

Mariposa 14.5% 1.16 -33.1% 147 9.7% 0.68

Mendocino 12.5% 1.00 -37.5% 612 9.4% 0.66

Merced 22.1% 1.77 -69.4% 5,273 22.6% 1.59

Modoc 17.6% 1.41 -16.7% 46 8.6% 0.60

Mono 7.8% 0.62 -31.4% 261 7.3% 0.51

Monterey 17.7% 1.42 -65.0% 5,472 16.0% 1.12

Napa 10.4% 0.83 -41.7% 1,667 10.8% 0.76

Nevada 11.9% 0.95 -29.5% 1,158 8.0% 0.56

Orange 9.7% 0.78 -34.1% 30,625 10.7% 0.75

Placer 11.6% 0.93 -34.9% 6,162 12.7% 0.89

Plumas 22.8% 1.82 -31.6% 230 9.4% 0.66

Riverside 14.9% 1.19 -54.9% 49,302 22.2% 1.56

Sacramento 12.9% 1.03 -51.9% 26,875 16.6% 1.17

San Benito 22.1% 1.77 -57.3% 1,019 18.5% 1.30

San Bernardino 14.4% 1.15 -59.2% 45,203 22.0% 1.54

San Diego 10.6% 0.85 -38.0% 36,493 12.3% 0.86
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San Francisco 9.9% 0.79 -14.8% 2,726 4.3% 0.30

San Joaquin 18.4% 1.47 -63.7% 14,757 21.4% 1.50

San Luis Obispo 10.2% 0.82 -31.6% 2,362 8.0% 0.56

San Mateo 9.4% 0.75 -23.5% 5,009 6.4% 0.45

Santa Barbara 9.9% 0.79 -44.9% 3,954 10.9% 0.77

Santa Clara 11.7% 0.94 -32.4% 16,459 8.9% 0.62

Santa Cruz 15.3% 1.22 -40.4% 2,609 8.8% 0.62

Shasta 17.7% 1.42 -31.4% 2,292 12.2% 0.86

Sierra 18.7% 1.50 -30.1% 33 9.6% 0.67

Siskiyou 19.4% 1.55 -23.1% 359 8.8% 0.62

Solano 12.7% 1.02 -57.6% 8,035 17.2% 1.21

Sonoma 11.0% 0.88 -43.1% 5,291 9.9% 0.69

Stanislaus 19.1% 1.53 -63.4% 11,023 20.1% 1.41

Sutter 22.4% 1.79 -48.1% 1,663 16.8% 1.18

Tehama 17.0% 1.36 -41.3% 671 15.2% 1.07

Trinity 22.3% 1.78 -17.1% 81 9.1% 0.64

Tulare 18.7% 1.50 -43.1% 6,433 17.3% 1.21

Tuolumne 15.0% 1.20 -33.8% 591 9.1% 0.64

Ventura 11.1% 0.89 -40.7% 11,053 12.0% 0.84

Yolo 14.6% 1.17 -39.9% 2,252 12.0% 0.84

Yuba 20.3% 1.62 -51.7% 1,559 21.6% 1.52

Unemployment Rates: Unemployment statistics were provided by the California Employment 

Development Department website. Data is through February 2010.

Housing Price Decline: Housing Decline statistics provided by third party vendor DataQuick. The 

period selected illustrates the peak decline for California based on the change (decline) in home sales 

price for each county from 2006 to 2009.

Delinquent Loans: Delinquent loan statistics, as of January 2010, provided by Federal Reserve Bank of 

New York from a data base of approximately 31.5 million active mortgage loans across the U.S. This 

database includes mortgages from 9 of the top 10 mortgage servicers and represents approximately 50-

70% of the number of mortgages in the U.S. The database segment utilized in the chart is limited to 

California. The Federal Reserve Bank believes the percentages in its database are likely indicative of 

market conditions. Data are calculated based on first-liens only for single and 2-4 family residences, 

condos, and cooperatives. Active loans include loans with current, delinquent or foreclosure status 

(excluding REOs).

Weighted Ratios: 

Unemployment Ratio is defined as the county’s unemployment rate as compared the State of 

California’s overall unemployment rate which was 12.5% as of February 2010. 

Delinquent Ratio is defined as the county’s delinquent loan percent as compared to the State of 

California’s overall delinquent loan percent which was 14.5% as of January 2010. 

A ratio of 1.00 indicates the county is experiencing the same level of decline experienced overall by the 

state of California. A ratio greater than 1.00 indicates the county is experiencing a higher level of decline 

and a ratio less than 1.00 indicates the county is experiencing a lower level of decline as experienced 

overall by the state of California respectively.
Exhibit 1.b.(ii)

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Program Program Average Low Average High Low Average High Total

$ 200,000 $ 300,000 $ 400,000 $ 200,000 $ 300,000 $ 400,000

Unemployment (UMA)

Average Program $ $7,228 $5,426 $8,139 $9,000

Anticipated % of Program 10% 30% 45% 25%

Anticipated Program Spend $64,713,000 $19,413,900 $29,120,850 $16,178,250 3,578 3,578 1,798 8,953

Average PITIA Payment $1,808.67 $2,713.00 $3,617.34

Gross Income (Annual) $51,676 $77,514 $103,353

Unemployment Benefit $1,400 $1,700 $1,900

PITIA Payment at 31% $434.00 $527.00 $589.00

Shortfall $1,374.67 $2,186.00 $3,028.34

Estimated Monthly Program $ $904.33 $1,356.50 $1,500.00

Reinstatement (MRAP)

Average Program $ $7,484 $5,426 $8,139 $10,852

Anticipated % of Program 20% 30% 45% 25%

Anticipated Program Spend $129,426,000 $38,827,800 $58,241,700 $32,356,500 7,156 7,156 2,982 17,293

Unpaid Principal Balance Estimated Program Participants

CalHFA

Hardest Hit Fund

Program Assumptions
Exhibit 1.b.(ii)

13

Program Program Average Low Average High Low Average High Total

$ 200,000 $ 300,000 $ 400,000 $ 200,000 $ 300,000 $ 400,000

Principal Reduction (PRP)

Average Program $ $31,450 $25,696 $32,609 $39,544

Anticipated % of Program 65% 30% 45% 25%

Anticipated Program Spend $420,634,500 $126,190,350 $189,285,525 $105,158,625 4,911 5,805 2,659 13,375

Principal Reduction Assistance Only

Average Assistance $38,095 $30,000 $40,000 $50,000 2,103 2,366 1,052 5,521

Anticipated % of Program 50% 30% 45% 25%

Anticipated Program Spend $210,317,250 $63,095,175 $94,642,763 $52,579,313

Principal Reduction + 1 Other Program

Average Assistance $30,216 $25,000 $31,000 $38,000 2,019 2,442 1,107 5,568

Anticipated % of Program 40% 30% 45% 25%

Anticipated Program Spend $168,253,800 $50,476,140 $75,714,210 $42,063,450

Principal Reduction + 2 Other Programs

Average Assistance $18,403 $16,000 $19,000 $21,000 789 996 501 2,286

Anticipated % of Program 10% 30% 45% 25%

Anticipated Program Spend $42,063,450 $12,619,035 $18,928,553 $10,515,863

Transition (TAP)

Average Program $ $5,000

Anticipated % of Program 5% 30% 45% 25%

Anticipated Program Spend $32,356,500 $9,706,950 $14,560,425 $8,089,125 1,941 2,912 1,618 6,471

Program Total 100% $194,139,000 $291,208,500 $161,782,500 17,586 19,451 9,056 46,093

Program Total $ (Net) $647,130,000

Unpaid Principal Balance Estimated Program Participants

CalHFA

Hardest Hit Fund

Program Assumptions
14

Exhibit 1.b(iii)

Program FY 10/11 FY 11/12 FY 12/13 Total

Unemployment (UMA) $29,120,850 $25,885,200 $9,706,950 $64,713,000

Reinstatement (MRAP) $58,241,700 $51,770,400 $19,413,900 $129,426,000

Principal Reduction (PRP) $189,285,525 $168,253,800 $63,095,175 $420,634,500

Relocation (TAP) $14,560,425 $12,942,600 $4,853,475 $32,356,500

Total (Net of Admin) $291,208,500 $258,852,000 $97,069,500 $647,130,000

Administrative $52,470,000

California HHF Allocation $699,600,000

Program Funding reported on federal fiscal year (October 1 to September 30) basis.

CalHFA

Hardest Hit Fund

Program Funding Assumptions

CalHFA reserves the right to adjust these allocations amount the various HHF programs based on various factors, 

including without limitation, borrower and lender participation.

Program funding for fiscal years 2010/2011, 2011/2012, and 2012/2013 is projected to be 45%, 40%, and 15% 

respectively.

Program funding for fiscal years 2010/2011, 2011/2012, and 2012/2013 is projected to be 45%, 

40%, and 15% respectively.

Program funding reported on federal fiscal year (October 1 to September 30) basis.

CalHFA reserves the right to adjust these allocations among the various HHF Programs based on 

various factors, including without limitation, borrower and lender participation.
15

Overall Program Eligibility

Each of the HHF Programs contained in this Proposal have certain borrower and property 

specific eligibility requirements, as described more fully below. CalHFA understands that the 

articulated purpose of these funds is to assist those borrowers “hardest hit” by the foreclosure 

crisis in California. In determining those who have been most seriously impacted by this crisis, 

CalHFA determined certain required eligibility criteria common to all borrower applicants.

Borrower Eligibility Criteria: For each of the programs described in this Proposal, the following 

eligibility criteria will be generally applicable to applicants:

· Borrower must meet the low-to-moderate income limitations described as at or below 

120% of AMI based upon the county where borrower resides, either at loan origination or 

at the time of application for the HHF Programs. This can also be satisfied if the 

borrower can prove that they have a loan financed in whole or in part by bonds that are 

tax-exempt under IRC section 143.

· Borrower must complete and sign a Hardship Affidavit and document the reason for the 

hardship, which may include the loss of employment, reduction of income, disability or 

illness. The documentation to support income should not be more than 60 days old as of 

the date the borrower applies for the modification program or as otherwise required by 

the lender.

· Borrower has adequate income to sustain modified mortgage payments per lender 

guidelines.

· Borrower is able to satisfy program guidelines established by CalHFA.

· Borrower’s mortgage loan is delinquent or the servicer received documentation from the 

borrower that substantiates an imminent default that meets hardship qualifications.

· Borrowers who have recently encountered a financial hardship due to their military 

service are presumed eligible conditioned upon servicer receipt of a financial and 

hardship statement provided by the borrower. Eligible borrowers may include members 

of the California National Guard or military reserve ordered to federal active duty, are 

transferred to another military installation or are honorably discharged within the prior 

six months. Such individuals may be eligible to receive HHF Program funds even if the 

lender does not provide matching funds.

Property Eligibility Criteria: For each of the programs described in this Proposal, the following 

eligibility criteria will be generally applicable to all properties:

· The subject property is a first lien mortgage loan.

· The total original mortgage indebtedness cannot exceed the GSE conforming limit of 

$729,750.

· The property securing the mortgage loan must not be abandoned, vacant, condemned or 

in a serious state of disrepair.
16

· The property must be owner-occupied, the borrower’s principal residence and located in 

California.

General Program Exclusion Criteria: Although an applicant may satisfy some or all other the 

criteria established by CalHFA for participation in one or more of the HHF Programs, if such 

applicant meets any of the following, they will not be eligible to participate:

· The borrower owns real property other than their primary residence being considered for 

assistance.

· The loan was originated after January 1, 2009.

· The borrower consummated a “cash-out” refinancing of the subject property (a 

refinancing for purposes solely of obtaining a new interest rate and loan term is 

permissible).

Loan Counseling

CalHFA believes it is critical for borrowers to complete counseling with a HUD-approved 

counseling agency. The counseling agency will work with the borrower to obtain financial 

information to assess their suitability for one or more of the HHF Programs. The counseling 

agency may also help the applicant determine if they qualify for participation in lender-approved 

modification programs, such as HAMP (with or without the HHF Program assistance), the 

CalHFA CMP (as discussed below) or another suitable lender loan modification program, and 

recommend a course of action based on the facts and circumstances presented by the borrower’s 

application file. Under this Proposal and the HHF Programs, CalHFA will encourage that every 

effort be made by servicers and counseling agencies to have borrowers complete the necessary 

counseling.

Borrowers that are experiencing excessive consumer debt may be required to seek debt

management or National Foreclosure Mitigation Counseling (NFMC) Level IV counseling (or 

the equivalent). We recognize that some borrowers may be immediately eligible for the program 

and may not require counseling as determined by the servicer (e.g., a borrower suffers a 

reduction in income but does not have extensive consumer debt).

CalHFA has set aside approximately $10 million included in the administrative expense budget 

to subsidize required counseling for approximately 30,000 program applicants.

Outreach and Eligibility Process

A critical component of the HHF Programs is the outreach to borrowers, eligibility determination 

and ultimate approval by CalHFA. Outlined in this section is a general framework to reach 

qualified borrowers and place them in an efficient decision making system that facilitates the 

rapid implementation of the programs.

CalHFA will use its Centralized Processing Center (“CPC”), participating counselors and 

servicers to help identify, pre-qualify and/or place homeowners in the most appropriate program 

after conducting a full evaluation of their financial condition and hardship. Based on a

borrower’s financial situation (e.g., income, debt, DTI ratio) and reason for delinquency (e.g., 
17

temporary vs. permanent), the counselor/servicer may recommend use of an HHF Program. 

Participating servicers will be required to first evaluate the mortgage loan and if eligible, offer

HAMP and HAFA programs to borrowers prior to application for HHF Program monies. 

Servicers will be encouraged to use HHF Program monies to reverse a previous HAMP NPV 

negative result. 

CalHFA does not envision re-underwriting HAMP, HAFA programs and checking servicers’ 

analyses. However, we will require the counselor/servicer share certain data and documentation 

with CalHFA to confirm HHF Program eligibility, to substantiate the request for HHF monies 

and to demonstrate that use of these funds will help achieve a positive result and prevent an 

avoidable foreclosure. We will also use some of the data received to perform compliance and 

quality control processes and develop reporting, as discussed herein.

Loan Servicers

· The major servicers that administer the majority of the single family loans in California 

will be actively encouraged to participate in the HHF Programs detailed in this Proposal. 

Servicer outreach to borrowers that qualify under program criteria will be done through a 

variety of channels, include mailings, telephone contact and other efficient methods in an 

attempt to contact eligible borrowers and solicit favorable responses. 

· Although servicer and lender participation in the HHF Programs are strictly voluntary, 

servicers will be required to enter into a HHF Program participation agreement with 

CalHFA to offer these programs to their borrowers.

· Servicers will apply the guidelines set forth in this Proposal as applicable to individual 

borrowers and their loans, and determine the ability of their respective investors to 

participate financially. 

· Servicers will work with CalHFA to identify California homeowners that may be eligible 

for HHF Programs and be required to code loans in their respective servicing systems to 

enable servicing staff to advise borrowers on eligibility and the necessary steps to 

become part of a particular HHF Program. 

Counseling Agencies

· Loan counseling agencies will be informed of the HHF Programs and educated on the 

program parameters through the established network of foreclosure counseling agencies 

in California that meet or exceed HUD guidelines and are currently listed on the HUD 

website. This coordination effort will be managed by the Rural Community Assistance 

Corporation, a non-profit organization that currently partners with CalHFA to administer 

the State’s National Foreclosure Mortgage Counseling Program funds.

· Counseling agencies, with their unique knowledge of counseling clients, will channel 

these borrowers to the Centralized Processing Center (“CPC”) after a pre-qualifying 

evaluation is completed to determine program eligibility and to provide an assessment to 

determine the best solution for the borrower(s) and their household.
18

Local Governments and Non-Profits

Local governments and non-profits that have developed and administered first-time homeowner 

programs will also be encouraged to review their portfolios and identify borrowers that may 

qualify and need assistance. Staff administering these local programs would refer borrowers to 

counseling agencies for assistance, or may work directly through servicers or CalHFA. 

Operational Considerations

Timeline for Implementation

Given the timing between the date of the initial HHF award announcement and date of this 

Proposal, the programs outlined herein, if approved by the U.S. Treasury, will need to be quickly 

developed by CalHFA staff and contractors. The main steps for implementation include:

· Developing the systems and identifying the resources to support the HHF 

Program, preparing program documents and processing workflows (that include 

CalHFA staff, contractors, servicers and housing counselors) and providing 

training;

· Developing a comprehensive outreach program including program material 

development and dissemination; and

· Establishing internal and external cash advance and accounting procedures, 

underwriting and financial review, and fraud, risk and quality control practices.

CalHFA believes that certain of the programs described herein could be operational within 120

days after final approval by the U.S. Treasury. Attached as Annex 1 is a detailed timeline that 

sets forth implementation detail from the anticipated date of the U.S. Treasury approval of the 

Proposal to initial deployment of capital (for each program component as applicable). The 

timeline includes a summary of all material internal and external processes/steps that need to be 

completed prior to HHF Program launch and funding.

We would request from the U.S. Treasury that an advance funding (administrative and programbased) be made available to CalHFA to test each program prior to its statewide launch. CalHFA 

believes this step is critical to minimize program glitches commonly associated with new 

program development. CalHFA is sensitive to the unintentional stress factors experienced by 

homeowners, servicers and counseling agencies that will be impacted by these programs and we 

seek to avoid or minimize these effects to the best of our ability. CalHFA intends to use its lowto-moderate income first-time homebuyer portfolio to test loans in conjunction with each HHF 

Program. In addition, CalHFA will make every effort to include an external servicer actively 

participating in HAMP in this “pilot” program.
19

c. Capacity to Implement HHF Programs

Background on CalHFA

CalHFA was created in 1975 for the sole purpose of providing low cost financing for both rental 

and ownership housing. CalHFA is a quasi-independent agency that is governed by a board of 

directors consisting of appointed and ex-officio members. To date, the majority of CalHFA’s 

loans are funded through the sale of a combination of tax-exempt and taxable mortgage revenue 

bonds, the proceeds of which are used to provide funding for affordable rental projects and firsttime homeownership with various subordinate mortgage loans to assist homeowners. CalHFA 

loans for home ownership are originated and administered by participating private lenders and 

servicers along with CalHFA’s in-house servicing, credit underwriting review, processing and 

compliance functions. Additional information on CalHFA, along with a database of participating 

lenders can be found on CalHFA’s website – www.calhfa.ca.gov. CalHFA continues to offer 

housing finance programs that help make home ownership more affordable for low-to-moderate

income households. 

CalHFA also has extensive experience administering state bond-funded programs. Programs

have included: the California Housing Downpayment Assistance Program in the amount of 

approximately $320 million; the Extra Credit Teacher Program, in the amount of approximately 

$25 million, the School Facility Fee Program, in the amount of approximately $50 million; the 

Residential Development Loan Program, in the amount of approximately $50 million; and the 

housing loan development component of the Mental Health Services Act, in the amount of $400 

million.

CalHFA has taken a number of steps to address the foreclosure crisis in California both through 

programs both within and outside of our own loan portfolio. CalHFA works closely with our 

administrative contractor, the Rural Communities Assistance Corporation (RCAC), to administer 

funds from the National Foreclosure Mitigation Counseling (NFMC) grant program administered 

by NeighborWorks® America. This program helps fund counseling activities intended to assist 

homeowners of owner-occupied homes with mortgages either currently in default or in danger of

default. In addition, we have an aggressive internal program (Keep Your Home campaign), that 

is used to identify and communicate with our own borrowers that have or are at risk of falling 

behind on their mortgage. 

In May 2009, CalHFA introduced the CalHFA Loan Modification Program (“CMP”) for 

borrowers with CalHFA mortgages. CMP was designed as a simple, streamlined loss mitigation 

tool aimed at helping families in the CalHFA single-family loan portfolio retain their homes and, 

at the same time, minimize losses to CalHFA’s bondholders that would otherwise result from 

foreclosure. To date, CalHFA has received over 550 applications and approved approximately 

300 for final modification.

Due to the requirements of our home mortgage revenue bond indenture, borrowers with CalHFA 

loans cannot effectively participate in the federal government’s Making Home Affordable 

Program. However, borrowers with CalHFA loans that are part of a GSE mortgage-backed 
20

security are restricted by bond indenture requirements and thus, can be referred to those federal 

programs such as HAMP for assistance.

In conjunction with the CMP, CalHFA administers a variety of loss mitigation programs that 

provide necessary alternatives to loan modifications including forbearance and repayment plans, 

short sales, deeds-in-lieu of foreclosure and borrower relocation assistance. 

Experienced Staff 

CalHFA’s current programs are overseen and administered by a highly-experienced team of

middle and senior level managers. Collectively, CalHFA senior officers have over 175 years of 

experience in the mortgage industry and in single-family low-to-moderate income housing 

programs. CalHFA as a whole has developed extensive experience over the course of its 35-year 

existence in the creation, implementation and management of new programs.

CalHFA employs a comprehensive project management approach to the development of 

programs that involves subject matter experts from within CalHFA, complemented as necessary 

by outside expertise, detailed project tracking to ensure timely delivery of programs and 

management involvement that coordinates necessary resources and determines priorities. Our 

depth of management experience will add significant value to the HHF Programs and ensure 

proper development, implementation, quality, compliance, controls and adherence to policies and 

procedures. We appreciate the opportunity provided to our experienced team to work with the 

U.S. Treasury to design and implement scalable, innovative approaches to foreclosure prevention 

that meet the needs of California’s hardest-hit communities and homeowners. We are confident 

that our programs will complement other federal and private industry programs and activities 

designed to stabilize California’s housing market.

Within CalHFA, staff has been dedicated to providing outreach and training to borrowers, 

lenders and local governments to ensure a complete understanding of our programs. This 

outreach effort is coupled with our in-house marketing department that provides the necessary 

materials and media connections to promote programs. Once loans are purchased by CalHFA, a 

network of loan administrators manage the loan servicing and default management functions 

through both in-house servicing and outside servicers. Credit decisions for the loan portfolio are 

made by a single department to ensure uniform application of loan policies and servicing 

guidelines. To that end, CalHFA intends to leverage its current systems and protocols in 

fulfilling the compliance and monitoring requirements that come with receiving the monies from 

the Hardest Hit Fund.

Technology & System Infrastructure

CalHFA will take full advantage of its current infrastructure, staff and systems to ensure that 

administrative program dollars from the U.S. Treasury are used efficiently and effectively to 

achieve program goals. There will be some new technology developed specifically for the HHF 

Programs to capture, track and monitor each program transaction. CalHFA will explore every 

opportunity to leverage in-house resources and technologies and external industry processes, 

workflows, and reports that are already in use to perform loss mitigation activities and administer 
21

unemployment relief programs. CalHFA acknowledges that one of the current hindrances to 

loan modification programs is the difficulty associated with the transfer of borrower financial 

information and program documents to and from loan servicing operations. CalHFA will make 

every effort to design and build systems and workflows that improve and streamline current 

processes to decrease the complaints associated with current industry transactions.

Internal Controls

CalHFA will develop a comprehensive list of data elements and internal control points for each 

HHF Program from which we will perform regular fraud and risk mitigation protocols. The 

primary elements of any quality fraud mitigation program include timely identification, 

validation and verification of the processes core areas of risk. In this program, we will focus on

validating, verifying and reviewing information provided by the borrower, loan originator, loan 

servicer, lender and other outside organizations that are a party to the transaction. Every effort 

will be made to identify fraudulent practices and/or entities. CalHFA will disseminate

information to the U.S. Treasury through established HHF reporting practices.

The administrative services agreement between the CalHFA Mortgage Assistance Corporation 

and CalHFA will designate departments within CalHFA responsible for establishing and 

maintaining controls for the project. Control responsibilities for CalHFA staff will include:

· The Director of Administration will be responsible for ensuring CalHFA responds 

appropriately to the findings of the independent financial auditor. The Director of

Administration is also a member of the Project Steering Committee.

· The CalHFA Comptroller will be responsible for ensuring the proper accounting of HHF 

Program funds; appropriately respond to findings of the independent financial auditor 

maintaining the general ledger for the project. The Comptroller is responsible to 

establish the necessary policies, procedures and systems enhancements necessary for the 

project’s internal financial controls. Given the anticipated flow of funds for the Project, 

an accounting supervisor will directly manage staff that will properly account for 

program funds and their allocation.

· The internal controls will utilize an independent financial audit of all program funds. The

independent audit firm is familiar with CalHFA and its accounting process and systems. 

· CalHFA intends to leverage its current quality assurance plan and protocols to fulfill the 

program compliance and monitoring requirements for HHF.

CalHFA currently employs the accounting firm of Deloitte LLP as its external auditor. Given 

the limited nature of the HHF and associated funding, CalHFA will likely employ Deloitte or 

another outside auditing firm to provide internal auditing and HHF Program risk management

support, rather than employing full-time staff directly. The statement of work for the outside 

auditing firm will include requirements to perform a pre-launch readiness assessment to review, 

evaluate, test procedures and make recommendations related to the operations process for all 

aspects of the program and the associated points of internal controls.
22

Readiness Assessment

The CalHFA Mortgage Assistance Corporation, the eligible entity for the project, will operate 

under an administrative services agreement with CalHFA to provide necessary CalHFA services 

and staff required for the project not procured from outside vendors. As described above, we 

anticipate the HHF Project Team will work with an outside auditing firm to perform the 

necessary assessments to determine when to implement components of the project. Additional 

resources will be added as necessary to assess readiness. The project team views readiness 

assessments and the related timelines as integrated components of the overall project plan. The 

project timeline is shown in Annex 1.

d. Staffing and Business Partners

It is expected that an initial wave of borrowers will contact counseling agencies, Centralized 

Processing Center (CPC) vendor staff, CalHFA or their servicer seeking to take advantage of one 

or more of the new HHF Programs, followed by a monthly inflow of borrowers that are 

experiencing financial hardships or have newly defaulted on their loans. Ostensibly, this will 

place an immediate demand on counselor, CalHFA, CPC and servicer staff once the HHF 

Programs are made available.

The staffing plan detailed below is based on CalHFA’s Proposal for the HHF Programs and the 

efforts needed to develop, implement and support the programs for their expected duration. Due 

to the timeline for proposal development, the comprehensive operational impact is not yet fully 

understood. The following is CalHFA’s best estimate of the staffing requirements for the HHF 

Programs, and includes estimates of the number of staff necessary during each year of the 

planned, eight-year program.
23

Role Role Description Number of Staff

Staffing

Director, Oversight Oversee the HHF Program

operations, ultimately responsible for 

HHF Program delivery.

Part-time throughout 

program life

HHF Program

Operations Manager

Responsible for the day-to-day 

operations of the HHF Program.

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)

HHF Program

Administration

Provides administration and clerical 

support to the HHF Program.

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)

HHF Program

Processing 

Oversight Manager

Responsible for managing the CPC 

vendor that processes the application 

packages from servicers for Hardest 

Hit funds.

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)

HHF Program Call 

Center Oversight 

Manager

Responsible for managing the CPC 

vendor providing call center 

functionality to handle incoming 

calls from homeowners, servicers, 

counselors, and other housing 

stakeholders involved in the HHF 

Program.

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)

HHF Program

Compliance & 

Reporting

Responsible for managing reporting 

to CalHFA; CalHFA HHF Program 

reporting to the U.S. Treasury; 

ensure compliance with Treasury and 

internal compliance guidelines.

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)
24

Role Role Description Number of Staff

HHF Program

Compliance 

Research

Responsible for researching all 

applicable state, federal and local 

programs and ensuring the HHF 

Program processes, policies and 

practices remain current with 

industry practices – e.g., HAMP 

revisions.

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)

HHF Program

Underwriting

Oversight Manager

Responsibilities include review of 

underwriting and program 

compliance of external servicers’ 

loan modification analyses and CPC 

vendor processes. 

1 full-time during funds 

allocation and part-time 

after funds are allocated 

(Compliance & Reporting)

HHF Program

Training & 

Outreach Manager

Responsible for providing program 

training materials and information to 

various housing stakeholders (e.g., 

servicers, counselors, advocates) 

regarding the HHF Program, policies 

and processes.

1 full-time during funds 

allocation

Acting CIO –

Information 

Technology (IT)

Oversee the delivery and support of 

technology components that enable 

the HHF Program.

Nominal effort throughout 

program life

IT Support Services 

Manager

Responsible for managing the staff 

providing proper management of

technology components necessary to 

support the HHF Program.

Part-time support 

throughout program life

IT Support Services 

Staff

Responsible for delivering and 

maintaining the technology

components that enable the HHF 

Program.

Part-time support 

throughout program life

Director of 

Administration

Oversees Fiscal Services Division; 

responsible for ensuring CalHFA 

responds appropriately to the 

findings of independent financial 

auditor.

Nominal effort during 

funds allocation
25

Role Role Description Number of Staff

Accounting 

Manager

Responsible for ensuring the proper 

accounting of HHF Program funds

and appropriate oversight is provided 

of the commercial bank vendor; 

appropriately responds to findings of 

independent financial auditor.

Part-time during funds 

allocation

Accounting 

Supervisor / 

Oversight

Provides oversight of the commercial 

bank vendor to ensure the proper 

accounting of HHF Program funds; 

responds appropriately to findings of 

independent financial auditor.

Part-time during funds 

allocation

Director of 

Marketing

Oversee the communication and 

outreach for the HHF Program, 

ultimately responsible for 

communication delivery.

Part-time throughout 

program life

Marketing Staff –

Communication & 

Outreach

Responsible for the planning, 

development and delivery of 

communication materials; 

collaboration with other housing 

stakeholders; outreach to potentially 

eligible homeowners.

Part-time throughout 

program life; anticipate 

the bulk of the effort will 

be during implementation 

and year 1

Marketing Staff –

Web Site

Responsible for the delivery of 

outreach and communication 

materials via the CalHFA website 

and via other partner websites, as 

necessary.

Part-time throughout 

program life; anticipate 

the bulk of the effort will 

be during implementation 

and year 1

Director of 

Financing

Oversee the financial analyses of 

portfolios to help ensure the HHF 

Programs are properly targeted and 

effective.

Nominal effort during 

funds allocation

Financing Staff Conduct detailed financial analyses 

of portfolios to help ensure the HHF 

Programs are properly targeted and 

effective.

Part-time during funds 

allocation
26

Role Role Description Number of Staff

General Counsel Provides oversight to all legal issues 

and resolutions associated with the 

HHF Program and the Eligible 

Entity.

Part-time throughout 

funds allocation

Staff Counsel Provides counsel on all legal issues 

and resolutions associated with the 

HHF Program and the Eligible 

Entity.

Part-time throughout 

funds allocation

Business Partners

Audit Firm 

Contractor

Provides HHF Program with “onetime” pre-launch readiness 

assessment and annual independent 

financial audit. 

The anticipated Audit Firm 

Contractor has experience with 

CalHFA as its independent financial 

auditor.

Anticipate no more than 

the equivalent of one fulltime contractor for the 

funds allocation period 

and part-time during 

Reporting & Compliance

Outside Counsel –

Contractor

Supports the General Counsel and 

Staff Counsel, as necessary, on legal 

issues and resolutions associated 

with the HHF Program.

The anticipated Outside Counsel 

Contractor has extensive real estate, 

banking and bankruptcy expertise 

and experience working with 

CalHFA, and supported the 

development of the HHF Program 

Proposal to the U.S. Treasury.

Part-time throughout 

funds allocation
27

Role Role Description Number of Staff

Contractor –

Operations Project 

Manager

Fulfill the role of HHF Program 

expert; consult to the HHF Program

Operations Manager in the delivery 

of the HHF Programs; proactively 

improve processes; provide 

knowledge transfer; support program 

processes.

Contractor is playing a lead role in 

the development of the CalHFA 

HHF Program and has 24+ years 

experience in the mortgage servicing 

industry with a focus on default 

management and call center 

operations.

Full-time for the first year 

of the HHF Program

HHF Program 

Commercial Bank 

Vendor

Provides cash management, general 

ledger accounting and wire transfer 

capabilities; provides reporting to 

CalHFA and supports Treasury

reporting; supports Treasury, 

independent auditor and CalHFA 

audits.

Full-time throughout 

funds allocation

HHF Program

Centralized 

Processing Center 

Vendor

Provides HHF Program application 

triage, application processing and 

“decisioning” services; interacts with 

counselors, servicers and 

homeowners; provides reports to 

CalHFA to support oversight and 

Treasury compliance requirements; 

supports Treasury, independent 

auditor and CalHFA audits.

Full-time throughout 

funds allocation; provides 

reports and other 

information as necessary 

during Reporting & 

Compliance

HHF Program 

Counseling Vendor

Provides selection, training and 

oversight of counseling agencies 

participating in the HHF Program. 

Full-time throughout 

funds allocation
28

CalHFA will attempt to utilize its own staff to fulfill as many program roles as possible. 

However, due to the urgency needed to make the HHF Programs available to eligible 

homeowners, and the amount of time it takes to recruit and hire staff employed by the State of 

California, some roles may be filled by knowledgeable contractors, as necessary. The 

anticipated HHF Program organizational chart is shown in Figure 2.d.

Figure 2.d below illustrates the organizational structure anticipated to be necessary to deliver the 

HHF Program. CalHFA may need to alter the organizational structure, as the operational impacts 

are better understood during implementation and operations.
29

Figure 2.d: CalHFA HHF Program Organizational Chart
30

Project Procurement

As part of this project, the Project Team will procure business partners, products and services to 

support the objectives of the project. Typically, the procurement process for CalHFA mirrors 

many of the State of California’s best practices. Although CalHFA is a state agency, CalHFA is 

not required to procure any of its contracts through a competitive bidding process. Neither is 

CalHFA generally subject to many of the restrictions or requirements associated with state 

contracting practices. 

CalHFA, in conjunction with the designated entity, the CalHFA Mortgage Assistance 

Corporation, will enter into an administrative services agreement to provide substantial elements 

for the project. CalHFA will also follow the HHF Project Management Plan and CalHFA best 

practices in evaluating all entities and services procured for this project. To facilitate the 

decision-making aspects of the project, the following Governance model has been implemented:
31

The Core Project Team will work with the Steering Committee, including CalHFA’s General 

Counsel and Director of Administration, to determine the best approach to procuring goods and 

services for this time-constrained project. The Project Team will work within the CalHFA best 

practices for procurement. The following lists the initial procurement strategies for the primary 

staffing and services needed to support the project. In all vendor procurement activities, the 

project team will develop statements of work or Request for Proposal criteria specific to the 

activity.

· Centralized Processing Center vendor: Rapid competitive bid with a “lite” RFP

o Potential vendors may not provide the desired full range of processing and loan 

review services; individual vendors with the ability to perform specific tasks may 

be procured as an alternative

· Commercial Bank vendor: Leverage existing relationships to reach contractual 

relationship

· Audit: Extend or amend existing contract with Deloitte for auditing services (includes 

HHF Program “one-time” pre-launch readiness assessment and annual financial audit)

· Legal: Extend or amend existing contracts with Orrick Herrington and Sutcliffe (San 

Francisco/Sacramento) and Downey Brand (Sacramento)

· Counseling: Extend or amend existing contract with Rural Community Assistance 

Corporation (RCAC)

The Project Team will have the primary responsibility to solicit, evaluate and recommend 

vendors to the Project Steering Committee and conduct all required due diligence and site visits. 

The Project Steering Committee is responsible for making the final decision on the engagement 

of vendors for this project.

Project Issue and Risk Management

The structure of the project is designed to address issues and risks that could jeopardize the 

successful outcomes of the initiatives. Described below are both issue and risk management

guidelines to address events and potential problems.

Project Issue Management

The Project Manager will utilize CalHFA best practices to facilitate the timely and thoughtful 

management of Project issues. In general, the approach to managing project issues requires 

consistent documentation of the issues that arise, assignment of responsibility for issue 

resolution, management of issues to ensure they are resolved in a timely manner and 

documentation of the resolution to each issue.

The Project Manager will implement a project issue log that will be used to track issues that arise 

during the course of the Project. The issue log will document the following at a minimum:
32

· Issue description

· Issue priority

· Issue status (e.g., open, pending, in process, closed)

· Impact of issue

· Plan for resolution

· Individual responsible for resolution

· Targeted and actual resolution dates

· Resolution action or result

The Project Manager will prioritize the issues and identify the issues that can be resolved by the 

Core Project Team, Extended Project Team or Project Sponsor and those issues that require 

Project Steering Committee guidance. 

Issues that are identified as “high” priority will be brought promptly to the attention of the 

Project Sponsor and Project Steering Committee, as necessary. Issues will be reported on at least 

a monthly basis to the Project Sponsor and to the Project Steering Committee.

Project Risk Management

The Project Manager will consistently monitor and report on Project risks throughout the life 

cycle of the Project. Proactive project risk management entails processes and activities that 

facilitate the identification and analyses of project risks and helps to minimize the consequences 

of risk events through carefully planned risk avoidance, response and contingency actions. 

The primary objectives of risk management are:

· To maximize the benefits of the Project and lessen the project impacts caused by the 

occurrence of adverse events through thoughtful management and communication of 

project risks.

· A realistic understanding of project risks by the Project Team and the Steering 

Committee.

· For each significant project risk, a reasonable plan of action is developed that is 

understood and approved by the Core Project Team and Steering Committee.

· An assigned owner of project risk responsible for monitoring the risk and ensuring the 

planned response action is executed.

· Ongoing monitoring of project risk events throughout the project life cycle.
33

· Steady maintenance of project risk documentation throughout the project life cycle.

· Open communication of project risks with project stakeholders.

The five basic processes of risk management that will be actualized are:

1. Risk Identification - Determine the risks that may affect the Project and document their 

characteristics in the Risk Management Matrix (i.e., a spreadsheet used to manage risk 

characteristics and planning information for the Project).

2. Risk Evaluation - Determine which project risks have the greatest impact on the Project 

and/or the Agency and the probability of the risk being realized.

3. Risk Response and Contingency Planning – Develop the planned responses for each risk 

and the contingency plans should the risk responses not be fully effective.

4. Risk Response Control – Monitor for potential risk events, enact planned risk responses 

and contingency plans and track the outcomes.

5. Risk Communication –Communicate identified risks and risk responses/contingencies 

and changes in Project risk status.

The Project Manager will report the status of the highest priority risks to the Project Steering 

Committee during each Project Steering Committee meeting.

Conflicts of Interest

The Core Project Team engaged for the Project will be required to complete the California 

Conflict of Interest Form 700. This form is produced by California’s Fair Political Practices 

Committee (FPPC) and is the standard disclosure document used for all state contracts. Form 

700 disclosures must be filed annually and the Core Project Team and the General Counsel will 

review all conflict of interest filings.

HHF Program outsourced operations vendors will be required to provide confirmation they have 

read and comply with the U.S. Treasury Conflict of Interest guidelines documented in 31 CFR 

Part 31. 

All disclosures will be filed with the General Counsel’s Office at CalHFA or in the Project team 

library.

Key Executive Biographical Information

L. Steven Spears, Executive Director, appointed April 2010. Previously he held the position of 

Chief Deputy Director beginning December 2006 and Acting Executive Director since 

December 2008. Prior to that, Steve was the principal consultant of the SAER Group (2003-

2005), Managing Director for Metropolitan West Financial and Strategic Services (1998-2003), 

and Deputy State Treasurer to former State Treasurer Matthew Fong (1995-1998). Education: 

B.S., Accounting, Southern Missionary College – Collegedale, Tennessee. M.B.A., Finance, 
34

University of Tennessee – Knoxville, Tennessee. Juris Doctor, University of the Pacific; 

McGeorge School of Law – Sacramento, California. Pacific Law Journal: Comment Staff, 

Assistant Managing Editor.

Bruce D. Gilbertson, Director of Financing since August 2004. Bruce previously served as 

Comptroller from October 1996 until July 2004, Financing Officer from January 1994 until 

September 1996, Mortgage Loan Accounting Administrator from February 1988 until December 

1993. Bruce also held various accounting positions with the California State Department of 

Transportation (1978-1988). Education: B.S., Business Administration, California State 

University, Sacramento.

Thomas C. Hughes, General Counsel since February 2001. Mr. Hughes had been a partner in 

the Sacramento law firm of Kronick, Moskovitz, Tiedemann & Girard (1982-2001), practicing 

real estate and business law. Prior to that time, he practiced with the firm of Iwama & Castro 

(1978-1982).

Howard Iwata, Director of Administration since January 2009. B.A., Political Science, UC 

Berkeley. Previously: Bureau Chief, State Controller’s Office (2005-2008); Assistant Executive 

Director, San Francisco Bay Conservation and Development Commission (1997-2005); Division 

Administrative Officer, Department of Fish and Game (1991-1997); and various administrative 

positions for a variety of State Agencies (1980-1991).

Charles K. McManus, Director of Mortgage Insurance since December 2006. B.A. Harvard 

University; M.B.A. Harvard Graduate School of Business Administration. Previously: Acting 

Director of Mortgage Insurance for CalHFA (May 2006); Owner McManus Financial Services 

(2005 to 2006); SVP Branch Operations for Home American Mortgage (2005); VP Retail 

Mortgage Production for Ohio Savings Bank FSB (2003-2004); SVP National Account for NCS 

(2002 -2003); VP Real Estate for American Invsco (2001-2002); SVP Variable Annuities for 

Annuity Investors Life Insurance (1995-2000); Various mortgage banking and consulting 

positions (1991-1994);Chief Operating Officer of Mortgage Guaranty Insurance Corporation 

(1980-1991); SVP Marketing of Verex Mortgage Insurance (1975-1980).

e. Administrative Expenses

CalHFA’s intention is to allocate the HHF monies in a fashion that allows the maximum amount

to be spent directly on assisting qualified homeowners. However, responsibly deploying 

approximately $700 million to California homeowners in financial crisis does not come without 

expense – both to ensure that the dollars are being spent appropriately and that proper reporting 

and oversight takes place, as required by the U.S. Treasury. 

Indeed, each of the HHF Programs will have a variety of administrative expenses separate and 

apart from the actual funds going toward the affected homeowners. These expenses include the 

one-time expenses of implementation and the ongoing expenses of administering the HHF 

Programs. The one-time expenses are associated with designing and implementing the programs 

and systems needed to support the HHF Programs in production and to meet the reporting and 

compliance requirements of the U.S. Treasury. The ongoing administrative expenses are those 
35

expenses that will be incurred to support the operations to deploy nearly $700 million in HFA 

monies.

The estimated administrative expenses are based on CalHFA’s understanding, at the time of this

Proposal, of the HHF Programs and the efforts needed to implement and execute the programs 

throughout their anticipated duration. The expense estimates will be adjusted as the details of the 

programs and operations are more fully developed.

Table 2.e(i) identifies the estimated expenses CalHFA anticipates it will incur to implement the 

HHF Programs. Some of the primary expenses are:

· Staff and consulting services necessary to implement the new programs and associated 

business processes and compliance and auditing functions

· Centralized Processing Center vendor one-time implementation costs including system 

enhancement, program development, staffing and training

· Initial marketing and outreach efforts

· Establishment of an “Eligible Entity”

· Establishment of facilities to support oversight of outsourced operation vendors 
36

Table 2.e(i): One-Time Expense of Implementing HHF Programs

Account/Detail Estimated Expenses

Personal Services:

Salary $242,343

Personal Services Total: $242,343

General Expenses:

Supplies/Materials $15,650

Space Lease $9,000

Miscellaneous $850

Moves/Storage $9,000

General Expenses Total: $34,500

Communications:

Advertising/Press Services $200,000

Postage/Mailing/Courier Svcs $0

Telephone $4,156

Communications Total: $204,156

Consulting Services:

IT $100,160

Marketing $0

Audit $37,575

Financial $0

Legal $200,000

Program $1,709,150

Other $147,180

Consulting Services Total: $2,194,065

Information Technology:

Rental/Leases/Maintenance $0

Supplies/Miscellaneous $0

Software Purchases/Maintenance $15,000

IT Expendable Equipment $9,810

IT Non-Expendable Equipment $53,000

IT Total: $77,810

Training:

Professional Development $0

Training Total: $0

Travel:

In-State $10,000

Out-of-State $7,500

Travel Total: $17,500

Equipment:

Expendable Equipment $0

Non-Expendable Equipment $27,704

Equipment Total: $27,704

TOTALS: $2,798,077
37

The anticipated ongoing administrative expenses for the HHF Programs are listed in Table 

2.e(ii). These expenses are based on the assumption that all funds will be allocated within the 

first three years of the program and that reporting and compliance functions will continue, with 

lighter staffing, for another five years for a grand total of eight years. Some of the primary 

expenses are:

· HHF Program outsourced operations vendors

· Consulting services to support quality assurance, audit, legal and oversight functions

· Marketing and outreach to servicers, borrowers and other housing stakeholders

· Payment for counseling services for those borrowers where counseling is required

· Lease of space to house HHF Program staff and associated facilities expenses

· Credit reports and property valuations in support of applicant processing and quality 

control efforts

· In-state and out-of-state travel expenses to support ongoing outreach, training and 

meetings with other HHF Program stakeholders
38

Table 2.e(ii): HHF Programs Operational Expenses

Account/Detail Estimated Expenses

Personal Services:

Salary $5,539,410

Overtime $180,000

Personal Services Total: $5,719,410

General Expenses:

Supplies/Materials $59,500

Space Lease $432,000

Miscellaneous (e.g., Credit 

Reports, Appraisals, Counseling) $12,435,000

Insurance $800,000

Recording Fees $4,890,780

ACH/Wire Transfer Fees $1,260,075

Moves/Storage $0

General Expenses Total: $19,877,355

Communications:

Advertising/Press Services $300,000

Postage/Mailing/Courier Svcs $135,000

Telephone $63,720

Communications Total: $498,720

Consulting Services:

IT $0

Marketing $0

Audit $1,427,850

Legal $315,630

Program $20,400,300

Other $286,000

Consulting Services Total: $22,429,780

Information Technology:

Rental/Leases/Maintenance $68,750

Supplies/Miscellaneous $0

Software Purchases/Maintenance $84,500

IT Expendable Equipment $0

IT Non-Expendable Equipment $0

IT Total: $153,250

Training:

Professional Development $90,000

Training Total: $90,000

Travel:

In-State $63,000

Out-of-State $31,500

Travel Total: $94,500

Equipment:
39

Expendable Equipment $0

Non-Expendable Equipment $0

Equipment Total: $0

TOTALS: $48,863,015
40

Based on CalHFA’s understanding of the HHF Programs at the time of this Proposal, the current 

estimate for one-time implementation and ongoing operational expenses comprises 

approximately 7% of the HHF monies allocated to California. In assigning funds to the different

HHF Programs (see Section 2.b, Exhibit 1.b(iii)), CalHFA assumed that the total administrative 

costs to be realized would be 7.5% of the HHF monies allocated to California; therefore, there is 

about $800,000 difference between the two presented values.

Table 2.e(iii) shows the annual anticipated implementation and annual operational expenses (i.e., 

starting from the time the first HFA Program monies are allocated) throughout the expected eight

years of the program. CalHFA began incurring implementation expenses following the U.S. 

Treasury announcement, and these expenses will continue to be incurred until the HFA Program 

is “live” (anticipated to be in the October 2010 timeframe). Expenses are projected to be 

significantly heavier in the first year of operations as fully 50% of the applications are expected 

to arrive in the first year. Expenses are shown to taper off during the anticipated three years of 

funding allocation and into the final five years of reporting and compliance.

Table 2.e(iii): Timeline of Implementation and Operational Expenses

Implementation Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

$2,798,077 $27,718,860 $13,631,316 $9,087,544 $1,027,589 $685,059 $570,883 $570,883 $570,883 
41

f. Overview of Risk Management and Fraud Prevention

Monitoring Program Performance

In establishing and deploying each of the HHF Programs described throughout this Proposal,

CalHFA MAC is mindful of the significant public interest at stake in monitoring how the funds 

are deployed and the impact the HHF Programs will have on the foreclosure problem in 

California. 

In addition, given the fact that the funds being allocated to CalHFA MAC were appropriated by 

the U.S. Treasury from EESA, CalHFA MAC understands that it will have significant reporting 

responsibilities. CalHFA MAC will work with servicers and outsourced operations vendors to 

develop processes to collect and transmit mortgagor loan transaction and property data to ensure 

compliance with the HHF Programs and to measure its effectiveness. CalHFA MAC will adhere 

to data and reporting elements provided by U.S. Treasury. 

CalHFA MAC intends to leverage CalHFA’s current quality assurance plan and protocols in 

fulfilling the compliance and monitoring requirements that come with receiving the monies from 

the Hardest Hit Fund. Currently, CalHFA MAC performs quality assurance, compliance and 

audit functions for its own lending and loan servicing departments and for other Agency 

initiatives. CalHFA MAC will build customized systems and protocols to track, store and report 

data.

Compliance

CalHFA MAC will establish protocols to comply with all requirements under EESA, including 

but not limited to, allowing full compliance and oversight, as necessary, by the U.S. Treasury, 

the Comptroller General of the United States, Government Accountability Office, Congressional 

Oversight Panel, and the Special Inspector General of the Troubled Asset Relief Program as to 

the application of any EESA funds. CalHFA MAC will engage Deloitte LLP to conduct a 

Readiness Assessment of the HHF program about one month prior to statewide launch to ensure 

preparedness and compliance.

Additional elements of these compliance efforts will include:

· Granting access to these governmental entities all books, communications and records 

regarding the use of funds given to CalHFA MAC under the Hardest Hit Fund, upon their 

reasonable request.

· Designing programs, establishing monitoring mechanisms, and implementing a system of 

internal controls that minimize the risk of fraud, mitigate conflicts of interest, and 

maximize operational efficiency and effectiveness.

· Establishing a system of internal controls that encompasses the CalHFA MAC’s 

processes, their business partnerships and relationships and any constituency being aided 

through these Programs.
42

· Administer Pilot Program (to commence about one month prior to statewide launch) 

using CalHFA low-to-moderate income residential mortgage loan portfolio to further test 

readiness and compliance. 

· Test, certify, and provide an independent verification of Pilot Program success and 

readiness prior to statewide launch.

· Provide verification of effectiveness of internal controls to Treasury on an annual basis. 

CalHFA MAC will hire Deloitte LLP to perform this function.

· Provide CalHFA MAC audited financial statements to the U.S. Treasury on an annual 

basis. CalHFA MAC will hire Deloitte LLP to perform this function.

CalHFA will utilize a multi-phase compliance methodology for the HHF Programs. We will 

collect and analyze transaction level data such as borrower income, liabilities, hardship, reason 

for delinquency, occupancy status, loan amount, origination date, lien status, property value, and 

loan due date to perform pre- and post-funding reviews that ensure borrowers meet HHF 

eligibility criteria; general and program specific. 

The purpose of the compliance review is to verify the existence and accuracy of HHF 

transactions and documents as it pertains to program eligibility, distribution of funds, and 

documented policies and procedures. As stated throughout this Proposal, CalHFA is required to 

obtain an independent verification that proper controls be in place and maintained prior to and 

during program implementation. On no less than a quarterly basis, we will employ a 10% 

random sample review on post-funded transactions. CalHFA will hire qualified audit and control 

professionals to perform this function. 

g. Tracking/Reporting

Measuring performance will be critical in determining the impact that the HHF Programs have 

on the mortgage crisis affecting California. As part of that effort, CalHFA intends to work with 

Treasury to develop a variety of custom reports required to manage and monitor the HHF 

Programs. CalHFA intends to customize these reports not only as appropriate for the specific 

HHF Program, but also to comply with all requirements under EESA. Some of the detail that 

will be contained in CalHFA’s HHF Program reports will include, but not be limited to the 

following summary and detailed data:

· Lender

Ø Program participation rate

Ø # and $ for each program

Ø Program performance - approve & cancel rate

Ø Loan performance - # of post-program current/delinquent loans

Ø Leveraged dollars per program

Ø Average LTV, borrower income
43

Ø By county

· Servicer 

Ø Program participation rate, %, # and $

Ø # and $ for each program

Ø Program performance - approve & cancel rate

Ø Loan performance - # of post-program current/delinquent loans

Ø Average LTV, borrower income

Ø By county

Ø Leveraged dollars per program

· Borrower

Ø Average income

Ø Average LTV

Ø By county

Ø Program type

Ø # and $ Contribution, if applicable

· Program Data 

Ø # and $ for each program

Ø Per household

Ø Borrower income level

Ø # Approved & Denied transactions, income and county

Ø # Program requests per household

Ø Average monthly payment savings when combined with 

modification program

· Trend and Market Data will be developed, tracked and reported.

The data elements for these programs have not yet been finalized with Treasury. The population 

of the data elements will depend on the requirements of Treasury and the capabilities of CalHFA 

to obtain data from participating servicers, and those discussions are not complete. However, 

generally, compliance reporting and data elements will be similar to data supplied under the 

HAMP program. It is anticipated that compliance reporting will be part of the statement of work 

for the independent auditor engaged for this program. The independent auditor will define the 

appropriate sampling method based on the reporting and compliance requirements. While HHF 

Program results will be evaluated by CalHFA, it is anticipated that an outside consulting firm 

will be engaged to conduct audit and compliance reviews. If appropriate, CalHFA will make 

efforts to coordinate selection of such outside consultants with other HFAs to minimize overall 

administrative expenses of the Hardest Hit Fund.

Conclusion

CalHFA believes the HHF Programs outlined in this Proposal will offer California homeowners,

their lenders and servicers, as well as other stakeholders affected by the foreclosure crisis, the 
44

unique opportunity to leverage federal funds while promoting and advancing the very purposes 

of the Hardest Hit Fund – preventing avoidable foreclosures and helping to stabilize home values 

in California.