Cal HFA has already taken 21 homes and is poised to take four dozen more. John Hill with the California Senate Office of Oversight and Outcomes issued a new report saying the foreclosures are based on an overly strict interpretation of federal tax law. The law was intended to keep borrowers from profiting on below-market-interest loans.
HILL:"They didn't want people using the program, exploiting the program, trying to set themselves up as landlords, so they have this rule. But the rule did not take into account the real estate market would go the way it's gone."
186 mortgage holders in violation of the rule have been
ordered to apply for a one-year waiver, move back in, or sell.
Seven other states allow the renting of such properties
outright. Another ten allow it in some cases. Cal HFA says it
is reviewing its policy.