As the Fed Cuts Rates, Newsom Veto Impacts Undocumented Immigrants

Gov. Gavin Newsom<p>(Photo by Ray Chavez/Getty Images)</p>
Gov. Gavin Newsom

(Photo by Ray Chavez/Getty Images)

The Federal Reserve lowered interest rates across the country by half of a percent point on Sept. 18, which is good news for home buyers. But just days prior, Gov. Gavin Newsom vetoed AB-1840, a bill that could have helped undocumented immigrants with home purchases as well.

According to a Federal Open Market Committee statement, progress with inflation and the balance of risks were the driving factors in lowering the federal funds rate to four-and-three-quarters and five percent.

“The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities," it said in the release. "The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective,”

AB1840, proposed by Assemblyperson Joaquin Arambula from District 31, was focused on ensuring that applicants seeking assistance from the California Housing Finance Agency would not be disqualified due to their immigration status. The bill stated if the applicant met the requirements for a loan in the home purchase assistance program and was eligible under applicable state and federal law, they could apply regardless of this status. 

Overall, the fed cuts will have an impact on homebuyers. Sam Khater, Freddie Mac chief economist, shares in a release that despite mortgage rates not following federal reserve rate cuts, Freddie Mac’s Primary Mortgage Market Survey showed 30 year fixed rate mortgages averaged at 6.09%.

“Declining mortgage rates over the last several weeks indicate this cut was mostly baked in, but we expect rates to fall further, sparking more housing activity,” Khater says. “A year ago at this time, the 30-year FRM averaged 7.19 percent.”

“Given the finite funding available for CalHFA programs, expanding program eligibility must be carefully considered,” Newsom states in his AB1840 veto letter, indicating that California’s budget needs to be managed more efficiently before signing such a bill, even with rates declining. 

The governor signed the 2024 state budget in June, which balances the budget for the 2024-2025 and 2025-2026 years. According to the release, there is a $46.8 billion shortfall but the legislation avoids deep program cuts.