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Glossary of Terms

Mello-Roos

Aka Community Facilities Act. Named after its authors, this Californian Act enabled “Community Facilities Districts” (CFDs) to be established by local government agencies as a means of obtaining community funding to pay for public works and some public services. It allowed public improvements to be funded despite local government’s restriction on raising property taxes by more than inflation. The down-side is that the payments levied on affected homes are fixed, and so in some down markets they can eventually prevent buyers from qualifying for loans because the effect on debt to income ratio by the Mello-Roos addition payment to the impound/escrow account.