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-HOUSE BILL 176
-57TH LEGISLATURE - STATE OF NEW MEXICO - SECOND SESSION, 2026
-INTRODUCED BY
-Alan T. Martinez and Rebecca Dow and Jonathan A. Henry
-AN ACT
-RELATING TO HOUSING; CREATING THE ZERO INTEREST DOWN PAYMENT
-LOAN FUND FOR FIRST-TIME HOME BUYERS; CHANGING CERTAIN
-DISTRIBUTIONS MADE TO THE EARLY CHILDHOOD EDUCATION AND CARE
-FUND, THE BEHAVIORAL HEALTH TRUST FUND AND THE MEDICAID TRUST
-FUND TO BE MADE TO THE ZERO INTEREST DOWN PAYMENT LOAN FUND;
-MAKING AN APPROPRIATION.
-BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
-SECTION 1.  Section 6-4-27 NMSA 1978 (being Laws 2020,
-Chapter 3, Section 4, as amended) is amended to read:
-"6-4-27.  EXCESS EXTRACTION TAXES SUSPENSE FUND--TRANSFER
-OF EXCESS OIL AND GAS EMERGENCY SCHOOL TAX REVENUE--TAX
-STABILIZATION RESERVE--[EARLY CHILDHOOD EDUCATION AND CARE
-FUND--BEHAVIORAL HEALTH TRUST FUND] ZERO INTEREST DOWN PAYMENT
-LOAN FUND--SEVERANCE TAX PERMANENT FUND.--
-.233090.1
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-A.  The "excess extraction taxes suspense fund" is
-created as a nonreverting fund in the state treasury.  Money in
-the fund shall only be used to make transfers by the department
-of finance and administration as required by this section.
-B.  At the end of each fiscal year, the department
-of finance and administration shall calculate and transfer the
-balance of the fund attributable to that fiscal year as
-follows:
-(1)  if in the current fiscal year the total
-net receipts attributable to the tax imposed pursuant to
-Section 7-31-4 NMSA 1978 and distributed pursuant to Section
-7-1-6.20 NMSA 1978 exceed the annual average amount, the
-department shall distribute the excess amount above the annual
-average amount as follows:
-(a)  to the tax stabilization reserve,
-the amount necessary to bring the balance of state reserves to
-a level equal to twenty-five percent of the aggregate recurring
-appropriations for that fiscal year from the general fund, as
-determined by the department; provided that, if the balance in
-the excess extraction taxes suspense fund is not sufficient to
-meet that level, the entire balance shall be transferred to the
-tax stabilization reserve; and
-(b)  to the zero interest down payment
-loan fund, the balance of the excess amount above the annual
-average amount, if any, after the transfer is made pursuant to
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-Subparagraph (a) of this paragraph [shall be transferred as
-follows:  1) for fiscal years 2026 through 2028, fifty percent
-to the early childhood education and care fund and fifty
-percent to the behavioral health trust fund; provided that if,
-as of the end of one of those fiscal years, the balance of the
-early childhood education and care fund is less than the
-balance of that fund as of the end of fiscal year 2025, the
-transfer to the behavioral health trust fund made pursuant to
-this item shall be decreased by an amount equal to one-half of
-the difference between the balance of the early childhood
-education and care fund as of the end of fiscal year 2025 and
-the balance of that fund as of the end of that fiscal year; and
-2) for fiscal year 2029 and each fiscal year thereafter, one
-hundred percent to the early childhood education and care
-fund]; and
-(2)  the remaining balance of the fund, if any,
-shall be distributed to the severance tax permanent fund.
-C.  As used in this section:
-(1)  "annual average amount" means the total
-net receipts attributable to the tax imposed pursuant to
-Section 7-31-4 NMSA 1978 and distributed pursuant to Section
-7-1-6.20 NMSA 1978 in the immediately preceding five fiscal
-years, divided by five; and
-(2)  "state reserves" means the general fund
-balances, as determined by the department of finance and
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-administration, including all authorized revenues and transfers
-to the general fund and balances in the appropriation
-contingency fund, the general fund operating reserve, the
-state-support reserve fund and the tax stabilization reserve."
-SECTION 2.  Section 9-29A-3 NMSA 1978 (being Laws 2020,
-Chapter 3, Section 3, as amended) is amended to read:
-"9-29A-3.  DISTRIBUTION--[EARLY CHILDHOOD EDUCATION AND
-CARE FUND--MEDICAID TRUST FUND] ZERO INTEREST DOWN PAYMENT LOAN
-FUND--SEVERANCE TAX PERMANENT FUND--PAYMENTS PURSUANT TO
-FEDERAL MINERAL LEASING ACT.--
-A.  If, by June 30 of each fiscal year, the net
-receipts for that fiscal year of the money received by the
-state pursuant to the federal Mineral Leasing Act exceed the
-annual average amount, the excess amount above the annual
-average amount shall be distributed [as follows and attributed
-to that fiscal year:
-(1)  for fiscal years 2026 through 2028:
-(a)  fifty percent to the early childhood
-education and care fund and fifty percent to the medicaid trust
-fund; provided that
-(b)  if, as of the end of one of those
-fiscal years, the balance of the early childhood education and
-care fund is less than the balance of that fund as of the end
-of fiscal year 2025, the distribution to the medicaid trust
-fund made pursuant to Subparagraph (a) of this paragraph shall
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-be decreased by an amount equal to one-half of the difference
-between the balance of the early childhood education and care
-fund as of the end of fiscal year 2025 and the balance of that
-fund as of the end of that fiscal year; and
-(2)  for fiscal year 2029 and each fiscal year
-thereafter, one hundred percent to the early childhood
-education and care fund] to the zero interest down payment loan
-fund and attributed to that fiscal year.
-B.  If, [by June 30, 2025, and] by June 30 of each
-fiscal year, [thereafter] the remaining amount of the net
-receipts for that fiscal year of the money received by the
-state pursuant to the federal Mineral Leasing Act after the
-distribution pursuant to Subsection A of this section exceeds
-the threshold amount, the excess shall be distributed to the
-severance tax permanent fund.
-C.  The department of finance and administration
-shall make the calculations to determine if excess amounts
-shall be distributed pursuant to this section.  If there is an
-excess amount, the distribution shall be made as soon as
-practicable.  If there is not an excess amount, no distribution
-shall be made.
-D.  As used in this section:
-(1)  "annual average amount" means the total
-net receipts attributable to money received by the state
-pursuant to the federal Mineral Leasing Act in the immediately
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-preceding five fiscal years, divided by five; and
-(2)  "threshold amount" means the net receipts
-of the money received by the state pursuant to the federal
-Mineral Leasing Act distributed in fiscal year 2024 pursuant to
-Subsection B of Section 22-8-34 NMSA 1978."
-SECTION 3.  A new section of the Mortgage Finance
-Authority Act is enacted to read:
-"[NEW MATERIAL] ZERO INTEREST DOWN PAYMENT LOAN FUND FOR
-FIRST-TIME HOME BUYERS--REQUIREMENTS.--
-A.  The "zero interest down payment loan fund" is
-created as a nonreverting fund in the state treasury.  The fund
-consists of distributions, appropriations, gifts, grants,
-donations and income from investment of the fund.  The
-authority shall administer the fund, and money in the fund is
-appropriated to the department of finance and administration to
-contract with the authority to provide loans as provided in
-this section.  Expenditures from the fund shall be by warrant
-of the secretary of finance and administration pursuant to
-vouchers signed by the secretary of finance and administration
-or the secretary's authorized representative.
-B.  Subject to availability of money in the fund,
-money in the fund shall be used to provide zero interest loans
-to eligible home buyers for up to twenty percent of the
-purchase price of residential housing in New Mexico that is the
-first home of the eligible home buyer; provided that the loan
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-provided by the authority shall be a lien on the property
-secured by a thirty-year mortgage.  If the property is sold in
-less than thirty years, the balance of the loan shall be
-immediately repaid.  The authority may foreclose on the loan if
-the home buyer defaults on the loan.
-C.  Applications for a zero interest loan shall be
-submitted to the authority on forms and in a manner prescribed
-by the authority.
-D.  The authority may promulgate rules to carry out
-the provisions of this section.
-E.  As used in this section, "eligible home buyer"
-means a person whose household income is less than four hundred
-percent of the federal poverty level."
-SECTION 4.  EFFECTIVE DATE.--The effective date of the
-provisions of this act is July 1, 2026.
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-.233090.1
+Fiscal impact reports (FIRs) are prepared by the Le gislative Finance Committee (LFC) for standing finance
+committees of the Legislature. LFC does not assume responsibility for th e accuracy of these reports if they
+are used for other purposes.
+
+F I S C A L    I M P A C T    R E P O R T
+
+BILL NUMBER: House Bill 176
+SHORT TITLE: Create Zero Interest Down Payment Loan Fund
+SPONSOR: Martinez/ Dow/ Henry
+LAST
+UPDATE:
+ORIGINAL
+DATE:  02/03/26
+
+ANALYST: Torres
+
+REVENUE*
+(dollars in thousands)
+Type FY26 FY27 FY28 FY29 FY30 Recurring or
+Nonrecurring
+Fund
+Affected
+Oil and Gas
+Revenues ($84,400.0) ($86,800.0)  ($110,100.0) ($406, 500.0) ($512,400) Recurring
+Eary
+Childhood
+Trust Fund
+Oil and Gas
+Revenues ($61,000.00) ($42,740.00) ($108,100.00) $0.0 $0.0 Nonrecurring Medicaid
+Trust Fund
+Oil and Gas
+Revenues ($84,400.00) ($25,800.00 ) ($67,400.00) $0.0 $0.0 Nonrecurring
+Behavioral
+Health Trust
+Fund
+Oil and Gas
+Revenues $229,800.00 $155,340. 00 $285,600.00 $406, 500.00 $512,400.00 Recurring
+Zero Interest
+Down
+Payment
+Loan Fund
+Parentheses indicate revenue decreases.
+*Amounts reflect most recent analysis of this legislation.
+
+Sources of Information
+LFC Files
+
+Agency or Agencies Providing Analysis
+Health Care Authority
+Early Childhood Education and Care Department
+New Mexico Mortgage Finance Authority (Housing New Mexico)
+
+SUMMARY
+
+Synopsis of House Bill 176
+House Bill 176 (HB176) creates a zero interest down payment loan fund for first-time home
+buyers and redirects certain excess oil and gas– related revenues and federal mineral leasing
+revenues to capitalize that fund. The bill amends existing statutes governing the excess extraction
+taxes suspense fund and distributions of federal mineral leasing ac t revenues to redirect transfers
+from the early childhood educatio n and care fund, the behavioral  health trust fund, and the
+medicaid trust fund to the new zero interest down payment loan fund.
+House Bill 176 – Page 2
+
+The bill creates a new nonreverting fund in the state treasury to be ad ministered by the New
+Mexico Mortgage Finance Authority (MFA). Subject to available funding, the MFA would
+provide zero interest loans of up to 20 percent of a home’s purchas e price to eligible first-time
+home buyers with household income below 400 percent of the federal poverty level. The loans
+must be secured by a 30-year mortgage lien, must be repaid upon sale if the home is sold within
+30 years, and are subject to foreclosure in the event of default.
+The bill becomes effective July 1, 2026.
+FISCAL IMPLICATIONS
+Under current law, excess oil and gas emergenc y school tax revenues and excess federal mineral
+leasing revenues are distributed to a combination of the tax stabilization reserve, early childhood
+education and care fund, behavior al health trust fund, medicaid  trust fund, and severance tax
+permanent fund, subject to statutory formulas  and thresholds. HB176 redirects the excess
+revenues that would otherwise fl ow to early childhood, behavioral  health, and medicaid trust
+funds to the new zero interest down payment loan fund.
+As a result, the bill represents a reallocation of volatile, nonrecurring revenue streams rather than
+the creation of a new revenue so urce. The magnitude of funding available for the loan program
+will depend on oil and gas prices, production levels, federal leasing activity, and reserve
+balances, and will vary significantly from year to  year. In high-revenue years, the fund could
+receive substantial deposits; in lower-revenue years, deposits may be minimal or nonexistent.
+The bill eliminates future deposits into the early childho od education and care fund, the
+behavioral health trust fund, and the medicaid trust fund relative  to current law. While those
+funds are not part of the general fund, they support programs that would otherwise place pressure
+on general fund appropriations. Over  time, reduced growth in t hose trust funds could increase
+general fund obligations for early childhood, behavioral health, and medicaid services.
+House Bill 176 may materi ally affect the long-term sustai nability of the early childhood
+education and care fund (ECTF) by  redirecting revenues that the f und is relying on to meet its
+new statutory distribution requirements. Recent statutory changes establish a minimum annual
+distribution floor of $500 milli on from the ECTF, regardless of investment performance or
+revenue inflows. By diverting excess oil and gas emergency school ta x revenues and federal
+mineral leasing revenues that would otherwise be deposited into the ECTF, this bill reduces the
+inflows supporting that distribution obligation. The combination of fixed annual distributions and
+reduced deposits means future distributions will  be made from principal rather than earnings.
+Over time, this dynamic w ill cause the fund’s corpus to shri nk, eroding future earnings capacity
+and increasing the risk that th e ECTF becomes structurally uns ustainable without additional
+revenue sources or statutory changes to distribution requirements.
+Loans made under the program are expected to be repaid upon sa le or refinance, which may
+allow some degree of fund recy cling. However, because the loan s are zero interest and long-
+term, repayments are likely to be delayed, and the fund will function primarily as a revolving
+program only over long-time horizo ns. Loan defaults could also reduce the effective capital
+available for future borrowers.
+House Bill 176 – Page 3
+
+SIGNIFICANT ISSUES
+
+House Bill 176 could improve access to homeowne rship for first-time buyers by addressing one
+of the most signif icant barriers to entry in the housin g market: the accumulation of a down
+payment. Even households with stable income and credit may struggle to save for a down
+payment while facing rising rents, student loan ob ligations, and higher interest rates. By offering
+zero interest loans for up to 20 percent of a home’s purchase price, the bill could allow eligible
+households to enter homeownershi p earlier than would ot herwise be possible,  particularly in
+markets where rents are high relative to incomes.
+
+Expanded access to homeownership may generate  broader economic a nd fiscal benefits.
+Homeownership is associated w ith greater household stability, lo wer residential turnover, and
+increased investment in local communities. Ov er time, increased homeownership can support
+neighborhood stabilization, expand th e local property tax base, a nd reduce demand for rental
+assistance and other housing-rela ted public services. To the ex tent that first-time buyers
+transition from renting to owning, the bill may al so ease pressure on the rental market at the
+margin, though this effect depends on housing supply conditions.
+
+The program’s loan structure mi tigates some fiscal risk by requiring repayment upon sale or
+refinance and by securing the loan with a mortga ge lien. This design distinguishes the assistance
+from a grant and preserves the possibility of  recycling funds over the long term. Although
+repayments are delayed, the stru cture aligns public support with asset-building rather than
+consumption and allows the state to retain a financial interest in the property.
+
+However, the magnitude of these positive impacts depends on housing supply responsiveness. In
+markets with constrained supply, increased purchas ing power will primarily translate into higher
+prices, reducing the net afford ability benefit for buyers and benefiting sellers instead. The
+benefits of the program will therefore vary regionally and may be more pronounced in areas
+where new housing construction can respond to increased demand.
+
+Redirecting excess revenues away from early ch ildhood education, beha vioral health, and
+medicaid trust funds represents a significant shift in long-term policy priorities. Those trust funds
+were designed to provide and prioritize funding for those services and reduce reliance on annual
+appropriations. Slower growth in those funds may undermine that object ive and reintroduce
+fiscal pressures into funding those programs.
+
+The bill provides eligibility for assistance to households earning up to 400 percent of the federal
+poverty level, which includes moderate- and highe r-income households re lative to traditional
+housing assistance programs. While this may addr ess down payment barriers for middle-income
+households, it may dilute targeting toward lo wer-income households most constrained by
+housing affordability.
+
+The requirement that loans be secured by a 30- year mortgage lien raises questions about
+interaction with prima ry mortgage lenders, refinancin g transactions, and subordination
+agreements. Program rules will need to addr ess how zero interest loans interact with
+conventional mortgage products.
+
+The bill does not establish a lo an amount beyond the 20 percent purchase price cap, which could
+result in large disparities in loans provided and create inequity betw een homebuyers receiving
+House Bill 176 – Page 4
+
+support. Therefore, the fiscal exposure per borrower may vary widely.
+
+The Early Childhood Education and Care Department notes:
+While HB176 does not amend the Early Childhood Trust Fund distribution rate, it diverts
+future automatic deposits away from early childhood and toward a new housing loan
+fund, which would weaken the long-term su stainability framework intended to support
+early childhood services across New Mexico . The consequence is  not merely an
+accounting change: it reduces the state’s abilit y to maintain care an d education of young
+children as a stable, predictabl e program over time and increas es the likelihood of future
+funding shortfalls or greater reliance on the general fund…
+
+Redirecting all future auto matic deposits from the Earl y Childhood Education and Care
+Fund would have devastating impacts on the gr owth of this fund, weakening the fund’s
+ability to support early childhood program s over the long term. Without continued
+deposits, the corpus of the fund would stagna te or decline, weak ening its capacity to
+provide sustainable distributions  over time. As the balance er odes, then distributions to
+the Early Childhood Education and Care De partment may decrease, impacting the
+department’s ability to fund high-quality early childhood programming across the state.
+
+The Health Care Authority highlighted the following concerns:
+House Bill 176 would have a ne gative fiscal impact on the Health Care Authority (HCA)
+by diverting revenues that would otherwise be distributed to the Medicaid Trust Fund and
+Behavioral Health Trust Fund to the newly created Zero Interest Down Payment Loan
+Fund. While the bill does not appropriate or  reduce General Fund dollars directly to
+HCA, it reduces revenue sources that supports Medicaid and behavior al health services
+sustainability…
+
+Reduced growth of the Behavior al Health Trust Fund will limit  the availability of future
+earnings-based distributions in tended to support statewide behavioral health system
+investments. In the absence of these re venues, continued imp lementation of the
+Behavioral Health Reform and Investment  Act (SB3, 2025), including sustained funding
+for regional behavioral health infrastructure, will require increased reliance on general
+fund appropriations in future fiscal years.
+
+[There is also an] impact on Medicaid financ ing. The Medicaid Trust Fund is intended to
+provide long-term financial stability for the Medicaid program, including offsetting
+future general fund obligati ons, supporting program growt h, enrollment increases, or
+federal funding changes [and] reduced or eliminated deposits to the Medicaid Trust Fund
+may increase future reliance on general fund or other revenue sources, limits HCA’s
+ability to mitigate federal polic y or matching-rate changes, reduced financial flexibility
+during economic downturns.
+
+Finally, the New Mexico Mortgage Finance Aut hority (MFA) notes they currently administer
+three down payment assistance pr ograms serving more than 2,000 households annually, most of
+whom are first-time home buyers. Those programs include:
+
+• FirstDown – downpayment assistance for firs t time homebuyers with moderate income
+limits, which for example in the Albuquerque  Metropolitan Statistical Area (MSA)
+(Bernalillo, Sandoval, Torrance, and Valenc ia County) is $98,254 for a 1-to-2-person
+House Bill 176 – Page 5
+
+household and $112,992 for households with 3 or more members. This downpayment
+assistance can be layered with other downpayment assistance programs.’
+• FirstDown Plus – A third mortgage down pa yment assistance loan designed to provide
+additional down payment to first-time homeb uyers qualified to use the New Mexico
+Mortgage Finance Authority’s FirstHome program. Previous homeowners who have not
+owned and occupied a home as their primary residence in the past three years may also be
+eligible for the program.
+• HomeNow - downpayment assistance for fi rst-time homebuyers who have lower
+household incomes. The loan has a 0% interest rate and may be forgiven after 10 years if
+certain conditions are met. The income limits fo r this program, for example, in Bernalillo
+County for a 3-person household is $65,800.
+
+PERFORMANCE IMPLICATIONS
+
+The HCA reports:
+By reducing anticipated growth of the Behavi oral Health Trust Fund, the bill may affect
+the state’s long-term capacity to support the regional behavioral health system established
+under SB3. Delayed trust fund growth could limi t the availability of stable, recurring
+funding for regional service delivery and system transformation efforts.
+
+TECHNICAL ISSUES
+
+Although House Bill 176 has an effective date  of July 1, 2026, the timing of statutory
+distributions from the excess extraction taxes suspense fund and federal mineral leasing revenues
+means the bill would affect reve nues attributable to fiscal y ear 2026. Distributions from these
+sources are calculated after the close of the fiscal year and are made in September and December
+of the following fiscal year, ba sed on prior-year collections and statutory formulas. As a result,
+revenues generated during FY26 that would othe rwise have been distributed to the early
+childhood education and care fund, the behavioral h ealth trust fund, and the medicaid trust fund
+under current law would instead be  redirected to the zero intere st down payment loan fund once
+the bill becomes effective. This  timing effect reallocates FY26 revenues despite the prospective
+effective date, accelerating the fiscal impact on affected trust funds by one fiscal year and further
+reducing near-term deposits those funds may have been anticipating under existing statutes.
+
+IT/ct/cf