Legislature(1999 - 2000)
03/09/1999 01:45 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 93
"An Act relating to the Alaska Housing Finance
Corporation's rural assistance loan program and to the
definition of 'housing' for purposes of the
corporation's housing assistance loan program; and
providing for an effective date."
REPRESENTATIVE CARL MORGAN explained that the proposed
legislation would modify AHFC's Rural Mortgage program to
allow two changes:
? The Rural Mortgage program would allow for
refinancing of home loans in the same manner any
conventional mortgage allows. While many people
around the nation have taken advantage of low
interest rates to refinance their home mortgages,
state law simply does not provide the option under
the rural lending program.
? The current definition in state law limits the
term "housing" to either single family or owner
occupied duplexes. The proposed legislation would
bring the term into compliance with current
industry standards for lending by allowing owner-
occupied housing up to four units. The Rural
Mortgage program would be allowed to finance up to
a four-plex.
Representative Morgan asked members to note that the bill
would not allow the program to make loans that are not
allowed under conventional lending practices or industry
standards. The bill attempts to allow the loan program to
make the same kind of loans allowed for any conventional
urban loan program.
The Rural Mortgage loan program is a revolving fund. Alaska
Housing Finance Corporation (AHFC) has reported that default
rates in the program are the same or less than the rate of
defaults on conventional urban loans. The legislation would
attempt to make changes that would allow a lending program
to make the same kind of loans considered standard practice
under conventional lending. Representative Morgan stressed
that this is an issue of "fairness" for rural borrowers and
would be good business for AHFC.
JOHN BITNEY, LEGISLATIVE LIASON, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, ANCHORAGE, stated that
Alaska Housing Finance Corporation (AHFC) supports the
proposed legislation which will assist rural borrowers to
take advantage of the better interest rates currently
available. The original statutes were not written to
include the concept of "refinancing" or to address that the
rates would decline to what they currently are.
Co-Chair Therriault restated that current statute does not
allow for refinancing; the language would be inclusive of up
to a four-plex. He asked if this would be a subsidized loan
program.
KAY MURPHY, MORTGAGE OPERATIONS DIRECTOR, ALASKA HOUSING
FINANCE CORPORATION, DEPARTMENT OF REVENUE, explained that
the program was funded from a revolving loan fund by
corporate receipts of AHFC. The interest rate is set by
statute at 1% less than the Corporation's taxable loan
program.
Co-Chair Therriault questioned if additional staffing would
be needed to implement the program. Ms. Murphy responded
that AHFC was not anticipating any additional staffing. She
added, because rural borrowers can not refinance their
loans, AHFC has refinanced them under other programs within
the Corporation. A volume of loans has already been
addressed.
Representative Grussendorf asked if an owner would be
required to live on the property. Ms. Murphy replied that
it would need to be owner occupied housing and having four
or fewer units. Mr. Bitney pointed out that there is a non-
owner occupied program, which would not be addressed, in the
proposed legislation. Representative Foster commented that
he had proposed an identical bill six years ago. He voiced
strong support for the legislation.
Representative Bunde suggested that a subsidy needs to be
fair and that to date, rural communities have not had the
same opportunity to take advantage of loan programs
available to the urban communities.
Representative Kohring questioned the level of risk with
loans offered to rural Alaska. He suggested that risk
factor be reflected in the default rate. Ms. Murphy replied
that the delinquency rate in the rural loan program was
slightly less than the overall portfolio, which is a little
over 3%, with a good payment history.
Representative Kohring inquired if it would be a streamlined
refinance. Ms. Murphy explained that there is a streamline
refinance program, which is a continual program without a
cut off date. With the passage of HB 93, AHFC would be able
to offer streamline refinancing to rural loan borrowers
within the rural loan program.
Representative Kohring questioned how many loans would be
eligible for the program. Ms. Murphy replied that in the
rural loan program, there are over 500 loans which are over
8% at this time.
Representative Kohring asked what definition of "rural" was
used. Ms. Murphy replied that if a community was not
connected on a road system, it would consist of a population
of 6500 or less; if it was connected on a road system, it
would have a population of 1600 or less.
Representative G. Davis questioned the definition of
"community". Ms. Murphy replied that for the higher
populated areas around Anchorage and Fairbanks, a community
would be within 50 miles of the Anchorage City center, which
would be considered urban, and within 25 miles of Fairbanks
City center would also be considered urban. She noted this
was an attempt by AHFC to define community.
Representative Kohring MOVED to report HB 93 out of
Committee with individual recommendations and with the
accompanying zero fiscal note. There being NO OBJECTION, it
was so ordered.
HB 93 was reported out of Committee with a "do pass"
recommendation and with a zero fiscal note by the Department
of Revenue dated 2/24/99.
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