Legislature(1999 - 2000)

02/23/1999 08:03 AM CRA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HB 93 - RURAL ASSISTANCE HOUSING LOANS                                                                                          
                                                                                                                                
Number 0060                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HALCRO announced the committee would hear 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."                                                                             
                                                                                                                                
Number 0068                                                                                                                     
                                                                                                                                
REPRESENTATIVE CARL M. MORGAN, JR., prime sponsor, came forward to                                                              
present the bill.  He told members this legislation would allow two                                                             
simple changes.  First, the rural mortgage program would allow for                                                              
refinancing of home loans in the same manner as for any                                                                         
conventional mortgage.  While many Alaskans have taken advantage of                                                             
these low interest rates to refinance their home mortgages, state                                                               
law does not provide this option for the rural lending program.                                                                 
Second, current state law limits the term "housing" to single-                                                                  
family homes and owner-occupied duplexes.  This would allow owner-                                                              
occupied housing having up to four units.  Because of rural housing                                                             
shortages, this would allow for more homes to rent to doctors or                                                                
teachers, for example.                                                                                                          
                                                                                                                                
REPRESENTATIVE MORGAN pointed out that whereas the current lending                                                              
rate is 6.125 percent for 30-year loans, the Alaska Housing Finance                                                             
Corporation (AHFC) rural loan program has more than 1,100 loans                                                                 
with interest rates over 8 percent, and it has 500 loans at 9                                                                   
percent interest.  Refinancing would provide a big savings to the                                                               
home buyer.  Representative Morgan emphasized that this is not a                                                                
giveaway, as  the rural loan program is a revolving fund.                                                                       
                                                                                                                                
Number 0243                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HARRIS asked why urban dwellers, but not rural                                                                      
dwellers, have been allowed to refinance their homes.                                                                           
                                                                                                                                
REPRESENTATIVE MORGAN said he didn't know whether it was an                                                                     
oversight or if there was a reason when the legislation was passed.                                                             
He noted that a person can seek help from another lending                                                                       
institution.  This bill would make it a one-stop process, however,                                                              
lowering closing costs and other costs.                                                                                         
                                                                                                                                
Number 0342                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON asked who had requested this bill.                                                                         
                                                                                                                                
REPRESENTATIVE MORGAN said he and his staff had been looking at                                                                 
these regulations and had done it on their own.                                                                                 
                                                                                                                                
REPRESENTATIVE DYSON asked what caused them to look at the                                                                      
regulations in the first place.                                                                                                 
                                                                                                                                
REPRESENTATIVE MORGAN explained that where he comes from there is                                                               
a housing shortage.  When looking at the refinancing, they had                                                                  
discovered a discrepancy in the AHFC loan program.  This would                                                                  
provide equality under the lending statutes.                                                                                    
                                                                                                                                
Number 0463                                                                                                                     
                                                                                                                                
JOHN BITNEY, Legislative Liaison, Alaska Housing Finance                                                                        
Corporation, testified via teleconference from Anchorage, noting                                                                
that Kay Murphy and Daniel Fauske (CEO/Executive Director) were                                                                 
with him.  He advised members that packets should contain a zero                                                                
fiscal note from the AHFC, as well as a two-page letter to the                                                                  
sponsor from Mr. Fauske.  He said the letter would speak for                                                                    
itself; he himself would make general comments and then ask Kay                                                                 
Murphy to address specific items in the letter.                                                                                 
                                                                                                                                
MR. BITNEY advised members that the AHFC supports HB 93.  Both                                                                  
provisions in the bill have been introduced in prior legislatures                                                               
and have gone through various hearings; however, they were included                                                             
with legislation containing other matters that had raised                                                                       
questions.  At the start of this session, the AHFC had begun                                                                    
working with Representative Morgan's office on some of those                                                                    
provisions that appeared noncontroversial, and that related to                                                                  
fairness between rural and urban borrowers.                                                                                     
                                                                                                                                
Number 0630                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HARRIS asked whether HB 93 contains anything possibly                                                               
detrimental that the committee isn't aware of, discussed by                                                                     
previous legislatures.                                                                                                          
                                                                                                                                
MR. BITNEY said no, he doesn't believe so.  The prior provisions                                                                
had related to the AHFC's supplemental housing grant program and to                                                             
the extent that it would be allowed to do some other things.  He                                                                
characterized the prior legislation as "nonglamorous," saying they                                                              
had been unable to get it through some of the end-of-session                                                                    
bargaining and excitement. The provisions in HB 93 are very                                                                     
straightforward, and there is nothing that he believes the                                                                      
committee would be missing.                                                                                                     
                                                                                                                                
Number 0778                                                                                                                     
                                                                                                                                
REPRESENTATIVE DYSON asked what public purpose is served by                                                                     
financing four-plexes.                                                                                                          
                                                                                                                                
KAY MURPHY, Mortgage Operations Director, Alaska Housing Finance                                                                
Corporation, answered via teleconference from Anchorage that she                                                                
believes the public purpose is twofold.  First, allowing the                                                                    
financing of small multifamily housing units will provide                                                                       
additional housing in rural Alaska, where there exists a severe                                                                 
shortage.  Second, allowing owner occupancy will provide for better                                                             
maintenance of the units.                                                                                                       
                                                                                                                                
REPRESENTATIVE DYSON asked the reason for four units, rather than                                                               
more.                                                                                                                           
                                                                                                                                
MS. MURPHY said it is to bring the rural loan program in line with                                                              
traditional mortgage loan programs.  The typical definition of a                                                                
single-family dwelling, in general secondary market terms, is "one-                                                             
to-four-family," whereas anything with five or more units is                                                                    
"multifamily."  Ms. Murphy pointed out that AHFC has a program for                                                              
multifamily financing, typically for investment property that is                                                                
not occupied by the owner.                                                                                                      
                                                                                                                                
Number 0894                                                                                                                     
                                                                                                                                
REPRESENTATIVE MURKOWSKI asked whether an individual in a rural                                                                 
community has an option to refinance his or her home, if that                                                                   
person has a loan through the AHFC.                                                                                             
                                                                                                                                
MS. MURPHY said current statutes do not specifically allow a person                                                             
to refinance an existing rural loan program loan.  The AHFC does                                                                
have a streamlined refinancing program where the borrower applies                                                               
with a lender, provides very limited documentation, and can effect                                                              
a refinance, a lowering of interest rates, or a change in terms.                                                                
However, rural borrowers don't have that option under their rural                                                               
loan program, so they would have to refinance under other                                                                       
conventional programs, through the AHFC or other lenders.  They                                                                 
would therefore not have the interest rates and terms associated                                                                
with the rural loan program.                                                                                                    
                                                                                                                                
Number 1031                                                                                                                     
                                                                                                                                
REPRESENTATIVE JOULE commented that he himself had recently gone                                                                
through this process; after 15 years with the AHFC, he'd had to                                                                 
borrow from another institution to refinance, at a higher interest                                                              
rate than he would have gotten from AHFC if he could have                                                                       
refinanced with them.  He said this is a very good step in the                                                                  
right direction.                                                                                                                
                                                                                                                                
CO-CHAIRMAN HALCRO asked whether Representative Joule would have                                                                
been able to take advantage of the program proposed in HB 93, had                                                               
it been available.                                                                                                              
                                                                                                                                
REPRESENTATIVE JOULE said yes, at a whole percentage lower than the                                                             
rate he got.                                                                                                                    
                                                                                                                                
Number 1110                                                                                                                     
                                                                                                                                
REPRESENTATIVE MORGAN pointed out that the default rate is the                                                                  
rural mortgage loan program is generally the same as for the urban                                                              
programs; in some cases, it is much less.                                                                                       
                                                                                                                                
CO-CHAIRMAN HALCRO asked whether there were further questions, then                                                             
closed public testimony.                                                                                                        
                                                                                                                                
Number 1153                                                                                                                     
                                                                                                                                
CO-CHAIRMAN HARRIS made a motion to move HB 93 from the committee                                                               
with the attached zero fiscal note and individual recommendations.                                                              
There being no objection, HB 93 moved from the House Community and                                                              
Regional Affairs Standing Committee.                                                                                            

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