Legislature(1999 - 2000)

03/09/1999 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
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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