04/16/2002 08:03 AM House STA

HB 370 - GUARANTEED REVENUE BONDS FOR VETERANS                                                                                
                                                                                                                                
CHAIR COGHILL announced  that the next order of  business would be                                                              
HOUSE BILL  NO. 370, "An  Act relating  to the issuance  of state-                                                              
guaranteed   revenue  bonds   by   the  Alaska   Housing   Finance                                                              
Corporation  to finance  mortgages  for qualifying  veterans;  and                                                              
providing for an effective date."                                                                                               
                                                                                                                                
Number 1470                                                                                                                     
                                                                                                                                
JOHN   BITNEY,  Legislative   Liaison,   Alaska  Housing   Finance                                                              
Corporation (AHFC),  Department of Revenue, explained  that HB 370                                                              
is  an authorization  to  ask voters  this  fall  to approve  $500                                                              
million  in  state-guaranteed  mortgage revenue  bonds  that  AHFC                                                              
would  issue out  over  time to  provide  the  funds necessary  to                                                              
continue the  veterans mortgage revenue.   The state  got involved                                                              
in this  program around 1980 when  Congress opened up  a provision                                                              
in the  U.S. tax code  for states to  provide a tax-free  mortgage                                                              
program  to  qualified  veterans.   Shortly  thereafter,  Congress                                                              
closed the  window for states  to get in  on the program.   Alaska                                                              
was one  of five states  that had gone  ahead and gotten  started.                                                              
Essentially, Alaska has been grandfathered in.                                                                                  
                                                                                                                                
Number 1556                                                                                                                     
                                                                                                                                
MR. BITNEY  told the members that  in order for these  bonds to be                                                              
tax-exempt under  the U.S. Code,  the state issuing the  bonds has                                                              
to  unconditionally  guarantee  the  bonds,  and  in  Alaska  that                                                              
requires voter approval.   Unlike any other mortgage  program AHFC                                                              
has,  this one  has  to  have voter  approval.   These  bonds  are                                                              
structured so that  the mortgages that they're  purchasing are the                                                              
assets  that back  them.    This is  no  way uses  up  any of  the                                                              
state's general obligation bond capacity.  That is separate.                                                                    
                                                                                                                                
Number 1624                                                                                                                     
                                                                                                                                
MR. BITNEY  reported  that this  is the fifth  time this  question                                                              
has been  put out on the  ballot, and the  last time was  in 1986.                                                              
He noted that  these questions have been strongly  approved by the                                                              
voters at 60 percent  or better.  Information would  be gotten out                                                              
to the  voters if  this were  put out for  a vote,  he said.   The                                                              
program is  offered and available  to qualified veterans  who were                                                              
in active-duty  service  prior to  January 1,  1977, and have  not                                                              
been discharged more  than 30 years prior to the  date of the loan                                                              
application,  so   there  is  a  diminishing  pool   of  qualified                                                              
veterans.   Right  now there  are about  400 loans  per year,  $70                                                              
million in volume.   He said that this would probably  be the last                                                              
time this is done, unless Congress extended the benefit.                                                                        
                                                                                                                                
Number 1775                                                                                                                     
                                                                                                                                
MR.  BITNEY explained  that the  AHFC would  not just  go out  and                                                              
issue  $500 million  in  one  sale; it  would  be  broken up  into                                                              
pieces  over time  as the  demand for  loans comes  in each  year.                                                              
Two  weeks  ago  the  AHFC  finished  a  sale  on  a  $50  million                                                              
financing for loans.   There's about $47 million  in capacity left                                                              
from the  last voter authorization in  1986.  He told  the members                                                              
that the  AHFC will be  out of authorization  from that  last vote                                                              
easily by the end of this year.                                                                                                 
                                                                                                                                
Number 1828                                                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON asked what the average amount of loan is.                                                                 
                                                                                                                                
MR. BITNEY  answered that in FY  [fiscal year] 01, there  were 411                                                              
loans;  the average  sale  price was  $188,000;  the average  loan                                                              
amount  on that  was $169,000.   The  average loan-to-value  ratio                                                              
was about  91 percent,  and  a 5 percent  down is  required.   The                                                              
AHFC  will go  to 100  percent loan-to-value  if there  is "a  VA"                                                              
[Veterans  Administration] coupled  with  the loan.   The  average                                                              
age of  the borrower was  50 years old,  with a household  size of                                                              
two, and an average payment of $1,000 per month.                                                                                
                                                                                                                                
Number 1897                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD asked  if $500  million was  the size  of                                                              
the obligation done in the past.                                                                                                
                                                                                                                                
MR. BITNEY  answered in 1986  it was $600  million.  The  total is                                                              
almost $2.2 billion.                                                                                                            
                                                                                                                                
REPRESENTATIVE WILSON  asked for more details on the  rules of the                                                              
loans.                                                                                                                          
                                                                                                                                
MR. BITNEY answered  that there are no income  restrictions and no                                                              
acquisition restrictions  on this  tax-exempt program that  are in                                                              
other tax-exempt  programs.  Someone  can only own one  home under                                                              
the  program.     It  is  for  an  owner-occupied,   single-family                                                              
residence or  condominium up  to a four-plex,  or a  type-1 mobile                                                              
home.                                                                                                                           
                                                                                                                                
Number 2125                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES moved  to  report HB  370  out of  committee                                                              
with  individual  recommendations   and  the  accompanying  fiscal                                                              
notes.  There being  no objection, HB 370 was reported  out of the                                                              
House State Affairs Standing Committee.