Legislature(2001 - 2002)
04/25/2001 09:11 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 181
"An Act making the interest rate for the Alaska Housing
Finance Corporation's small community housing mortgage loans
the same as the interest rate on mortgage loans purchased
under the corporation's special mortgage loan purchase program
from the proceeds of the most recent applicable issue of
taxable bonds before the origination or purchase of the small
community housing mortgage loans."
This was the second hearing for this bill in the Senate Finance
Committee.
Co-Chair Donley indicated he had a proposed committee substitute to
distribute to Committee members for consideration.
AT EASE 9:10 AM / 9:17 AM
Co-Chair Donley moved for adoption of CS SB 181, 22-LS0488/S as a
working draft and explained the changes. He noted the original
version of the bill eliminates the one-percent subsidy within the
Housing Assistance Loan Fund (HALF) program. The committee
substitute, he stated, retains this subsidy for the first $100,000
value of a residential purchase and would limit availability to
only those communities with an average cost of living equal to, or
greater than, 125 percent of the statewide average.
Senator Hoffman objected and shared he had a conversation with
representatives from the Alaska Housing Finance Corporation (AHFC)
where he learned that limiting availability of the subsidy to any
amount less than $200,000 would jeopardize the dividend provided to
the state treasury. He commented that this limitation would also
"cripple the housing program in many rural areas of the state."
stressed the existing allowances are necessary to ensure the
continuation of the program's ability to offer lower interest
rates. He requested a representative of the Corporation address the
benefits of the program.
Co-Chair Kelly announced public testimony had been heard during the
bill's previous hearing and was concluded.
Co-Chair Donley added that his intent is to only adopt the
committee substitute at this meeting and hold the bill for future
review. He invited written comments on the committee substitute.
Co-Chair Kelly asked what, if any impact the proposals in the
committee substitute would have on the annual AHFC dividend to the
State of Alaska.
JOHN BITNEY, Legislative Liaison, Alaska Housing Finance
Corporation, Department of Revenue testified that he saw the
committee substitute as "legislation that would limit use of the
program."
Co-Chair Donley clarified the $100,000 limitation only applies to
the first $100,000 of a home loan. A loan over that amount could
still be obtained, with the portion above the limit accrued at the
regular interest rate, he stressed.
Senator Austerman commented that public testimony should be allowed
on the changes in the committee substitute.
Mr. Bitney stated he understood the language to imply that the
corporation may not use money to subsidize any amount that exceeds
$100,000. He pointed out this does not change other statutes
governing the calculation procedure determining the one-percent
reduction below the normal rate. Therefore, he advised, language
reconciliation may be necessary to overcome the conflict.
Mr. Bitney continued, noting the committee substitute also limits
the corporation from issuing loans under this program only to those
areas with a higher cost of living. This, he emphasized, changes
the program itself and would probably limit the loan activity to
the extent that AHFC would earn less money and subsequently the
dividend would be smaller. He qualified that because the committee
substitute was just released, he had been unable to research the
matter fully.
Co-Chair Kelly requested an analysis from the corporation and that
the witness work with Co-Chair Donley and Senator Hoffman to
determine the best way to carry out the intent of the legislation
without drastically reducing dividend payments.
Co-Chair Donley recalled Senator Hoffman's earlier comments that
the existing interest rate subsidy program is parallel to the first
time homebuyers program. Co-Chair Donley understood there is a
limit to the amount that could be borrowed under the first time
homebuyers program and asked if this were correct.
Mr. Bitney affirmed and stated the acquisition limit for the price
of a home in Anchorage is $179,000, and for areas outside of
Anchorage the limit is $160,000.
Co-Chair Donley asked if first time homebuyers program is available
statewide.
Mr. Bitney answered it is, but pointed out that the real estate
market in many areas is such that the first time homebuyers program
could not be utilized because home prices are higher than the
maximum allowed.
Co-Chair Donley stated that while the HALF program has no financial
needs criteria, the first time homebuyer program does have
limitations if the borrower has significant assets.
Mr. Bitney confirmed that as well as an acquisition limit; the
first time homebuyers program is for low to moderate-income
borrowers.
Co-Chair Donley asked if in light of these factors, the first time
homebuyers program really is comparable to the HALF program.
Mr. Bitney responded that the comparison is shown through the
historical use of the program. He informed that 85 percent of loans
issued under the HALF program have been made to borrowers earning
less than $100,000 annually. He stated the average income of
borrowers under the HALF program is less than that of the urban
borrowers of the tax exemption program. While he admitted there are
exemptions to the norm, such as with the $400,000 loan granted
under the HALF program, he stressed that the program is used
primarily by borrowers with similar incomes and for the purchase of
similar homes as the borrowers under the tax exemption program.
Co-Chair Kelly again asked how the provisions in the committee
substitute would impact the AHFC dividend.
Co-Chair Donley stated he wanted an analysis of the financial
ramifications of the committee substitute from AHFC.
Senator Hoffman withdrew his objection and the committee substitute
was ADOPTED.
Co-Chair Kelly ordered the bill HELD in Committee.
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