Legislature(2001 - 2002)

04/25/2001 09:11 AM FIN

Audio Topic
* first hearing in first committee of referral
+ 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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