Legislature(2001 - 2002)

03/21/2002 09:13 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 fourth hearing for this bill in the Senate Finance                                                                 
Committee.                                                                                                                      
                                                                                                                                
Co-Chair Donley moved for adoption of CS SB 181, 22-LS0488\W as a                                                               
working draft.                                                                                                                  
                                                                                                                                
There were no objections, and the committee substitute was ADOPTED                                                              
                                                                                                                                
Amendment #2: This amendment inserts language into the bill's title                                                             
and inserts a new bill section as follows.                                                                                      
                                                                                                                                
     The title is amended to read:                                                                                              
     "An Act  relating to the Alaska  Housing Finance Corporation's                                                             
     rural  assistance loan  program; relating  to the use  of money                                                            
     from  the housing assistance  loan fund  in the Alaska  Housing                                                            
     Finance  Corporation,   preventing  use  of that  money  for  a                                                            
     single-family  owner-occupied  house with a value that  exceeds                                                            
     $250,000,  adjusted for  inflation, and  repealing a  provision                                                            
     authorizing  use of that money  for nonowner-occupied  housing;                                                            
     repealing  the home  ownership assistance  fund; and  providing                                                            
     for an effective date."                                                                                                    
                                                                                                                                
     Section 1. AS 18.56.420(a) is amended to read:                                                                             
        (a)There is created in the corporation, as a revolving loan                                                             
     fund,  the housing  assistance  loan fund  consisting of  money                                                            
     appropriated  to it by the legislature  and deposited  in it by                                                            
     the corporation,  and repayments  of principal and interest  on                                                            
     loans  made  or purchased  from  the assets  of  the fund.  The                                                            
     corporation shall                                                                                                          
         (1) adopt regulations to administer the housing                                                                        
     assistance loan fund under AS 18.56.400 - 18.56.600; and                                                                   
         (2) subject to appropriation, provide money for a rural                                                                
     assistance   loan   program   to  originate,   purchase,   [OR]                                                            
     participate in the purchase of, or refinance                                                                               
                (A) small community housing mortgage loans;                                                                     
                (B) loans made for building materials for small                                                                 
                     community housing;                                                                                         
                (C) loans made for renovations or improvements to                                                               
                     small community housing;                                                                                   
                (D) loans made for the construction of own-                                                                     
                     occupied  small community  housing  other  than                                                            
                     loans to builders or  contractors or loans that                                                            
                     compensate  an owner for  the owner's labor  or                                                            
                     services  in   constructing  the  owner's   own                                                            
                     housing.                                                                                                   
                                                                                                                                
Co-Chair Donley moved for adoption of Amendment #2.                                                                             
                                                                                                                                
There being no objection, Amendment #2 was ADOPTED.                                                                             
                                                                                                                                
AT EASE 9:35 AM /9:36 AM                                                                                                        
                                                                                                                                
JOHN   BITNEY,   Legislative   Liaison,   Alaska   Housing   Finance                                                            
Corporation, Department  of Revenue, explained that Amendment #2 was                                                            
offered at  the request  of the Alaska  Housing Finance Corporation                                                             
(AHFC)  and   stated  current  state   law  regarding  the   Housing                                                            
Assistance  Loan Fund (HALF) Program,  does not allow a borrower  to                                                            
refinance  their loan. He  stated refinancing  "is a very  standard"                                                            
provision  under most conventional  loan programs,  and is  "also an                                                            
issue  of fairness  for the borrowers."  He  informed the  Committee                                                            
that AHFC's  income would be affected  by the refinancing  component                                                            
because when  loans are refinanced  at lower interest rates,  income                                                            
into the  fund is  also reduced;  however, he  noted AHFC  currently                                                            
loses  borrowers   who  want   to  refinance   to  other   financial                                                            
institutions.                                                                                                                   
                                                                                                                                
Senator  Hoffman asked  for  clarification  on how  this bill  would                                                            
affect AHFC's "bottom line".                                                                                                    
                                                                                                                                
Mr.  Bitney   responded  AHFC's  largest   concern  is  the   income                                                            
restriction  on persons whose income  must be less than 400%  of the                                                            
United  States Department  of  Health  and Social  Services  poverty                                                            
level  guidelines.  He  stressed this  limitation,  based  on  prior                                                            
history of  the program,  would exempt "close  to 50 percent  of the                                                            
borrowers."  He stated recent  analysis indicates  that most  of the                                                            
current loans  are for household sizes  of one or two persons  whose                                                            
income  is slightly  over the 400  percent level,  or approximately                                                             
$44,000 for a one-person household.                                                                                             
                                                                                                                                
Co-Chair  Kelly distributed  an  AHFC chart  [copy  on file],  dated                                                            
March 20, 2002,  reflecting current  loans and the affect  this bill                                                            
would have on them.                                                                                                             
                                                                                                                                
Senator  Hoffman summarized  this  bill would  result  in a loss  of                                                            
income to the State.                                                                                                            
                                                                                                                                
Mr. Bittner  concurred that this bill,  as currently drafted,  would                                                            
reduce revenue to the State.                                                                                                    
                                                                                                                                
Co-Chair  Donley stated  Mr. Bittner's  response  "was based on  the                                                            
assumption"  that AHFC  would lose  money by the  introduction  of a                                                            
refinancing  program.  Co-Chair  Donley  questioned  if  AHFC  could                                                            
expand  its business  in  other areas  such  as providing  loans  to                                                            
communities that are ineligible for the HALF program.                                                                           
                                                                                                                                
Mr. Bitney responded  the committee substitute does  not delete size                                                            
restrictions  or  clarify  small community  population  parameters;                                                             
therefore  the HALF  program is  restricted from  being expanded  to                                                            
some communities.                                                                                                               
                                                                                                                                
AT EASE 9:41 AM/ 9:42 AM                                                                                                        
                                                                                                                                
Co-Chair  Donley  asked  Mr.  Bitney  to  work  with  his  staff  to                                                            
formulate   appropriate   language   regarding   small  communities                                                             
restrictions.                                                                                                                   
                                                                                                                                
Co-Chair  Kelly stressed the  intent of this  bill is to offer  AHFC                                                            
more  lending  possibilities,  and  not  to  harm  the  program.  He                                                            
supported Co-Chair  Donley's request for AHFC to work  with staff to                                                            
establish the appropriate  language in the bill to provide AHFC with                                                            
further lending opportunities.                                                                                                  
                                                                                                                                
The bill was HELD in Committee.                                                                                                 
                                                                                                                                
                                                                                                                                

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