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.