HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE February 23, 1999 8:03 a.m. MEMBERS PRESENT Representative Andrew Halcro, Co-Chairman Representative John Harris, Co-Chairman Representative Carl Morgan Representative Lisa Murkowski Representative Fred Dyson Representative Reggie Joule Representative Albert Kookesh MEMBERS ABSENT All members present COMMITTEE CALENDAR * HOUSE BILL NO. 93 "An Act relating to the Alaska Housing Finance Corporation's rural assistance loan program and to the definition of 'housing' for purposes of the corporation's housing assistance loan program; and providing for an effective date." - MOVED HB 93 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 93 SHORT TITLE: RURAL ASSISTANCE HOUSING LOANS SPONSOR(S): REPRESENTATIVES(S) MORGAN, Phillips, Foster, Austerman, Harris, Kapsner, Mulder, Joule Jrn-Date Jrn-Page Action 2/10/99 198 (H) READ THE FIRST TIME - REFERRAL(S) 2/10/99 198 (H) CRA, FINANCE 2/23/99 (H) CRA AT 8:00 AM CAPITOL 124 WITNESS REGISTER JOHN BITNEY, Legislative Liaison Alaska Housing Finance Corporation P.O. Box 101020 Anchorage, Alaska 99510-1020 Telephone: (907) 338-6100 POSITION STATEMENT: Testified in support of HB 93. KAY MURPHY, Mortgage Operations Director Alaska Housing Finance Corporation P.O. Box 101020 Anchorage, Alaska 99510-1020 Telephone: (907) 330-8414 POSITION STATEMENT: Answered questions regarding HB 93. ACTION NARRATIVE TAPE 99-8, SIDE A Number 0001 CO-CHAIRMAN ANDREW HALCRO called the House Community and Regional Affairs Standing Committee meeting to order at 8:03 a.m. Members present at the call to order were Representatives Halcro, Harris, Morgan, Dyson and Joule. Representatives Murkowski and Kookesh arrived at 8:04 a.m. and 8:05 a.m., respectively. HB 93 - RURAL ASSISTANCE HOUSING LOANS Number 0060 CO-CHAIRMAN HALCRO announced the committee would hear House Bill No. 93, "An Act relating to the Alaska Housing Finance Corporation's rural assistance loan program and to the definition of 'housing' for purposes of the corporation's housing assistance loan program; and providing for an effective date." Number 0068 REPRESENTATIVE CARL M. MORGAN, JR., prime sponsor, came forward to present the bill. He told members this legislation would allow two simple changes. First, the rural mortgage program would allow for refinancing of home loans in the same manner as for any conventional mortgage. While many Alaskans have taken advantage of these low interest rates to refinance their home mortgages, state law does not provide this option for the rural lending program. Second, current state law limits the term "housing" to single- family homes and owner-occupied duplexes. This would allow owner- occupied housing having up to four units. Because of rural housing shortages, this would allow for more homes to rent to doctors or teachers, for example. REPRESENTATIVE MORGAN pointed out that whereas the current lending rate is 6.125 percent for 30-year loans, the Alaska Housing Finance Corporation (AHFC) rural loan program has more than 1,100 loans with interest rates over 8 percent, and it has 500 loans at 9 percent interest. Refinancing would provide a big savings to the home buyer. Representative Morgan emphasized that this is not a giveaway, as the rural loan program is a revolving fund. Number 0243 CO-CHAIRMAN HARRIS asked why urban dwellers, but not rural dwellers, have been allowed to refinance their homes. REPRESENTATIVE MORGAN said he didn't know whether it was an oversight or if there was a reason when the legislation was passed. He noted that a person can seek help from another lending institution. This bill would make it a one-stop process, however, lowering closing costs and other costs. Number 0342 REPRESENTATIVE DYSON asked who had requested this bill. REPRESENTATIVE MORGAN said he and his staff had been looking at these regulations and had done it on their own. REPRESENTATIVE DYSON asked what caused them to look at the regulations in the first place. REPRESENTATIVE MORGAN explained that where he comes from there is a housing shortage. When looking at the refinancing, they had discovered a discrepancy in the AHFC loan program. This would provide equality under the lending statutes. Number 0463 JOHN BITNEY, Legislative Liaison, Alaska Housing Finance Corporation, testified via teleconference from Anchorage, noting that Kay Murphy and Daniel Fauske (CEO/Executive Director) were with him. He advised members that packets should contain a zero fiscal note from the AHFC, as well as a two-page letter to the sponsor from Mr. Fauske. He said the letter would speak for itself; he himself would make general comments and then ask Kay Murphy to address specific items in the letter. MR. BITNEY advised members that the AHFC supports HB 93. Both provisions in the bill have been introduced in prior legislatures and have gone through various hearings; however, they were included with legislation containing other matters that had raised questions. At the start of this session, the AHFC had begun working with Representative Morgan's office on some of those provisions that appeared noncontroversial, and that related to fairness between rural and urban borrowers. Number 0630 CO-CHAIRMAN HARRIS asked whether HB 93 contains anything possibly detrimental that the committee isn't aware of, discussed by previous legislatures. MR. BITNEY said no, he doesn't believe so. The prior provisions had related to the AHFC's supplemental housing grant program and to the extent that it would be allowed to do some other things. He characterized the prior legislation as "nonglamorous," saying they had been unable to get it through some of the end-of-session bargaining and excitement. The provisions in HB 93 are very straightforward, and there is nothing that he believes the committee would be missing. Number 0778 REPRESENTATIVE DYSON asked what public purpose is served by financing four-plexes. KAY MURPHY, Mortgage Operations Director, Alaska Housing Finance Corporation, answered via teleconference from Anchorage that she believes the public purpose is twofold. First, allowing the financing of small multifamily housing units will provide additional housing in rural Alaska, where there exists a severe shortage. Second, allowing owner occupancy will provide for better maintenance of the units. REPRESENTATIVE DYSON asked the reason for four units, rather than more. MS. MURPHY said it is to bring the rural loan program in line with traditional mortgage loan programs. The typical definition of a single-family dwelling, in general secondary market terms, is "one- to-four-family," whereas anything with five or more units is "multifamily." Ms. Murphy pointed out that AHFC has a program for multifamily financing, typically for investment property that is not occupied by the owner. Number 0894 REPRESENTATIVE MURKOWSKI asked whether an individual in a rural community has an option to refinance his or her home, if that person has a loan through the AHFC. MS. MURPHY said current statutes do not specifically allow a person to refinance an existing rural loan program loan. The AHFC does have a streamlined refinancing program where the borrower applies with a lender, provides very limited documentation, and can effect a refinance, a lowering of interest rates, or a change in terms. However, rural borrowers don't have that option under their rural loan program, so they would have to refinance under other conventional programs, through the AHFC or other lenders. They would therefore not have the interest rates and terms associated with the rural loan program. Number 1031 REPRESENTATIVE JOULE commented that he himself had recently gone through this process; after 15 years with the AHFC, he'd had to borrow from another institution to refinance, at a higher interest rate than he would have gotten from AHFC if he could have refinanced with them. He said this is a very good step in the right direction. CO-CHAIRMAN HALCRO asked whether Representative Joule would have been able to take advantage of the program proposed in HB 93, had it been available. REPRESENTATIVE JOULE said yes, at a whole percentage lower than the rate he got. Number 1110 REPRESENTATIVE MORGAN pointed out that the default rate is the rural mortgage loan program is generally the same as for the urban programs; in some cases, it is much less. CO-CHAIRMAN HALCRO asked whether there were further questions, then closed public testimony. Number 1153 CO-CHAIRMAN HARRIS made a motion to move HB 93 from the committee with the attached zero fiscal note and individual recommendations. There being no objection, HB 93 moved from the House Community and Regional Affairs Standing Committee. ADJOURNMENT Number 1167 There being no further business before the committee, the House Community and Regional Affairs Standing Committee meeting was adjourned at 8:15 a.m.