Legislature(2007 - 2008)HOUSE FINANCE 519
02/13/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB325 | |
| HB285 | |
| HB65 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 325 | TELECONFERENCED | |
| + | HB 285 | TELECONFERENCED | |
| += | HB 65 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 325
"An Act relating to the teachers' and nurses' housing
loan program in the Alaska Housing Finance Corporation;
and providing for an effective date."
BRYAN BUTCHER, LEGISLATIVE LIAISON, ALASKA HOUSING FINANCE
CORPORATION (AHFC), gave an overview of HB 325. In 2003, SB
25 established a teachers and registered nurses housing loan
program. Buying a home, particularly the cash down payment,
had been an obstacle for young teachers and nurses in many
communities across the state. The idea was to set up a zero-
down payment program to remedy the problem. A five year
sunset was put on SB 25 due to concerns that if consumers
didn't invest money initially they would be more likely to
walk away from the loan. The program has been successful.
House Bill 325 would lift the sunset and would expand
"nurses" to "health care professionals."
Mr. Butcher said that since the program was initiated in
2003, 373 teachers and nurses have mortgaged homes in 34
communities across the state. To date there has been only
one foreclosure. Alaska Housing Finance Corporation
foreclosure rates are low and rates of this program are even
lower. He emphasized that the program is not a subsidy
program; there is no interest break. Applicants have to pass
AHFC's normal guidelines for getting a mortgage.
2:08:51 PM
Representative Crawford asked for a definition of "health
care professionals." He wondered if doctors were included.
Mr. Butcher replied that there had been discussions with the
Governor's office about the definition. They realized it
would be easy to miss an occupation.
Mr. Butcher referred to a different program in the capital
budget that funds housing for rural teachers and health care
professionals. The definition of who is qualified in that
program is: any person who is licensed or board-certified by
the State of Alaska in a health profession, holds a State
certification in a health occupation, or is an administrator
of a hospital or clinic or employed as an aide, assistant,
counselor, or technician in a health field. Occupancy in the
household is limited to health professionals and family
members.
Representative Crawford asked if dental assistants and
hygienists were included. He reiterated concerns about
doctors using the program.
Mr. Butcher said AHFC discussed whether there should be an
income cap on the program. They questioned having a zero-
down program for someone making $500,000 a year. However,
after talking with mortgage experts, the conclusion was
reached that a doctor making $500,000 would not use the
program. Most of AHFC's portfolio consists of rural,
veterans, and first-time homebuyer loans, making AHFC a
lender of "last resort." A person making more money could
get a better interest rate by shopping around, so it would
not make sense for someone with a large income buying a
large home to skip a down payment in exchange for having to
pay a lot more money. In addition, AHFC's experience over
the past five years has been that fears regarding a cap were
unfounded. The house cannot be used as investment property
since users of the program must live in it.
2:12:05 PM
Representative Hawker asked for specifics relating to both
delinquency and foreclosure. Mr. Butcher did not have the
delinquency numbers, although he knew they were low. Until
very recently the foreclosure rates were at zero.
Representative Hawker wondered about defaults.
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, DEPARTMENT OF REVENUE, said that people
occasionally get behind on their payments. However, AHFC has
tracked this and found that the delinquency rate goes down
around the time the permanent fund checks come out.
rd
Delinquency rates through AHFC are 43 in the nation, with
50 being the best. He said there is not a significant
problem in Alaska. Foreclosures are well within historical
norms and well below national average. Regarding the concern
of someone making a great deal of money using this program,
Mr. Fauske pointed out that zero-down buyers must have
mortgage insurance. If an investor was going to be paying
more, they would rather put the money down and free up the
cash.
2:15:27 PM
Representative Hawker asked, regarding the removal of the
sunset date, how open-ended AHFC wanted the program to be.
Mr. Fauske pointed out that the program evolved because of
recognized need. The sunset provision was added in order to
test the program. Across the country, housing finance
agencies are trying to come up with solutions for the same
challenges that AHFC has been dealing with successfully.
Teachers everywhere have difficulty affording a home. He
thought the program was doing exactly what it was designed
to do and hoped to see it continue.
Representative Hawker reiterated his desire for specific
information regarding delinquency rates and credit
experience with the consumers of the program.
PAUL KAPANSKY, DIRECTOR, MORTGAGE OPERATIONS, ALASKA HOUSING
FINANCE CORPORATION (TESTIFIED VIA TELECONFERENCE), spoke
to the issue of foreclosures and delinquencies. He said that
over the four year period that the program has been in
place, there have been 378 loans, with one foreclosure. He
said AHFC doesn't specifically track delinquency in the
program, but delinquency rates are around 3.5%, which is
historically low. He said the program has performed very
well.
2:19:02 PM
Representative Hawker was surprised to hear the State
doesn't track delinquency rates by program, as those rates
are a benchmark measure of performance. Mr. Kapansky said
historically AHFC hasn't tracked delinquency rates because
the foreclosure rate is so low. There didn't seem to be a
need.
Representative Gara had previously thought the program got
teachers lower interest rate loans. He wondered if a person
could still shop around for the best bank rate or if they
had to accept a higher interest rate through AHFC in
exchange for the zero-down. Mr. Kapansky answered that the
loan option is only good with an Alaska Housing Finance
loan. The loan could be processed under the veterans'
program or the tax-exempt first-time home-buyer program.
Those interest rates are currently approximately 5.5%, which
is a very attractive interest rate.
Representative Gara wondered if someone would be able to
find a lower interest mortgage than they could get through
the AHFC program if they shopped around. Mr. Kapansky
answered that if the person were a first time home-buyer or
a veteran he did not think they could find a more attractive
interest rate.
2:21:46 PM
Representative Kelly asked how the mortgage insurance
worked. Mr. Butcher said in most cases a person pays
mortgage insurance until the mortgage is 20% paid, but in
the teachers and health professionals program the mortgage
insurance is paid until 35% of the mortgage is paid, as AHFC
is taking an increased risk.
Representative Kelly wondered if the house went to another
teacher when the teacher who bought the house through the
program left. Mr. Butcher replied that the house returns to
an all-new loan. Anyone could buy the house with the normal
requirements.
2:24:33 PM
Representative Kelly wanted to know the differences between
the program covered by HB 325 and the rural program Mr.
Butcher had referred to earlier. Mr. Butcher said the two
programs were often confused with one another as they were
created at the same time. The program covered in HB 325 is
not the rural program. The rural program helps rural
communities recruit and retain teachers and health care
professionals.
Representative Kelly referred to the handout listing houses
in Aniak that were purchased through the HB 325 program
("Cumulative Purchases for Teacher/Nurse Option by
Location," On File). He thought Aniak was a rural community.
Mr. Butcher explained that the HB 325 program can be
utilized by any community in the state.
Mr. Fauske interjected that AHFC learned that even though
the HB 325 program could be used in rural communities, it
rarely was. The HB 325 program is mainly used in urban
communities. In many of rural situations, teachers and
health care professionals are itinerant. The rural program
specifically addresses grants and loans to regional housing
authorities, village corporations and school districts. That
program has been equally successful.
Representative Kelly wondered about asset quality
monitoring. He stated he supported a sunset, especially if
the category of eligible participants was broadening to
people with less income. He also wanted delinquencies
tracked.
2:28:36 PM
Vice-Chair Stoltze spoke regarding sunset length. Mr.
Butcher thought longer would be more beneficial for AHFC but
would understand if the Committee wanted a shorter sunset.
Mr. Fauske agreed that longer would be better; in terms of
market conditions he thought five to eight years would be
optimal. Mr. Kapansky agreed that five to eight would work.
Co-Chair Meyer anticipated an amendment on the subject of
sunset dates.
2:30:45 PM
Representative Crawford stated that he did not see a need
for a cap on the salary level of a program participant. He
had originally thought a cap was needed because of the
shortage of teachers and nurses. He wondered if there were
shortages in the expanded categories. Vice-Chair Stoltze
said there were shortages.
Representative Crawford said he supported the program
continuing with a sunset so that progress could be
evaluated.
Mr. Fauske added that the current accelerated value in the
real estate market makes it even more difficult for young
workers to come up with a down payment. He thought the
program has helped forestall the shortages of teachers and
health professionals in the state.
2:33:41 PM
Representative Joule commented on the situation of the
upcoming generation that cannot afford to buy a home. The
whole issue has become the down payment, often putting
parents in the position of having to pay it. He thought the
program would make a huge difference to many people and
would affect how committed they would be to a community. He
supported the bill and said he was excited it will be
expanded.
2:35:30 PM
Co-Chair Meyer opened public testimony. Seeing none, he
closed public testimony.
Representative Hawker MOVED Conceptual Amendment #1 to HB
325.
Co-Chair Meyer OBJECTED for discussion purposes.
Representative Hawker described the conceptual amendment as
putting a five-year reauthorization sunset on the bill. He
stated that in his view, the sunset is not a sunset on the
program. He intended the sunset to be a check on the
management and operations of the program.
Co-Chair Meyer WITHDREW his OBJECTION.
There being NO OBJECTION, Conceptual Amendment #1 was
adopted.
2:38:09 PM
Representative Hawker noted for the record that the fiscal
note is zero and does not require General Fund or other
expenditures.
Co-Chair Chenault MOVED to report CSHB 325 (FIN) out of
Committee with individual recommendations and with zero note
#1.
CSHB 325 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with zero note #1 by the Department
of Revenue.
2:39:29 PM AT EASE
2:39:55 PM RECONVENE
| Document Name | Date/Time | Subjects |
|---|