Legislature(2023 - 2024)BELTZ 105 (TSBldg)
02/07/2024 01:30 PM Senate LABOR & COMMERCE
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Audio | Topic |
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Start | |
SB191 | |
SB209 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
*+ | SB 191 | TELECONFERENCED | |
*+ | SB 209 | TELECONFERENCED | |
SB 191-AHFC MAKE/PURCHASE MORTGAGE LOANS 1:33:37 PM CHAIR BJORKMAN announced the consideration of SENATE BILL NO. 191, "An Act relating to the power of the Alaska Housing Finance Corporation to make or purchase mortgage loans." 1:33:52 PM AKIS GIALOPSOS, Deputy Executive Director, Alaska Housing Finance Corporation, Anchorage, Alaska, testified by invitation on SB 191. He noted the presence of Mr. Fadil Limani, Deputy Commissioner of the Department of Revenue and requested that he be given a moment to present an overview of SB 191. 1:34:34 PM FADIL LIMANI, Deputy Commissioner, Department of Revenue (DOR), Anchorage, Alaska, read from the following statement: [Original punctuation provided.] I am the Deputy Commissioner of the Department of Revenue. I am also a sitting Board Member for Alaska Housing Finance Corporation. The proposed legislation Mr. Chair would enable AHFC to modify the residential lending programs that will provide additional loan opportunities to Alaskan families. Currently, with the high interest rate environment and the downpayment requirements, it makes it difficult for homebuyers, particularly first-time home buyers to secure a loan for their home purchase. This legislation Mr. Chair increases the Loan-to-Value ratio from 95 percent to 97 percent which significantly reduces the downpayment requirements to homebuyers and enables AHFC to compete with the government sponsored loan programs that are offered by Fannie Mae and Freddie Mac. This is a GOV mission critical legislative priority as it addresses the livability aspect and provides Alaskans with access to housing and keeping families in Alaska and attracting more people to come and live in Alaska. 1:36:15 PM MR. GIALOPSOS said that the Alaska Housing Finance Corporation (AHFC) was founded in 1971 with the mission to provide Alaskans with safe, quality, and affordable housing. He explained that this is done by three prongs. First, it increases housing stock, primarily through the low-income housing tax credit and rural professional housing grant programs. Second, it augments and improves housing stock through weatherization and rebate programs. He noted that one in five residences in Alaska receiving funding through the corporation to improve energy uses by decreasing energy consumption by an average of one-third over the past 20 years. He went on to explain that the third prong is being able to provide access to housing stock through various financial instruments. He noted that SB 191 would be included in the latter category. 1:37:51 PM MR. GIALOPSOS stated that Alaska statute 18.56.096(a)(4) limits the corporation to the ability to purchase single family residences on a first convention loan to a loan to value ratio (LTV) of no more than 95 percent. He explained that lenders use LTV to determine what proportion of a loan would need to cover an appraised asset for purchase. Thus, LTV of 95 on a $100 thousand loan would require a $5 thousand down payment in addition to closing costs - which can be up to three percent of the appraised value. He said that LTV is one of several tools lenders use to determine the risk factors a borrower may have - including default or payment issues. He explained that loans with LTV of 80 or higher require private mortgage insurance - this is true for both private lenders and AHFC. He said that two key factors have changed, leading to the creation of SB 191. He explained that, ten years ago, the government sponsored entities Fannie Mae and Freddie Mac - which are the federal government counterparts to AHFC - began offering products that allowed LTV of 97 percent. This lowered the buyer's down payment requirement from 5 percent to 3 percent. He went on to explain that the second key change has been the increase in the average appraised value of homes throughout the state of Alaska. He said this increase has been particularly notable in the past five years and pointed out that as the appraised value has gone up, the cost to credit-worthy borrowers has likewise increased. 1:40:11 PM MR. GIALOPSOS referred to a handout titled "Impact of Proposed Loan-to-Value (LTV) Legislation - SB 191." He explained that the three charts show the average sale prices for a single-family home between 2019 and 2023 in the Kenai, Fairbanks, and Anchorage areas. He commented that the numbers vary slightly; however, the trend is the same for all three locations. For example, in [Kenai] the cost has increased from roughly $250 thousand to nearly $400 thousand. He pointed out that under current AHFC rules, the required down payment has likewise increased from $12.5 thousand to nearly $20 thousand. He explained that AHFC does not believe that the credit worthiness of borrowers has deteriorated, though their purchasing power has. He said that AHFC is requesting that the legislature remove the 95 percent LTV restriction, thereby allowing AHFC to set products that would be competitive when compared to its federal counterparts. He acknowledged that a higher LTV would require qualified borrowers to make a smaller down payment; however, AHFC already requires private mortgage insurance and must move through its due-diligence process. He pointed out that AHFC - and the state as a whole - leads the nation in terms of low default and foreclosure numbers and shared AHFC's belief that any incremental risk is offset by these provisions. He suggested that this would give more Alaskans access to home ownership without the "debilitating additional cost that would otherwise disincentivize them from being able to put down roots in their community." He went on to explain that SB 191 includes "clean up language" that removes duplicative language in the current statute. 1:42:55 PM SENATOR GRAY-JACKSON asked if the date included in the charts also applies to duplexes and condos. 1:43:08 PM MR. GIALOPSOS replied that the information in the charts applies to single-family homes. 1:43:14 PM SENATOR GRAY-JACKSON stated that she would like to see condos and duplexes included, as they are less expensive. She asked if 6.5 percent is the current interest rate. 1:43:41 PM MR. GIALOPSOS replied yes. 1:44:07 PM BRYAN BUTCHER, CEO/Executive Director, Alaska Housing Finance Corporation, Anchorage, Alaska, answered questions on SB 191. He explained that condos and duplexes would be included, as well as triplexes and fourplexes. He further explained that anything fourplex and under would be included, as long as the purchaser was living in one of the units. He stated that it would not apply to anything larger. 1:44:43 PM SENATOR DUNBAR pointed out that the letter of support from the Alaska Bankers Association states that relaxing LTV requirements can stimulate demand for housing; however, Alaska has a lack of housing, not a lack of demand. He asked if the loans can be used for housing construction and if there is a chance that SB 191 would increase housing costs in the state. 1:45:48 PM MR. BUTCHER answered that SB 191 is intended to level the playing field between AHFC and its competitors, which it does by allowing more Alaskans to access AHFC programs. He explained that the number of qualifying home buyers would increase, and this increased demand would result in more houses being built. He said that AHFC has a number of programs that are specifically focused on housing construction; however, SB 191 is not necessarily intended to increase housing construction. 1:46:35 PM SENATOR DUNBAR offered his understanding that Fannie Mae and Freddie Mac already offer these kinds of products and that AHFC offering this type of product would give homebuyers the chance to choose who they receive their loan through - which would be unlikely to increase the cost of existing housing. 1:47:09 PM MR. GIALOPSOS explained that while Fannie Mae and Freddie Mac interest rates have generally been lower, AHFC has a more competitive interest rate, comparatively. He said that prices and affordability would change in favor of the borrower. He agreed that supply and demand dynamics are at play - this includes a restricted amount of supply. However, he pointed out that there is an outward migration of people from the state - and increased access to housing stock is one way to encourage people to stay in Alaska. He suggested that this is potentially less reflective of a runup in home valuation and more of finding individuals who are currently on the sidelines and competing against cash borrowers. He said that this stagnated capital would be liberated. In response to an earlier question, he clarified that "single family residence" is defined as anything from one to four units, as long as the borrower resides within the unit. 1:49:02 PM SENATOR BISHOP asked for clarification that Mr. Gialopsos had intended to say "cash buyers" rather than "cash borrowers". 1:49:16 PM MR. GIALOPSOS replied yes. He explained that a historic proportion of entrants in the housing market are outright buyers. He added that roughly 20 to 38 percent of Americans own a home outright. He acknowledged the role of realized equity and explained that an increased LTV ratio would allow buyers who do not own a property with realized equity and those who cannot purchase a home outright to be more competitive players in the housing market. He acknowledged that this would not solve all of the issues that buyers face; however, it is a small step in the right direction. 1:49:56 PM CHAIR BJORKMAN held SB 191 in committee.
Document Name | Date/Time | Subjects |
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SB191 ver A.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 191 |
SB191 Transmittal Letter 01.16.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 191 |
SB191 Sectional Analysis 01.23.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 191 |
SB191 Fiscal Note-DOR-AHFC-12.11.23.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 191 |
SB191 Public Testimony-AKBA 02.05.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 191 |
SB209 ver A.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 209 |
SB209 Transmittal Letter ver A 01.24.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 209 |
SB209 Sectional Analysis ver A 01.31.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 209 |
SB209 Fiscal Note-DFG-DCF-01.23.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 209 |
SB209 Public Testimony-Received as of 02.06.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 209 |
SB209 Supporting Document-NOAA Observers and EM at-a-Glance.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 209 |
SB191 Supporting Documents-AHFC Handout 02.07.24.pdf |
SL&C 2/7/2024 1:30:00 PM |
SB 191 |