HB 370 - GUARANTEED REVENUE BONDS FOR VETERANS CHAIR COGHILL announced that the next order of business would be HOUSE BILL NO. 370, "An Act relating to the issuance of state- guaranteed revenue bonds by the Alaska Housing Finance Corporation to finance mortgages for qualifying veterans; and providing for an effective date." Number 1470 JOHN BITNEY, Legislative Liaison, Alaska Housing Finance Corporation (AHFC), Department of Revenue, explained that HB 370 is an authorization to ask voters this fall to approve $500 million in state-guaranteed mortgage revenue bonds that AHFC would issue out over time to provide the funds necessary to continue the veterans mortgage revenue. The state got involved in this program around 1980 when Congress opened up a provision in the U.S. tax code for states to provide a tax-free mortgage program to qualified veterans. Shortly thereafter, Congress closed the window for states to get in on the program. Alaska was one of five states that had gone ahead and gotten started. Essentially, Alaska has been grandfathered in. Number 1556 MR. BITNEY told the members that in order for these bonds to be tax-exempt under the U.S. Code, the state issuing the bonds has to unconditionally guarantee the bonds, and in Alaska that requires voter approval. Unlike any other mortgage program AHFC has, this one has to have voter approval. These bonds are structured so that the mortgages that they're purchasing are the assets that back them. This is no way uses up any of the state's general obligation bond capacity. That is separate. Number 1624 MR. BITNEY reported that this is the fifth time this question has been put out on the ballot, and the last time was in 1986. He noted that these questions have been strongly approved by the voters at 60 percent or better. Information would be gotten out to the voters if this were put out for a vote, he said. The program is offered and available to qualified veterans who were in active-duty service prior to January 1, 1977, and have not been discharged more than 30 years prior to the date of the loan application, so there is a diminishing pool of qualified veterans. Right now there are about 400 loans per year, $70 million in volume. He said that this would probably be the last time this is done, unless Congress extended the benefit. Number 1775 MR. BITNEY explained that the AHFC would not just go out and issue $500 million in one sale; it would be broken up into pieces over time as the demand for loans comes in each year. Two weeks ago the AHFC finished a sale on a $50 million financing for loans. There's about $47 million in capacity left from the last voter authorization in 1986. He told the members that the AHFC will be out of authorization from that last vote easily by the end of this year. Number 1828 REPRESENTATIVE WILSON asked what the average amount of loan is. MR. BITNEY answered that in FY [fiscal year] 01, there were 411 loans; the average sale price was $188,000; the average loan amount on that was $169,000. The average loan-to-value ratio was about 91 percent, and a 5 percent down is required. The AHFC will go to 100 percent loan-to-value if there is "a VA" [Veterans Administration] coupled with the loan. The average age of the borrower was 50 years old, with a household size of two, and an average payment of $1,000 per month. Number 1897 REPRESENTATIVE CRAWFORD asked if $500 million was the size of the obligation done in the past. MR. BITNEY answered in 1986 it was $600 million. The total is almost $2.2 billion. REPRESENTATIVE WILSON asked for more details on the rules of the loans. MR. BITNEY answered that there are no income restrictions and no acquisition restrictions on this tax-exempt program that are in other tax-exempt programs. Someone can only own one home under the program. It is for an owner-occupied, single-family residence or condominium up to a four-plex, or a type-1 mobile home. Number 2125 REPRESENTATIVE HAYES moved to report HB 370 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 370 was reported out of the House State Affairs Standing Committee.