HB 192 AHFC HOUSING LOANS CHAIRMAN SHARP brought up HB 192 as the next order of business before the Senate State Affairs Committee. He called the sponsor's representative to testify. Number 050 BRYCE EDGMON, Aide to Representative Richard Foster, prime sponsor of HB 192, stated the bill is directed towards helping meet home financing needs in rural Alaska. Mr. Edgmon read the sectional analysis in members' bill packets, which was submitted by AHFC. Section 1 would allow regional housing authorities to originate and service mortgage loans. Section 2 would allow supplemental housing development grant funds to be used for both on-site and off-site water and sewer facilities. Section 3 attempts to clarify the existing statute. It does not make any substantive changes. Section 4 establishes a priority system for the allocation of supplemental housing development grant funds used to pay for off- site water and sewer facilities. Section 5 exempts projects constructed under the Building Material Loan Program from energy standards provided under AS 18.56.096(c). Section 6 exempts projects constructed under the Building Material Loan Program from construction standards provided under AS 18.56.300. Section 7 amends the statute regarding the Rural Assistance Loan Program to allow for the refinancing of rural mortgages in the same manner as AHFC's mortgage programs allow for the refinancing of urban loans. Section 8 would allow AHFC to make loans for rural non-owner occupied housing, to the extent feasible, to someone who already has an AHFC loan for an existing owner-occupied residence. Section 9 expands the existing Building Materials Loan Program to allow for small ($20,000.00 or less), unsecured loans for borrowers who have either restrictive deed lands or have no title to their HUD Mutual Help home. [Mr. Edgmon informed the committee that federal law prohibits people who own homes on native allotments from using the land as collateral in securing a loan.] Section 10 is a conforming change to coordinate this statute with the change made in the first part of Section 12. Section 11 is a conforming change to coordinate this statute with with the change made in the first part of Section 12. Section 12 clarifies the definition of non-owner occupied housing as rental housing. In addition, the definition of multi-family rental house is changed from an 8 to a 16 unit dwelling. Section 13 would bring the term "housing" into compliance with industry standards that view the term as owner-occupied housing of up to 4 units. Number 185 BRUCE KAVAROK, Executive Director, Bering Straits Regional Housing Authority, testifying from Nome, stated the authority serves Nome and sixteen other communities in the Nome area. Mr. Kavarok stated the Bering Straits Regional Housing Authority and the Association of Alaska Housing Authorities, which represents Alaska's fourteen regional housing authorities and AHFC, support HB 192. The bill has significant importance for Alaska's regional housing authorities in their mission to provide decent, safe, sanitary, and affordable housing to families throughout Alaska. Several of the housing programs now available from AHFC and other sources like the Farmers' Home Administration and the Veterans' Administration are severely under-utilized in rural Alaska. Part of the reason is village economics, but another part is the lack of rural access to information and the basic mechanics of loan programs. There are low and moderate-income families in his region and throughout the state who could benefit from one or more of these programs and achieve their goals of home ownership. MR. KAVAROK stated that there is virtually no tradition for conventional mortgage lending in housing development in rural Alaska. Expanding access to AHFC loans, as HB 192 would do, coordinating with lending institutions, and the recent willingness of the secondary mortgage market (FHA, Fannie Mae, Freddie Mac, for example) to participate in rural housing programs appear as a few bright spots on the horizon. Mr. Kavarok also gave a run-down of the sections of HB 192. Number 245 SENATOR RANDY PHILLIPS asked Mr. Kavarok if he could explain the language on page 6, lines 4-7 regarding the restricted deed issued by the Secretary of the Interior. MR. KAVAROK replied there are two types of deeds that he runs into. The Native Allotment act of 1909 specified that native allotments above 260 acres could be selected. The deed is held in trust by the Secretary of the Interior on behalf of the allottee. SENATOR RANDY PHILLIPS asked if it is held in trust forever. MR. KAVAROK responded, yes. A development that HB 192 doesn't address is the Federal Housing Development Act of 1992. That act established a home-loan guarantee program which provides for a federal subsidized loan guarantee for financial institutions, including AHFC, to protect them when they make mortgage loans on these types of restricted deeds. The drive behind that legislation was Indian reservations in the lower forty-eight, where reservations are all trust land held by the federal government. He believes AHFC has either participated or is looking at participating in one of the first loans of this kind in Alaska that would take advantage of that federal home loan guarantee. Number 290 JOHN BITNEY, Alaska Housing Finance Corporation, stated AHFC supports HB 192. Number 295 SENATOR RANDY PHILLIPS asked if refinancing is not allowed right now. MR. BITNEY responded that currently, refinancing is not an option under state statutes relating to AHFC. If a person were to refinance their mortgage right now, they would have to do substantial improvements to their home in order to get a new loan. SENATOR RANDY PHILLIPS asked if that is an oversight in the laws dealing with AHFC. MR. BITNEY stated he is not familiar with the history, but he would say it's definitely an oversight, since it's a very common mortgage option nation-wide. CHAIRMAN SHARP asked Mr. Bitney if he's received copies of the amendments, and if so, how does AHFC feel about the amendments? MR. BITNEY responded he has seen 3 1/2 amendments. He stated he would like to address the amendment applying to Section 1. That amendment would attempt to limit regional housing authorities to making loans only in rural areas of the state. Apparently there was some concern expressed that, by bringing regional housing authorities into urban Alaska, they might compete with traditional mortgage lenders. AHFC worked with the Mortgage Bankers Association to come up with compromise language. Committee members have that amendment, which is labeled amendment #2. Amendment #2 would limit the regional housing authorities to making loans in rural areas. There would be an exception for making loans in urban areas to under-served borrowers. SENATOR RANDY PHILLIPS asked what the mortgage bankers think about amendment #2. MR. BITNEY replied he did not speak to them directly, but it is his understanding that the "under-served borrowers" term was their suggestion for a compromise. CHAIRMAN SHARP stated that is his understanding also. Number 335 MR. BITNEY stated that AHFC does not have a position on the other amendments. SENATOR DONLEY made a motion to adopt amendment #1 for purposes of discussion. CHAIRMAN SHARP stated that amendment #1 would allow regional housing authorities to originate and service loans in rural areas, as defined in HB 192. It would also allow them to originate and service loans to "under-served urban borrowers". This amendment seemed to be satisfactory to all concerned parties. SENATOR LEMAN asked if amendment #1 would be a new Section 1. MR. BITNEY responded amendment #1 would be a revision to Section 1. Number 355 SENATOR RANDY PHILLIPS asked if this would prohibit a mortgage lending institution from serving a small community. MR. BITNEY replied it would not. Section 1 only applies to the ability of a regional housing authority to get into the loans business. SENATOR RANDY PHILLIPS asked if this would be in competition with mortgage lending institutions. MR. BITNEY responded that was a concern that the banks had. This language was compromise language worked up with the Mortgage Bankers Association. They were concerned with regional housing authorities getting into making loans in urban areas, in competition with them. This would limit urban activities to just serving under-served borrowers. CHAIRMAN SHARP asked if there were objections to amendment #1. SENATOR RANDY PHILLIPS objected. He stated he wanted to check it out. How many bankers have looked at this? SENATOR LEMAN stated the amendment would limit the agency a little bit more. CHAIRMAN SHARP asked that the roll be called on amendment #1. Amendment #1 passed by a vote of 3 yeas, 1 nay, and 1 absent. Voting for the amendment were Senators Sharp, Leman, and Donley. Voting against the amendment was Senator Phillips. Senator Duncan was absent. Number 385 SENATOR LEMAN made a motion to adopt amendment #2. CHAIRMAN SHARP stated the purpose of amendment #2, of which language was contained in the original bill but was removed on the House floor, is to establish age 55. SENATOR LEMAN stated that "age 55" is the definition under federal law. SENATOR DONLEY asked who took the language out. CHAIRMAN SHARP responded it was Representative Martin. SENATOR LEMAN thought that Representative Martin thought "age 55" was broadening it. But it was actually hurting seniors that the state definition didn't match the federal definition. "Age 55" was taken out on the floor of the House, and he probably didn't realize the ramifications. CHAIRMAN SHARP asked if there was any objection to amendment #2. Hearing no objection, he stated the amendment was adopted. SENATOR DONLEY made a motion to adopt amendment #3 for purposes of discussion. CHAIRMAN SHARP stated that amendment #3 would assure that any funds coming from AHFC to the regional corporations would be used in accordance with the Equal Housing Opportunity laws. Number 405 CHAIRMAN SHARP asked if there was objection to amendment #3. Hearing no objection, he stated the amendment was adopted. SENATOR DONLEY made a motion to discharge HB 192 from the Senate State Affairs Committee with individual recommendations. CHAIRMAN SHARP, hearing no objection, stated HB 192 was discharged from the Senate State Affairs Committee. SENATOR RANDY PHILLIPS asked who in the Mortgage Bankers Association approved the language in amendment #1. MR. BITNEY responded it was the president of the Mortgage Bankers Association.