Sectional Analysis for HB 230

Section 1: Amends AS 18.55.997, Residential Loans. Allows regional housing authorities to originate and service loans in small communities of the state for the purpose of the purchase or development of residential housing.

Also in areas not meeting the definition of a small community, a regional housing authority may borrow funds from AHFC and make those funds available to borrowers who cannot obtain financing through traditional mortgage sources. These borrowers would generally be persons of low income whose financing needs are not currently met through existing conventional loan programs.

Section 2: Amends AS 18.55.998(a), Supplemental Housing Development Grants. Under the allowable uses of the supplemental housing development grant fund, infrastructure development for water and sewer could include both on-site and off-site facilities. For example, if a regional housing authority is constructing a water or sewer line to the site of a project, the cost of providing hook ups for other homes located along the line could be included as part of the project cost paid by these grant funds.

Section 3: Amends AS 18.55.998(c), Supplemental Housing Development Grants. The amended language attempts to clarify existing statute. It does not make substantive change.

Section 4: Amends AS 18.55.998(d), Supplemental Housing Development Grants. This section requires AHFC to establish a priority system for the allocation of supplemental housing development grant funds used to pay for off-site water and sewer facilities established under Section 2.

Section 5: Adds a new subsection to AS 18.56.096, Limitation On Power To Make or Purchase Mortgage Loans. Projects under the Building Material Loan Program are exempted from energy standards provided under AS 18.56.096(c).

While AHFC will support and encourage all projects to adhere to energy standards, the costs of the inspections and energy ratings for these standards can represent an extraordinary percentage of the small loans under this program. These loans are intended and designed to help people in rural Alaska finish or improve their homes, use local materials in the construction of homes or install wells or septic systems.

Section 6: Amends AS 18.56.300(d), Construction Standards for Housing Eligible for Purchase of Loans. Projects constructed under the Building Material Loan Program are exempted from construction standards provided under AS 18.56.300.

Again, as stated in the Section 5 analysis, AHFC will support and encourage all projects to adhere to good building standards. However, the inspections that would be required to insure these standards are met would represent an extraordinary percentage of the amount of the small loans under this program.

Section 7: Amends AS 18.56.420(a), Housing Assistance Loan Fund. Allows for the refinancing of rural mortgages in the same manner as AHFC's mortgage programs allow for the refinancing of urban loans. Current statute simply does not provide for refinancing as an option under rural loans. Rural residents have not had the opportunity to benefit from the lower interest rates by refinancing their loans as have most other individuals in Alaska and elsewhere in the United States. Under the Housing Assistance Loan Fund, a borrower would be required to do substantial improvements to their home as the only way to receive a new loan at a lower interest rate. This provision would allow for a refinance in which the borrower would not have to increase the loan amount to benefit from current low interest rates provided the borrower's refinance loan meets established eligibility criteria.

Additionally, this section allows a rural assistance loan to be used to pay for the cost of third party labor for a building materials loan. In other words, the loan could be taken out to not only cover the cost of the material for the improvements but could also be used to cover the labor costs for the improvements. To restrict loan proceeds to materials only may serve to promote unqualified borrower's installation of materials, equipment, utilities or appliances rather than installation by qualified professionals.

Section 8: Amends AS 18.56.440, Limitations on Use of Housing Assistance Loan Fund. Allows 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 loan.

The language in this section would not change any current practice since AHFC already interprets this statute to allow a qualified borrower to have more than one non-owner occupied loan. This section clarifies the statute to more clearly make this type of loan available.

Section 9: Adds a new subsection to AS 18.56.460, Security for Loans. Expands the Building Material Loan Program to allow for small ($20,000 or less) unsecured loans for borrowers who have either restrictive deed lands or have no title to their HUD Mutual Help home. These borrowers have financing needs for repairs and/or improvements to their homes but are unable to pledge their home as collateral or have native restricted deed land that is cost prohibitive in obtaining required BIA approval for encumbering the property.

Section 10: Amends AS 18.56.580(a), Loans for Nonowner Occupied Housing. Conforming change to coordinate this statute with the change made in Section 12.

Section 11: Amends AS 18.56.580(c), Loans for Nonowner Occupied Housing. Conforming change to coordinate this statute with the change made in Section 12.

Section 12: Amends AS 18.56.580(d), Loans for Nonowner Occupied Housing. Clarifies the definition of non-owner occupied housing as rental housing. The definition of a multi-family rental house is changed from an eight to a sixteen dwelling unit. Existing statute allows AHFC to modify this definition if AHFC determines there is special need and qualified tenants that shows going beyond an eight unit project is warranted. Borrowers can save costs on projects with up to the sixteen units by avoiding having to do a special demonstration as required by current statute.

Section 13: Amends AS 18.56.600, Definitions. Current statute limits the term "housing" to either single family and owner occupied duplexes. This section brings this term into compliance with industry standards that view the term "housing" as owner occupied housing with up to four units. This is the standard that is used by the VA, FHA, Fannie Mae and AHFC conventional urban loans.

This section would also increase the population base for communities eligible to participate in the rural loan program from 5,500 to 6,500 for communities not connected to Anchorage or Fairbanks by road or rail or from 1,400 to 1,600 for communities on the road system. Currently, the population of Bethel is approaching 5,300 with a continuing pattern of growth. By increasing the population allowance, communities such as Bethel will remain eligible to participate in the rural loan program. Alternative financing is generally not available from national secondary market sources.

Section 14: Allows AHFC to implement any necessary changes in regulation as a result of this legislation.

Section 15: Immediate effective date.