Travis County Commssioners Court
March 9, 2004
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Housing Finance Corporation
Housing finance corporation. 1. Consider and take appropriate action on a resolution authorizing swroo amendment and three-year extension (or refunding) of the $30 million single family mortgage revenue notes, series 2001-1.
>> good morning, I'm here with cliff blunt, lad pat till although, [indiscernible] with morgan keegan. As you will recall, we have our recycling program that the three year period has run out. So we are asking the bored to approve -- the board to approve the resolution extending the program for an additional three years.
>> and you have no reason not to do this, right? No good reason.
>> no good reason. There is some cost involved in the exemption, we where he estimate to be about $11,000.
>> second.
>> move approval. That is that we request a three-year additional extension. Any more discussion? All in favor? That passes by unanimous vote. 2. Consider and take appropriate action on options to enhance the $16 million 2002 single family bond program.
>> and if it's okay with you, judge, I would like to turn it over to mark o'brien to go over the status of our 2002 bond program and to go over the options.
>> thank you, harvey, judge Biscoe, Commissioners, I'm mark o'brien with morgan keegan the bond underwriter placement agent for the Travis County finance corporation since 1995. Single family bonds. We wanted to give you first a brief update. In your board packet of the one-page summary on the 2002 a program from December of 2002 and ends the end of this year, then we have a couple of option that we want to address with you to enhance the program. The program issuer is the non-profit formed by Travis County. We had lender demands for 16 million in funds. They have to write a check for 50 basis points, that of our lender demand. All recycled proceed. We got -- this is from our $30 million recycling program that we just -- that you just passed a motion to extend. The reason why that's important is number one we are using the money that we have gotten in recycling. Number 2, if this program were to fully originate we would not have a utilization percentage. In other words it wouldn't hurt us next time when it went to the state to get allocation. Professional supports are there. Including thompson co issuers council here with us, lad patillo. Our requesting lenders are set forth there. Sterling cap toll is now -- capital is now rbc moarj. We closed this program December of 2002. Our origination period was 24 months, to the end of this year, December 31st of 2004. However, if we have funds remaining unexpended at that point we could extend the program. Loan air of course is Travis County, including the city of Austin. The city of Austin didn't join until January 1st of this year. So this is -- as you see we haven't originated that much -- we anticipated that Austin would be in by March or April of last year. Emergency broadcast. [emergency broadcast pre-empting programming] [Travis County Commissioner court broadcast pre-empted by emergency broadcast]
>> those programs cost a bunch of money. You will have a situation where we haven't originated that much of the money, at least you didn't put in a big check to get it done. Our mortgage rates varied from a high of 655 to the current rate of 599 just set the week below last. Slightly above Margaret, but comes with a 4% down payment assistance grant. That is never repaid. It's an outright grant to the home buyers. I listed a $100,000 loan, average a little higher than that for our program, that's 4,000 down payment grant for closing costs and down payment at the -- that the home buyer receives, that of course is the advantage to the program [indiscernible] finally options to enhance judge and Commissioners to set new lower mortgage rate. We have done that, broken through 6%, a psychological barrier in the lenders market to our first time home buyers. Two was to include up to additional 1% of grant for one or more upcoming lots [indiscernible] that's what we wanted to consider today, whether the corporation might want to do that. We have had other issuer clients, including central Texas hfc, southeast Texas hfc. This is a tough market for bond programs, there are only 2 million -- through a 14, $16 million program. This is not unique to you. In cities and counties across the state, state agencies, these programs have moved much more slowly. Several reasons for that. Conventional rates declined [indiscernible] we can't undercut mortgage rate as much as we used to. This program does not move that effectively, number one you are in a good company, number two you didn't have to write a big check to put the program in place. Some other issuers added down payment assistance to make it more attractive ... For them to move this money. And if you were to do that, central Texas hfc, southeast Texas, an additional one or two percent of down payment assistant under income, if you all were to do this, for example, on this program, the 4% it is funded by the bond holder, if you were to add an additional 1% of this existing $2 million that would be a 20,000 investment. It wouldn't be due until 8/1 of '04 later this year when we deliver those mornings and you wouldn't spend it unless we make the mortgage loans. It wouldn't be going to professional fees. So this money, if you use it for this, would go to low and moderate income first time home buyers to help them with down payment assistance for a grant. Wouldn't go for professional fees. It would only be spend five months down the road if we were expended. So I talked with your financial advisor and your staff about it that this was another enhancement that several hfc's were doing, wanted to give you the option to determine if that was something that you might be interested in committing. You might want to set a cap on say 40 or $50,000 over the next several lots to enhance the program and then if it works, it works. If it doesn't you haven't spent it. We would come back to you and say you want to continue it because the program is going well, or do you want to cut it off because now it seems to be back on track. I will stop there and take any questions, judge.
>> we could authorize one percent additional enhancement for the first two million, or next two million, take a look see at this point.
>> that's what I would propose if you were to consider it in that way, judge.
>> the other thing that we chatted about was us basically trying to do a better job of getting out the word about the availability of this program through reality agents and others. No matter what we do, we let them know who the participating lenders are anyway. I say trying to blitz it. I'm not sure when the down payment assistance, there arrest whole lot of ways that you can get assistant thick, down payment grant. Thing. Down payment grant. This money is your, really, without condition. If you participate in the program. These sort of instant equity idea I found attractive. But a $210,000 home is a lot greater than I'm used to dealing with. Price higher. There ought to be a whole lot more housing stock available. But do we think that our lenders are encountering families that -- that I guess make the income that would scruff a home in the 170 to $200,000 range?
>> the income -- at a $71,000, our income limit for a family, 81,000 for a family of three or more. At those kind of levels, judge, you can get up to 160 to a $200,000 house.
>> that's pretty common in Travis County?
>> certain areas. It depends central city, forget it. Not happening.
>> I believe our average loan balance, judge, on this program was in the $155,000 range I think for the -- maybe a little less than that. I can -- upcoming meeting I can give you one of those detailed reports.
>> let's say on a $160 home at this interest rate, any idea of what the lenders would -- what kind of income the lenders would be look for for a family of four.
>> family of four, probably in the 65 to $80,000 range to qualify for 180,000 loan. There's a lot more to it, but the short way to calculate it is two and a half times your annual income.
>> one thing for the program to be available. It's another thing for residents to really understand it. The program. So --
>> one of the things that the judge mentioned yesterday when we were beginning to talk about this, I think that it's a great idea. When you say down payment assistance, it's something that doesn't -- kind of over the head. Doesn't really sink in. And I would like the suggestion in terms of renaming this. I'm even thinking instant equity grant. I mean that basically says -- gets your attention because it's not something new that's been thrown out there. When you say down payment assistance it sounds like somebody is going to help me fill out my forms. It's not something that gives the impression somehow there's something that will help you bridge the gap. I also September to mash and -- sent to mark and harvey, perhaps if we can work with some of the chamber of commerces, I gave the suggestion of Pflugerville, a home that is 210,000 or less is absolutely available out in that particular area. Because the chambers are made up of real estate agents and others that are trying to move those homes, that might be a way to make those more direct connections to kind of make this happen because there may be a real estate agent working with a client that wants to get it done and this is a way that it can happen.
>> we appreciate that. We have gotten that e-mail from you, Commissioner Sonleitner, and we will plan to get in touch with them. In addition to some of the other marketing -- this is kind of a new day on this program. Whether or not you authorize additional instant equity or home lender -- also brochures with the 599 rate. We have been having one on one meetings with the lender just to get in front of them. One of them yesterday, another today. Also appearing on Saturday on the mortgage talk show on a.m. 1370 from 1:00 to 2:00. So where he plan to do all we can under the demand side to make sure that the lenders, reelsors and -- realtors and potential home buyers know that we have this remaining 14 million that we want to get moved as quickly as possible.
>> we have 20,000 in the housing finance corporation.
>> yes, sir, we do that.
>> what is the uncommitted balance, approximately?
>> approximately 80 to 90,000?
>> this might have come from fees from different housing issues and in my view would be appropriate for us to put a little more money back into it. These programs are available for Travis County residents. If they don't use them, they are not achieving the purpose, so -- so in my view I would try an additional 1%. To be setting aside $20 how for the next increment of 2 million bucks. We will take a look-see after that. Then we will do what we can to sort of help market it. And if we have got brochure that may be a little bit more dramatic presentation than we have used historically, maybe our challenge is to try to make sure we get those in the hands of people that ought to be interested in using them. If this doesn't work, maybe we ought to look at working with lenders or -- increasing their take hope. In the end what motivates lenders to get out there and push this program compared to the others that are available. My motion is to approve the one percent additional incentive, which would be a commitment of $20,000 from the housing finance corporation, that would be paid around August 1 of this year. If it's used.
>> if it's not used then --
>> no money --
>> if you used half of it, that would be 10,000, et cetera. Zero, if we originated zero we would have zero.
>> that's right.
>> second.
>> give a back patting to working with [indiscernible] try to I guess increase interest in this around the committee will do a little bit more themselves. Mught it in the hands of the reality agents I think we can help with. Seconded did I director Gomez, any more discussion? All in favor? That passes by unanimous vote. With director Davis absent. That's it on that item, right?
>> yes, sir.
>> there is one more item, that is number 3. 3. Consider and take appropriate action to approve home contract with Texas department of housing and community affairs to provide down payment assistance for first time homebuyers.
>> as you recall forks this grant, about this time last year, we have been approved for the full amount of our application, $312,000, and we've received the contract from the state and our attorney cliff blunt has reviewed the contract and says that it's okay for the board for our board president to sign the contract. If you could bear with me maintain, I would be happy to go over the parameters of the program. Since it has been a while since we have discussed this item. The size of the grant is $312,000. This is to fund 60 forgivable loans. We do have match that we secure for the program. We have a $5,000 match from bank 1. As part of their community reinvestment act program. They have already paid us that money and the -- the mope was unrestricted in the program design, we will be using that money to -- to provide extra down payment assistance to lenders who are at 60% or less of Austin area needian income. Median income. We have committed six loans of that, that equals 833 -- $833 each loan. Other sources are match are twr two builders, main street and milburn, which is now dh horton homes, $37,500. Those source Travis County commis sources of match is that we would commit the homes to -- 30 of the loans would be for main street, 30 of the loans would be for milburn homes. The program would have 54 homes, 54 loans to home buyer at 80% or less of Austin area median income and six loans for home buyers at 60% or less of Austin area median income. So what this works out to is home buyer at 80% would receive assistance at $5,800, 4,550 from the -- from our grant and $1,250 from the builder. And then home buyers at 60% or less of median income would receive assistance totaling $6,633. And -- and the -- the grant fund will be in the form of a -- of a 10 year forgivable loan. If they repain in the house for 10 years or more, then the down payment is a grant. Otherwise when they make the lope it is a soft second lien, non-interest bearing loan. The home buyer is required to complete an 8-hour home buyer assistance course. We have made arrangements with consumer credit counseling to provide the course. And the -- the home buyer would pay the fee that they charge to do the course. What we are proposing is a couple of years ago, we had another home grant fund and we would be using the -- the same county personnel to administer the funds as far as the day to day operation of this program. It is very paper intensive, and so it would be myself, mary mays and leroy nellis would be the ones that would be authorized to set up and approve these loans. We had a system where we would secure a certified check from the bank for each of these down payment assistance and deliver them to the title company on the day before or the day of the closing of these homes. And it seemed to work pretty smoothly. So fortunately we had the same people here. Of course the judge would be the one that would be authorized to sign the contract. So that's -- and we have hired michael hunter, who was our consultant on the prior program. He would also be our consultant on this program. His main duty is to make sure that all of the paperwork is done that is required in the program, from the -- from the lenders. So he makes sure that there's -- there's an inspection done, that the -- that the people qualify in the income and that all of the proper paperwork is then sent on to the state though this is -- it's quite a bit of work, it's a little more -- a little more requirement say than the bond program because there is -- because there is a -- you the led based inspection, you have to inspect the home. You have to have a second lien placed on the home. There is quite a bit of work on it. But the last grant that we had seemed to have gone pretty smoothly.
>> how much of that last grant did we use?
>> the last grant was a $50,000 grant and it was for ten ten loans and -- 10 loans and we fully originated it.
>> this is for 60?
>> sir.
>> this grant will be for 60 loans.
>> 60 loans, right. This is quite a bit larger.
>> move approval.
>> second.
>> any more discussion? All in favor? That passes by unanimous vote.
>> move adjourn.
>> second.
>> judge. I may adjust for anyone that's listening, that can be layered on top with the other that we are talking about. So that -- but that's for people at lower income level therefore that grant plus the down payment assistance grant that we talked about, or the ins instant equity could be layered together. For someone at that income level which is below median it's a significant benefit.
>> can we put that in a box on the next pamphlet? The availability of -- [indiscernible]
>> right. If there are income requirements then I guess we ought to just highlight those, too. Not everybody qualifies, but if you are lucky enough to do so it would be a big financial advantage. I did hear a motion to adjourn and a second.
>> yes.
>> all in favor? That passes by unanimous vote.
>> thanks, thank you all very much.
>> all right. Absolutely.
Last Modified: Wednesday, March 9, 2004 6:57 PM