Travis County Commissioners Court
March 14, 2006
Housing Finance Corporation
[Travis County housing finance corporation voting session Tuesday, March 7, 2006 upon adjournment or recess of Commissioners court. Item 3. Conduct public hearing concerning the issuance of the corporations proposed single family mortgage ]
>> revenue and refunding bonds. Gnma and fannie-mae backed securities program series 2006.
>> all in favor? That passes by unanimous vote with director Sonleitner absent.
>> we would like to state that notice of this public hearing was published in the Austin american statesman as required by the internal revenue code I think about 14 days ago and that is the requirement.
>> the public hearing regards...
>> regards the $15 million Travis County housing finance corporation 2006 single family bond program and I’m harvey Davis, manager for the corporation here with elizabeth rippey from vinson and elkins and mark o'brien, with morgan keegan, our underwriter, and I think it would be good if mark would give a brief overview of the proposed program.
>> okay.
>> thank you, judge. Commissioners, mark o'brien, with morgan, keegan and company. We are the single bond underwriter. You all recall we talked about this in October and then again in January, this will be the last look before the bond resolution will be considered next Thursday -- next Tuesday, the estimated issue size as harvey mentioned is 15 million, the structure is an innovative publicly sold premium step coupon structure we developed 3 months ago, the advantage of the structure is it does not require an up front contribution from the issuer, provide as below market mortgage rate and provides a grant to your first time home buyers, so it's quite beneficial to y'all, the anticipated pricing date for this issue you would consider the bond resolution the next Tuesday, the 21st. The mortgagors closed on the 4th of April and we'll get some of the spring buying season too. The down payment assistance as I mentioned is 4%, that is a nonrepayable grant equalled to 4% of the initial principal balance of the mortgage loan, for example, hundred thousand dollars mortgage that is $4,000 for a down payment and closing costs, the lender contributes 50 basis points to participate in the program and net to participate when they close the loan and sell it to the servicer, a good transaction for lenders here in Travis County who are participating. Because of this structure we have no contribution at the closing for lag, no for negative arbitrage which is a great benefit to the hfc. None for transaction costs. And then other good news is this actually provides a source of income for the corporation assuming that we originate this $15 million bond issue and assuming it pre-pays in the normal fashion it will produce a net present value of $125,000 of income. That is net discounted to today to present value, it's a higher figure when it comes in. Finally where we think the mortgage rate where this program would be today based on this market would be a 595. That is a good below market rate. Current market in Travis County is in the 6 and 3 eights to 6 and a half range to give you an idea where the market is. One thing by the way on the structure I might note there is a -- the cost of the transaction is largely paid for by a contribution from the lenders and the contribution from the servicer. The servicer puts up 1% of the bond amount in anticipation of getting the $15 of mortgages when they're originated. In the event this program doesn't fully originate or if in the event we have less than the 90 originated, the issuer is obligated to extend or refund the program, assuming the mortgage rate is still good we would presumably extend the program. If rates were not good we would refund the program, there could be some costs associated with that. This structure will produce some -- assuming we originate some, this structure during that first 12 months throw off some cash which could presumably be used to extend or refund the program but it's a recommendation of the financing team and your staff that the issuer, Travis County hfc set aside a small amount of funds to make sure they could make good on their on gaik to extend or refund the program at the end of the 12 months in the event this program or not 90% originated, the figure arrived at in consultation with your finance team and your staff mr. Davis was the $50,000 the corporation would set aside in the event we had to extend or refund and didn't have sufficient moneys in the indenture to do so.
>> at the bottom of the -- and by the way, there would be no contributions for -- for -- from the issuer to close the transaction including be reimbursed for the attorney general filing fee. Judge and Commissioners at the bottom of the page, we have your lender requested allocations, as you see we've got a number of your -- of your best lenders in Travis County represented there, they have actually requested $22 million in allocation amount, so there's several reasons why we feel optimistic about the course of this transaction, number one, we have an innovative new structure that provide as below market rate with the down payment, number 2 a structure you don't have to put up cash to close the transaction, we're oversubscribed which hasn't been that way in a number of years, we're happy about that, the lenders seem enthusiastic, number 4 we have a good market to get this done, I’ll stop there and be happy to answer any comments or questions of we thank you for the opportunity, this is the initial go forward, next Tuesday you would consider a bond resolution and where that passed we would price the bonds and move to closing.
>> one reason there's a good market now is that there's not a state bond program that is active.
>> that's correct, judge. The Texas department of housing and community affairs periodically does bond issue, they generally do two to three a year in the hundred million dollars plus range, they are currently out of the market and don't intend, we hear, to do a new issue probably until June or July, however, that being said, these -- these lenders knew about that and still subscribed so I think we are in a good competitive position with respect to the state because they don't have a program currently, but even if they did, this program would be a little different, this program lenders actually control allocation. This program provide as down payment assistance, the state recent programs have been low rate programs without assistance, very good rates, by the way, in the 4.99 range but without the down payment. There's several reasons why this program may have a competitive advantage, one is the one you mentioned that they're not currently in the market. They presumably will be during this 12 months on origination period.
>> questions? We did have a chance to meet with the board members over the last few days?
>> yes, sir, I did.
>> questions.
>> and mark, really, the potential for this being, you know, an iffyier program is if we really thought that interest rates were, you know, going down versus the other way because that's really, you know, the strength behind this thing and I mean not that any of us have a krystal ball, but we did talk about that and thinking that -- that that really is probably more unlikely to happen with the rates going, you know, down, which would certainly have, you know, an effect on us, you know, being able to sell this program, so obviously, as I told harvey, you know, we've -- we've got to have a krystal ball somewhere because we're going to be -- we're going to be leaning on you, I know working with you all we feel pretty comfortable doing that, snak?
>> that's correct, Commissioner Davis, if let's say current rates, 30 year fixed rate mortgages in Travis County are 6 and a quarter to 6 and a half and we came out with say a 5.95 today, there's a couple of good things about that. You've got the down payment.
>> yeah.
>> however, we're below market when we start, you could even take some down side and still be okay, because keep in mind if rates get to 5.95 this is still more attractive.
>> because of the down payment.
>> we've done these programs where we're a little above or at or above the market when we price it. With the down payment, you've got some -- at some point that ceases to happen, five and a half, five and a quarter, it becomes less and less -- you're exactly right, Commissioner Davis, but we -- our best guess is that rates should be flat or riegz in the next 12 months, but point out no one does have a krystal ball and hope for the best with respect to this program and hope it's approveddal.
>> let me ask that the city of Austin and the city of Pflugerville have kindly passed resolutions allowing the corporation to use this program within their city's limits.
>> within their city limits?
>> yes, sir.
>> okay, and on top of that I guess how do we erother than what we just mentioned, advertise to anybody else that really has an interest in that and looking to move up as far as home ownership and stuff like that, most folks knew about it, but the average person out there that is looking at us today, that sounds like a pretty good deal to me. How can I take advantage of it? Go ahead.
>> what we have done in the past is prepared appress release and issued the press release to -- to all the news outlets, news -- tv stations, newspapers, we also have a -- when we marketed out down payment assistance program, we -- recently we also developed a -- a good list of e-mail list of local real estate agents that seemed to market to the home -- the type of home buyers that would be using this program, and so we would send that price release to those real estate agents.
>> and brochures too, we prepared, Commissioner Davis, morgan keegan prepares, to issue to board members and also all the participating lenders and I believe you also put it on your Travis County website. So we try to do outreach with lender, realtors, brochures, press releases, et cetera.
>> it's good for the folks to hear that. Otherwise they may leave it to interpretation and so anyway, their own interpretation. You find as we've just done so -- okay. Thank you.
>> would anyone like to give testimony during this public hearing? This is item number 3?
>> public hearing will be closed.
>> second.
>> all in favor? That passes by unanimous vote. Number one is to receive report and take appropriate action regarding a proposed $15 million series 2006 a single family bond program that is the explanation, description we just received.
>> yes, sir. And I do want to state that staff does recommend that the board approve proceeding with this transaction with the expectation of bringing this to the board next week for final resolution. I -- I also request board approval to issue a check for $9,500 to pay the attorney general's fee. This payment plus the $500 that we have already paid to the Texas bond review board would be reimbursed to the corporation at the closing of the bonds.
>> move approval of both.
>> second.
>> the proposal plus payment to the attorney general, we certainly want to keep our state government afloat. [laughter]
>> yes, sir.
>> and discussion on the motion? All in favor? That passes by unanimous vote. Thank y'all very much.
>> thank you too.
>> we will have an opportunity to learn the interest rate before final approval next Tuesday.
>> actually, judge, the -- the final approval will occur on Tuesday and I believe the contemplation was that you would be depp deputized to set the fee.
>> that is even better. Thank you.
>> you're welcome, sir, thank you, now, number two is to consider and take appropriate action on to release the funds to southwest key program, inc. Pursuant to section 4.2 of contract dated October 31, 2004.
>> and I’m here with veronica delgado savage who is with southwest key. If you'll recall in January of 2005, the -- the board approved a contract -- or executed a contract with southwest key to assist them in the construction of their head -- a new headquarter billing on jane lane which is about one block from johnston high school, the contract that -- in order for the funds to be released to southwest key, they had to satisfy a 3 conditions according to the contract, they had to give us copies of commitment letter from the economic development administration which is part of the federal government, the city of Austin and chase bank, they had to commence construction, actual construction of the project on jane lane, and they had to give uls invoices of expenses that they incurred in which they would be reimbursed, and I am representing to the board that they have fulfilled these three commitments in your backup is copies of the letters that are required. I did go out to the construction site about a week ago and witnessed the actual moving of the preparing the ground for the foundation and I talked with the general contractor out at the site, he also gave us a letter in which he said that construction has begun at the site, and that letter is in your backup. I talked with the -- their banker at chase -- j.p. Morgan chase bank who confirmed to me that they do have a line of credit with sufficient funds to -- to -- or the ability to raise the amount of funds in order to be able to complete this project. I believe that the estimated construction cost is about $6.3 million, they have raised $5.1 million so they only -- they only have a gap of 7 or hundred thousand dollars they haven't raised. Their goal was to try to raise all of it and not have to borrow any money from the bank, but they do have that ability. And so the contract had that their amount of the release of funds was to be $100,000, 50,000 was to be released. In fy '05 and the balance of October of 2005. Obviously we didn't release any money in '05 because they hadn't started construction, so my recommendation to the board is that they have met the requirements and recommend that they -- that we release the $100,000 provided in the contract.
>> any reason why we should not do this, miss delgado.
>> not that I know of. We're moving forward, we're very excited. Hopefully in the next year you'll invite us all and be joining in the opening. We do have our construction manager at risk, mr. Bob farmer, and our architect mr. Juan cortera.
>> congratulations.
>> questions?
>> move al approval.
>> second.
>> any discussion on the motion? All in favor, show Commissioners, Gomez, Daugherty, yours truly voting in favor.
>> judge, show me abstaining and I would like to tell you, say this, I do support southwest key program and I think I stated that over and over again, there's some neighborhood opposition, strong opposition to this particular location in that particular area from the johnson neighborhood association and based on their observation it's just the location that I oppose.
>> sure, I jiewns the neighborhood concerns of what they think it would bring to their neighborhood, so that's the reason I can't really --
>> I understand.
>> I hope you understand.
>> we do.
>> and that is in my precinct so I have to listen to them -- to what my constituents are telling me.
>> thank you very much.
>> good luck to you.
>> move adjournment, all in favor, that passes unanimously.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified:
Tuesday, March 15, 2006 10:38 AM