Travis County Commissioners Court
April 10, 2007
Housing Finance Corporation
We do need the Travis County housing finance corporation. Let's call it to order. Number swun to consider and take appropriate action on request to approve minutes of board of directors meeting of March 20th you, 2007.
>> move approval.
>> second.
>> discussion? All in favor? That passes by unanimous vote. Number two is to consider and take appropriate action on results regarding negotiation of bond counsel fees and contract with fulbright & jaworski, llp, including direction as to necessary follow-up action.
>> good afternoon. I'm harvey Davis, mrk for the on -- manager for the corporation. And attached to your backup is fulbright's response to our request for their fee schedule. And I -- their fee schedule does fit within the recommendation that I made to the board about what bond counsel fees should be on a single-family bond program. If you'll recall, my -- based on a survey that I did, I thought that the fee should be between two dollars and 2.50 cents a bond or for a 15-million-dollar bond program, between 30,000 and 37,500. Their proposed fee schedule does fit in practice thamter at 2 -- in that parameter at $2.50 a bond. So our recommendation is that their fees are fair and reasonable and that we should hire them as bond counsel.
>> move approval.
>> second.
>> discussion? And that was a substantial difference between the fees offered in negotiation from the number one firm and fulbright & jaworski being number two.
>> about 22,000. Irltd how much?
>> how much?
>> 22,000.
>> all in favor? That passes by unanimous vote. Item number 3 is to consider and take appropriate action on request to approve resolution extending the corporation's current series 2006-a single-family bond program.
>> and I'm here with mark o'bryan from morgan keegan, our underwriters for the bonds and ladd pattillo, the financial advisor. Cliff blunt is out of town and not tiebl attend this meeting. If you recall in April 2006 we initiated a 15-million-dollar single-family bond program with the interest rate of 5.95% mortgage rate for a 30-year fixed rate mortgage and a four percent down payment assistance grant. The time period for the program was 12 months. We do have the option to extend it for an additional six months, so that's the reason that we have this agenda item. And if it's okay, I would -- mark will give a brief update of the progress of the program thus far.
>> okay.
>> thank you, harvey, judge and Commissioners. Mark o'bryan with morgan keegan, the single-family bond underwriter for the program. You have a one page summary that harvey asked me to go over briefly before you consider the resolution to continue the program. The issue of course was the Travis County hfc issue size as harvey mentioned last April. These are triple a rated revenue bonds. Triple a because they carry the general any ma and fanny may. Our trustee was wells fargo and our servicer was city mortgage out of dallas. We closed almost exactly a year ago, 4-had of 2006. As mar I have mentioned we had a 5.95 mortgage rate. Our mortgage loans included several kinds. We had a 12 month origination period. All these programs that have this federal subsidy with the tax exempt bonds and therefore the below market rate have three requirements, first time home buyer, income limit and purchase price limit. They are listed for you. And finally and most importantly are 10 lenders are listed there. And at the bottom we recite what the program is. So far we have done 89 loans totaling 11.34 million. So we have over three-quarters of the program original fate nated. All loan are in a first come, first serve pool. This program was fully commit understand about four months and we had a target area of 20% set aside for a year period and that's the reason why we're looking at extending the program now because the one year period has just expired and we have little time to get the remaining funds originated. Also for the benefit of the Commissioners court, on the second page we gave a little bit of the demographics. You might want to know what these low mod first time home buyers in your community look like. The average loan amount, 127,000. Average household income was 47,000, which is below -- the average is below 80% of median income here in Travis County. Average purchase price for the residence was 134 house. Average household size a little bit over one and a half people per household. Loan types, 54% fha and 46% conventional. And about a two thirds, one-third split between more existing homes, but one-third new construction, and the demographics are also listed there for the home buyer families in terms of ethnicity. And break down by city, of the 89 loan referred to date, 79% were in the city of Austin and 30% in cities outside of Austin in Travis County. So it was a very successful program. We thank the corporation for the opportunity to work on it. I might also mention before you get to the resolution for your extension of this program that the board in October authorized implementation of a 2007 program. We are waiting for number one to get this program extended, number two to get your financing team in place, including your bond counsel, now that that is done, harvey will authorize us to have a lender meeting and get interest for the 2007 program. You do have an allocation from the state for a 2007 program, so we should be back for you after we get lender response and offers for a 2007 program. So I'll are happy to answer any questions or comments you may have regarding the program.
>> we think we'll be able to use the rest of the proceeds if we extend the program another six months?
>> oh, yeah. I expect quite a bit less than six months actually, judge. The 5.95 rate continues to be very attractive and the only reason why it's not out is because we had that targeted area set aside. I expect if we extend it we will have no problem bet getting this out to low income families.
>> if we extend it -- obviously we'll change this to f and j?
>> not this one.
>> so v and e, even if we extend it --
>> in terms of the bond counsel on this 2006 program will remain --
>> even though the extension of six months?
>> the extension of six months, right, although I expect that your new counsel and your issuer's counsel will expect the documentation. You're issuer's counsel rather than the bond counsel.
>> so this is pretty surprising to me. The folk that are buying these places are obviously mostly not couples, not with 1.69.
>> yeah, there are some single people and -- generally they're couples or couples with one or two children or single. So in this case you've got a fair amount of single people who have also -- who have brought this average down to below two. They would have to be a first time home buyer and generally they will be a young couple or an individual.
>> oh. So the average of saying you've got a number be of singles, that's how you -- okay. Make sense.
>> move approval.
>> second.
>> may I ask for a clarification? I know there's been a lot of talk at the federal level, federal programs designed to do essentially this have had a hard time and haven't been as successful as we have. Could y'all explain, perhaps tooting your own horn a little bit?
>> I think in early 2000, 2001, 2002, 2003, interest rates were so low that these programs weren't competitive because the difference between tax exempt bonds and taxable bonds just wasn't significant. So these programs weren't able to really compete. But now that interest rates are higher, they're able -- there is a significant gap between taxable bonds and tax exempt bonds. So these programs work a lot better. So I think that's the main reason why there maybe wasn't some success in prior years.
>> Commissioner, if I may add, once we fix a rate on these once the bonds are issued, that fixes the rate f rates in the marketplace go up, our programs are very attractive. If they go down, they're not.
>> right.
>> but it doesn't cost the corporation if that's the case because the cost of the program are paid by the participating lenders. So it's their business risk.
>> is our program yet too young to assess it by the default rate?
>> that's interesting you mention that, Commissioner, because that's been such a hot topic around the country and various of our issuer that morgan keegan represent around the state and country. What you find that was the main problem with foreclosure was subprime borrowers who are not a credit, number one. And number two, these were more innovative mortgage products, either adjustable rate mortgages, hybrids, interest only mortgages that the monthly payment can go up, be and they did. And part of the reason those products were attractive is because as harvey said nrks the early 2001, 2002, 2003, short-term rates were so low. So the foreclosure problem that we've seen have been a result in part of that, that was kind of creative financing, home financing devices. This type of program is almost the polar opposite of that. This is a blow market 30 year fixed rate mortgage. The borrower has instant equity in the home because you're giving him a down payment grant of four percent that's funded via the bond premium. So you have good credit worthy borrowers in this program who have a low fixed rate program and equity in the house. And you don't have quite the volume to did it against, but we've done for other issuers, surveys from 1997 to 2002, single-family bond programs, how much default rate. For one issuer in particular we just did this for, out of over 1200 loans, less than one percent default rate. I would say that this sort of program you're doing here is not only getting a lot of low mod families into the houses, but it's keeping them there.
>> and you attribute that to the four percent creating instant equity and the fact that the fixed rate across time being stable without a balloon note or anything like that?
>> exactly.
>> and also the underwriting is a lot more strict than with the subprime situation. These are not marginal borrowers. They're stronger borrowers.
>> with stronger credit histories.
>> okay.
>> what we've always said about these programs, Commissioner, since this is your first one, is that it doesn't give loans to someone who is not credit creditworthy, it just lortz flor a little farts and catches people that would be told no if they were trying to be getting a conventional loan.
>> or lack the dobl paint. -- lack the down payment.
>> all in favor? That passes by unanimous vote.
>> move adjourn.
>> all in favor? That passes by unanimous vote.
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Last Modified:
Tuesday, April 11, 2007, 8:34 AM