Travis County Commissioners Court
July 10, 2007
Housing Finance Corporation
Now let's call to order the Travis County housing finance corporation. Two items. The first is consider and take appropriate action on request to approve the issuance, sale and delivery of single-family mortgage revenue and refunding bonds, mortgage-backed securities program, series 2007-a, amt, approving the form, substance and execution of documents convenient and necessary for the issuance of the bonds and establishment of a single-family mortgage program, and other provisions related to the subject.
>> good afternoon. I'm harvey Davis, manager of the corporation. I'm here with bob grainsfeld, our bond counsel with fulbright & jaworski. Mark o'bryan with mar began key began and cliff blunt our attorney. And this is to give final approval to our 2007 single-family bond program, which we hope to issue the bonds I think on July 26th, and have we hope as successful a program as we've had with our 2006 single-family bond program, which is fully originated, and if it's okay, I'd like mark to go through in a little bit of detail about how this program is structured.
>> okay.
>> thank you, harvey. Judge Biscoe, Commissioners, mark o'bryan with morgan keegan. As harvey mentioned, the 2006 program has gone very well. We're now actually oversubscribed. We have a little over 15 million in loans made. We had a couple fall out, but the program has been very successful. You recall in the last meeting you extended the program for several months so we could get the target area originated. You've helped it looks like 116 low income and first time home buyers in Travis County to achieve home ownership. Congratulations. We appreciate the opportunity to work with you all on that program. It's been very successful. With respect to the new proposed program, which we've met about several times over the last several months, the issue size would be 15.5 million, 15 and a half million. As a reminder these are triple a revenue bonds. They are triple a rated because they have the securities backing the loans. Our professional team will be the same, of course, with the edition of fulbright & jaworski as bond counsel. The anticipated schedule, the resolution would be today we plan to price the bonds and therefore set the bond and the mortgage rate tomorrow morning, Wednesday, and then close the bond issue as harvey mentioned on July 26th. In terms of the rate and the structure of the dpa, once again judge Biscoe and board members, we will plan to do a publicly sold premium step coupon structure. We anticipate having a blow market mortgage rate again with the 30-year fixed rate or fannie mae or freddie mac conventional loans. And more importantly each loan will come with a four percent grant for the loan amount for down payment assistance. The loans are made in a targeted area. It's always the case that they need not be first time home buyers there. And also with respect to this program, for any issues, any single-family bonds issued in 2007 or before December 31st, 2007 of this year, veterans need also not be first time home buyers. And finally with respect to the requesting lenders, we have a request from seven different mortgage companies totaling 15.5 million. We also want to give our thanks to the mayor and city council for approving lending of these funds within the city of Austin. By state law we need that requirement for cities over 20,000. And over 60% of your loans in the '06 program went to the city of Austin.
>>
>> [ inaudible ].
>> about 60%.
>> so happy to answer any questions we will be pricing home and closing on the 26. We'll be back with you on that point. We appreciate the opportunity to serve the Travis County hfc again.
>> let me add that the resolution does give the authority to the president of the corporation to set the final mortgage rate because since we will be pricing the bonds small, there's some latitude as to how much of an issuer fee to add on to the mortgage rate. But you want to set the mortgage rate as some 5.95 or 5.99 instead of --
>> zero won't do.
>> [ laughter ]
>> that's what the residents will want to know. If the judge has that authority, why didn't he set it at zero?
>> conventional rates are in the 6.63 range as of fredty mack last Thursday and I suspect we should be below that. And of course with the down payment grant.
>> and the loans within the city of Austin do have -- the city has placed the same restrictions that they did on the '06 program that the new homes had to be smart compliant and the purchase price limit is aig bit lower than what is allowed by the internal revenue code because they have a different requirement in the city and the home buyer has to take a home buyer education course.
>> and for the lenders, city participation is real important. The ability to sell inside the city of Austin.
>> that's correct, judge. An be sent the city passing the resolution to allow lending there, I don't know if we would have had sufficient lenders. So we're very appreciative of the city's action, granting once again as necessity did in '06 the authority to lend in the city limits.
>> we'll add that Pflugerville also gave their permission.
>> yea Pflugerville!
>> and I was happy to attend their city council meeting to inform them of the program.
>> and could you remind me what is -- the family income is pegged to the percentage of -- the median family income?
>> that's correct. I'll defer to fulbright & jaworski.
>> you're exactly right. The statute provides in the tax code that it isied to medianng upon whether have you two or fewer or three or more. So there's a percentage there. And whether you're in the targeted area or non-targeted income. You have a little higher income, 120 or 140 percent. If you're in the targeted area and at 90% and 110%. So you have a little different variation. That equates to dollarwise for the non-targeted area, two or fewer at 71-1 and this three or foreis 81-765. And the targeted area is 85 and 99 respectively.
>> > so in the targeted area you could be above median family income and qualify?
>> yes. You get a percentage above that. So it's basing that 120 or 140 percent.
>> that's good news because as we are painfully aware in Travis County, there are many who are making the median family income or above and still can't afford to buy their homes.
>> and this program is really an important program for first-time home buyers, especially now because the state, who also issues single-family bonds for first-time home buyers, is not really in the market to the same extent that they have been. I think a lot of their problem is that they had to allocate resources to the rita area and have kind of left the other areas that weren't affected by rita, which includes Austin, with less of these types of funds. So they do have some programs, but it is -- the best benefit right now for the first-time home buyers is home buyers whose income is below 60 percent of the median family income, which is a much more restrictive restrictive requirement.
>> Travis County is still in a real estate bubble and we're not showing the same trends as in other parts of the nation where the bubble is popping. Basically our property values are out stripping our salaries. Do we see any kind of trend as far as that dropping off which would decrease our need for this program, but not eliminate it, of course? If our property values got more in line with our market salaries. Is there any chance of the real estate bubble in this area becoming more realistic any time soon?
>> I'm not sure, Commissioner, whether or not there will be a price correction. That's certainly in some certain high cost areas of arizona where the acceleration has stopped. I'm not sure if we'll see that in travis and Austin. The economic studies seem to indicate that Texas is a little more protected from that kind of are price fall off, but in any case, this sort of program, even if prices were to not accelerate not as quickly or if they were to level off or drop, this would still help your low and first time home buyer families who need the advantage of both a blow market rate and the down payment assistance grant. And that down payment is generally the most important things because a lot of times these people can afford the monthly payment, but they don't have the closing costs in order to get the loan closed.
>> move approval of the proposed resolution and execution of the other documents as necessary to make this happen. And authorize the county judge to sign on behalf of the board.
>> second.
>> mark, a question. The subprime market did he debaclethat's happened, does it affect any of this stuff? Or as long as you have freddie mac in there -- or is freddie mac, is there any fluctuation at all with what happens with something like the subprime?
>> I'm glad you prawt bureaucrat that up, Commissioner -- you brought that up, Commissioner Daugherty. That's been a hot city especially with some of our larger city clients where there's owe out the subprime and the foreclosure wave has really affected a lot of citizens, especially low and moderate income ones that have adjustable rate mortgages. This sort of program is an antidote to that program because you're giving -- first of all, they're grade a quality credits. These have to be fha, va and freddie mayor fannie mae backed securities. Second of all you're giving them a blow market rate. Third, it's a fixed rate. And fourth, you're giving them down payment sis sense so they automatically have equity in the house on the day they close. So what you're doing with this sort of program to the extent you're helping these folks is give them a good solid start in home ownership and no, it doesn't affect this, other than to the extent we see some flight to quality. Some areas where there's less mortgage activity generally, but more on tax exempt bond programs because it's a good quality product particularly for the first time home buyer families.
>> of course, the whole qualifying of the purchaser is also -- take a lot of volatility out of that thing. But you're right, for that -- is a great program for folks that this works for them.
>> that's right. For example --
>> is there any change as far as the criteria, as far as getting the down payment assistance portion money set aside for that potential homeowner, is it still required that duration of home oib, that particular portion of it is forgiven as far as down payment assistance or is that something separate?
>> Commissioner Davis, that four percent grant is now a grant that is not repayable. That four percent grant is a gift to the home buyer from the the hfc. There are other grant programs --
>> that require them to pay it back. I wanted to make sure -- that's why I asked the question because we have some situations where that assistance has to be forgiven or repaid. So I want to make sure this is not of that bunch.
>> you're right. Some programs will have a sale, a soft second lien or amortizing or the amount decreases over time, like 20 percent per year. This is none of those. There is no second mortgage on the house. It's a gift to the home buyer that allows them to have equity for their closing costs and down payment.
>> bob, give us the spelling of your last name.
>> dransfield, just like mansfield with a dr instead.
>> thanks.
>> any more questions? All in favor? That passes by unanimous vote. Thank you very much. Number 2 is to consider and take appropriate action on request with to approve a release of lien on a down payment assistance loan.
>> and Commissioner Davis, this is -- many times I've come before you with our releasing liens for first time home buyers that bought a home back in the '90's. This is on -- this is somebody that has -- first-time home buyer who has sold their home who purchased it in March of 2006. And they received a 1,600-dollar forgivable loan from the Travis County housing finance corporation and this was fore-- the provision of the loan document is forgiven for each 10 percent for each full year the home buyer remains in the home. So this home buyer remained in the home one full year, and so $160 was forgiven. So they have paid back and we have put in our bank account $1,440 as repayment of the loan, and so they have requested the release of the -- it's the third lien that the corporation had. And so I recommend that the board approve that.
>> move approval.
>> I will add that we also provided a second lien, which was our grant funds from Texas department of housing and community affairs, but the home buyer deals with the state as far as repaying and having that lien released. We're not involved in that.
>> you're not involved in that portion.
>> motion covers the one we are involved with.
>> exactly.
>> all in favor? That passes by unanimous vote.
>> move adjourn.
>> all in favor? That passes by unanimous vote.
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Last Modified:
Wednesday, July 11, 2007, 11:00 AM