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File #: 26-001    Version: 1 Name:
Type: Action Bond Finance Bond Resolution Status: Agenda Ready
File created: 9/22/2025 In control: Governing Board
On agenda: 10/9/2025 Final action:
Title: Presentation, discussion, and possible action regarding resolution no. 26-001 authorizing the issuance, sale and delivery of Texas Department of Housing and Community Affairs single family mortgage revenue bonds or residential mortgage revenue bonds in one or more series and installments; approving the form and substance of related documents; authorizing the execution of documents and instruments necessary or convenient to carry out the purposes of this resolution; and containing other provisions relating to the subject.
Sponsors: Scott Fletcher
Attachments: 1. Resolution 26-001 Authorizing TDHCA 2026 MRBs with Supplemental Indentures
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Title

Presentation, discussion, and possible action regarding resolution no. 26-001 authorizing the issuance, sale and delivery of Texas Department of Housing and Community Affairs single family mortgage revenue bonds or residential mortgage revenue bonds in one or more series and installments; approving the form and substance of related documents; authorizing the execution of documents and instruments necessary or convenient to carry out the purposes of this resolution; and containing other provisions relating to the subject.

End

RECOMMENDED ACTION

Adopt Resolution

BACKGROUND

On October 10, 2024, the Board approved Resolution 25-004, which authorized the issuance during the Department’s fiscal year ending in 2025 of single-family mortgage revenue bonds in a maximum aggregate amount not to exceed $1,100,000,000 in various series from time to time under one of the Department’s single family bond indentures. Such resolution delegated final approval for the sale of any individual issue of bonds to an Authorized Representative of the Department, subject to a determination by the Authorized Representative that the issue was in the best interests of the Department and in compliance with the parameters outlined in the resolution.

With this item, the Department seeks Board approval of Resolution 26-001 (“Resolution”) to authorize the issuance during FYE 2026 of single-family mortgage revenue bonds (“Bonds”) in a maximum amount not to exceed $1,100,000,000 in various series from time to time. Proceeds of the Bonds will be used to purchase Ginnie Mae mortgage-backed securities (MBS) backed by tax-exempt eligible mortgage loans, to pay all or a portion of the costs of issuance related to the Bonds, and to finance a portion of the down payment assistance, lender compensation, and second loan servicing fees related to the underlying mortgage loans and/ or to refund other outstanding bonds of the Department issued under the indentures. Depending on market conditions, proceeds of the Bonds may be invested in a Guaranteed Investment Contract (GIC) until expended.

As with Resolution 25-004, the Resolution delegates final approval by an Authorized Representative of the Department, subject to a determination by the Authorized Representative that the issue is in the best interests of the Department and in compliance with the parameters outlined in the Resolution.  Such parameters will require that (i) the total amount of all Bonds issued not exceed $1.1 billion; (ii) the maturity date of any series of Bonds not exceed 40 years from their date of delivery; (iii) the net effective interest rate on any series of Bonds not exceed the maximum allowable under state law (currently 12%); and (iv) that the purchase price of the Bonds not exceed 108% or be less than 95% of the principal amount.  Additionally, any refunding shall require a showing of at least 3% savings compared to the debt service requirements of the refunded bonds. The Authorized Representative may also determine whether to issue the Bonds as fixed rate or variable rate.

The Department will take cautious approach to issuance in 2026 as the housing market in Texas has slowed and appears to have limited momentum going forward.  The market must adapt to persistent affordability constraints and fluctuating demand across regions.  The mildly stagnated market led to lower than usual issuance in FY 2025, where the Department issued $675 million in MRBs. Recognizing continued challenges with affordability, the Department has shifted towards issuing 100% tax-exempt deals to provide the lowest possible rates to first-time Texas homebuyers and veterans.

The Fed recently cut the Fed Funds rate by 25 basis points and is projected to continue easing into 2026.  The mortgage rate outlook suggests a gradual decline in 30-Year fixed mortgage rates.  Fannie Mae forecasts suggest rates around 6.4% by the end of 2025, and 5.9% by late 2026. 

The yield curve has normalized, introducing negative carry back into our transactions from issuance date until funds are fully expended.  As such, the Department intends to build pipeline ahead of deals and possibly issue in smaller amounts with increased frequency.  This approach is facilitated by the flexibility provided through the Board’s approval of the Resolution. 

The $1.1 billion maximum bond amount will provide the Department with adequate capacity while maintaining need flexibility to adapt to market conditions. 

This annual “not to exceed” issuance approval provides several benefits to the Department, including:

1.                     Increased flexibility on timing of issuance to take advantage of market opportunities and changes in interest rates.

2.                     Enable the Department to better manage market risk and non-issuance exposure.

3.                     Continue to provide borrowers with continuous access to TDHCA bond-funded mortgage loans.

Department Contribution
The contribution by the Department for any series of bonds issued under the Resolution will not exceed $10 million, which will to be used to fund a portion of the down payment and closing cost assistance and costs related to the acquisition of qualifying mortgage loans (including the payment of lender compensation and servicing fees for second mortgage loans) and to pay all or a portion of the costs of issuance of the Bonds.  The contribution will be funded from amounts on deposit in the respective indenture.  The Resolution will additionally authorize capitalized interest of up to $10 million may be paid from the respective indenture as necessary.  As with prior transactions, these amounts are maximums; the actual contribution and capitalized interest expense are expected to be less than that approved in the Resolution.

Summary
Staff will continue to work with the Department’s financing team to ensure the economic viability of the Bonds.  Depending on market conditions and other factors, the actual amount of Bonds issued may be less than the maximum approved by the Board.