Presentation, discussion, and possible action on Resolution No. 24-023 approving Assignment Agreements relating to Private Activity Bond (PAB) Volume Cap Authority, and containing other provisions relating to the subject
RECOMMENDED ACTION
Adopt attached resolution.
BACKGROUND
Chapter 394 of the Local Government Code provides for the establishment of local housing finance corporations (HFCs) for, among other things, the issuance of single family mortgage revenue bonds (SFMRBs) or mortgage credit certificates (MCCs). Federal tax law limits issuance of SFMRBs or MCCs through the allocation of Private Activity Bond (PAB) volume cap. Chapter 1372 of the Texas Government Code (the Allocation Act) sets out the rules for allocation of volume cap in Texas.
For 2024, $1,229,664,332 in volume cap is available for Mortgage Revenue bonds (MRB) or Single Family programs. Approximately 33% is set-aside for TDHCA, 10% is set aside for the Texas State Affordable Housing Corporation (TSAHC), leaving approximately 57% of the single family volume cap available for use by local Housing Finance Corporations (HFCs) for the purposes of issuing SFMRBs or MCCs. On August 6, any unreserved set asides collapse into a single family pool on August 7. On August 15, those funds are then made available to the Department, TSAHC, and HFCs for reservation on a first-come, first-served basis.
HFCs were once very active in financing single family homeownership for low and moderate income homebuyers. However, in recent years, it has been difficult for HFCs to successfully issue SFMRBs or to implement MCC programs due to the combination of the up-front investment, interest rate risk, administrative costs, and other factors. As such, for several years now, the single family volume cap set-aside for HFCs has been largely unreserved.
Pursuant to Section 394.032(e) of the Local Government Code, an HFC can assign its volume cap to the Department “. . . to act on its behalf in the financing, refinancing, acquisition, leasing, ownership, improvement, and disposal of home mortgages or residential developments, within and outside the jurisdiction of the housing finance corporation, including its authority to issue bonds for those purposes.”
Through the assignment of volume cap the Department originates, on the HFC’s behalf, mortgage loans within the HFC’s jurisdiction through the Department’s My First Texas Home Program which are either financed by one or more of the Department’s SFMRB issues or originated in combination with an MCC.
The Department received its first assignment of volume cap in 2020 from Harris County Housing Finance Corporation. In 2022, the Department received $215.2 million in volume cap assigned from seven HFCs. Last year, the Department received $408 million in volume cap from twelve HFCs. As of June 2023, 85% has been originated. This year, 15 HFCs are seeking participation to assign $512,108,950 in volume cap to the Department.
|
HFC |
Amount |
|
Arlington |
$15,000,000 |
|
Cameron County |
$35,000,000 |
|
Capital Area |
$64,000,000 |
|
Dallas, City of |
$64,819,515 |
|
East Texas |
$40,000,000 |
|
El Paso, City of |
$51,152,600 |
|
Fort Bend County |
$40,000,000 |
|
Grand Prairie, City of |
$10,000,000 |
|
Harris County |
$64,819,515 |
|
McKinney |
$6,000,000 |
|
North Central Texas |
$54,817,320 |
|
Northeast Texas HFC |
$12,500,000 |
|
Rowlett, City of |
$4,000,000 |
|
Tarrant County |
$30,000,000 |
|
Travis County |
$20,000,000 |
|
Total |
$512,108,950 |
The Assignment Agreement substantially in the form attached to the resolution will assign volume cap to the Department in the not to exceed amounts outlined ABOVE (to be requested by each HFC prior to the August 7 collapse).
Approval of the Assignment Agreements benefit the HFCs and the Department. The HFCs will benefit economically through an ongoing fee received against loans originated, on their behalf, within the HFC’s jurisdiction. More importantly, the HFC can actively and meaningfully participate in financing affordable housing for single family activity. The HFCs have indicated a desire to jointly market the program, including the coordination of outreach efforts to increase participation by low and moderate income homebuyers in HFC jurisdiction. The Assignment Agreements benefit the Department by leveraging existing volume cap, which will assist the Department in maintaining current bond and MCC issuance levels in an environment where volume cap is becoming increasingly scarce. Ultimately, the benefit flows through to low and moderate income homebuyers in Texas that are able to access affordable financing options.