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98-668Council File # \O vb0 0 R l G l N A L Green Sheet # �� ��...7 RESOLUTION OF SAINT PAUL, MINNESOTA �� Presented By Referred To Committee: Date z GIVING APPROVAL TO A SINGLE FAMII,Y HOUSING 3 PROGRAM TO BE FINANCED BY THE ISSUANCE OF SINGLE 4 FAMILY MORTGAGE REVENI.JE BONDS AND MORTGAGE 5 CREDIT CERTIFICATES 7 8 WHEREAS, pursuant to the Minnesota Municipal Housing Act, Muuiesota Statutes, Chapter 9 462C (the "Housing AcY'), the City of Saint Paul, Minnesota (the "City") is authorized to adopt a 10 housing plan and cany out programs for the financing of single family housing for persons of low and 11 moderate income; and 12 13 WHEREAS, the MinneapolislSaint Paul Housing Finance Board (the "Boazd"), a joint powers 14 boazd organized under a Joint Powers Agreement (the "Joint Powers AgreemenY') by and between the 15 Minneapolis Community Development Agency (the "Agency") and the Housing and Redevelopment 16 Authority of the City of Saint Paul, Mixuiesota (the "Authority'� and the City of Mimieapolis, Minnesota 17 ("Minneapolis'� and accepted by the City, and under the laws of the State of Minnesota, proposes to 18 undertake a single family housing program relating to the Minneapolis and the Saint Paui 1998 19 entitlement allocations and certain recycling refunding bonds (the "Program"), to bg financed by the 2 o issuance of one or more series of mortgage revenue obligations, mortgage revenue refunding obligations 21 and/or mortgage credit cer[ificates ("MCCs") pursuant to Mnuiesota Statutes, Sections 469.001 to 2 2 469.047, Cl�apters 462A, 462C and 474A and Section 471.59 (collecrively, the "AcP'); and 23 2 4 WHEREAS, pursuant to the Act, the Boazd is authorized to issue bonds from time to time and 2 5 to use the proceeds of its bonds to make or purchase mortgage loans or to purchase participafions in 2 6 mortgage loans from lending institutions and to issue MCCs in order to finance the conshuction and 27 rehabilitation, and to facilitate the purchase and sale, of single family housing for eligible persons or 2 8 families under the Act and to issue bonds to refund previously issued bonds; and 29 3 0 WHEREAS, the Program will provide below mazket interest rate mortgage loan financing or 31 income taY credits primarily to persons of low or moderate income purchasing single family homes to 3 2 be used as their principal places of residence and which are located within the geographic limits of the 3 3 City or Mimieapolis; and 3? ORIGINAL q 35 WI�REAS, the Act requires adoption of the Progracn after a public hearuig held thereon 3 6 following publication of notice in a newspaper of general circulation in the City and Mivneapolis at least 3 7 fifteen days in advance of the hearing; and 38 3 9 WI�REAS, the City Council has on the date hereof conducted a public hearing on the Program, 4 o after publication of notice as required by the Act; and 41 42 WI�REAS, the Program was submitted to the Metropolitan Council at or before the time of 4 3 publication of notice of the public hearing on such Prog}em, and the Metropolitan Council was afforded 44 an opportunity to present comments at the public hearing, all as required by the Act; and 45 4 6 WHEREAS, the Program provides for the issuance of single family mortgage revenue bonds or 4 7 revenue refunding bonds in one or more series pursuant to the Act (the "Bonds") to make or purchase or 4 8 cause to be made or purchased mortgage loans, or to purchase securities the proceeds of which wouid be 4 9 used to purchase mortgage loans, and the issuance of MCCs to finance the acquisition, prunarily by low 5 � and moderate income persons and families, o£ singie family housing located within the geographic 51 boundaries of the City or Miimeapolis; and 52 53 54 55 56 57 58 59 60 61 62 63 54 VJ�IEREAS, the City's remaining 1997 entiUement allocation carried forwazd for single family purposes has been used for the issuance of Bonds or MCCs in 1998; and WI�REAS, it is proposed that the Program be approved and the Boazd be authorized to issue Bonds and MCCs pursuant to the Program and the Joint Powers Agreement; and WIIEREAS, it appears that the Program and the issuance of Bonds and/or MCCs by the Board or the Authority aze in the best interests of the City. . NOW, THEREFORE, BE IT RESOLVED BY TI� CITY COUNCIL OF TF� CITY OF SAINT PAUL AS FOLLOWS: 6 5 1. The Program is hereby approved in its entirety in substantially the forxn on file with the 6 6 City. The officers of the City and the Boazd are authorized to take all actions as may be 6 7 necessary or appropriate to carry out the Program in accordance with the Act and any 6 8 other applicable laws and regulations. 69 7 0 2. The issuance of the Bonds and/or MCCs pursuant to the Program is hereby approved 71 subject to agreement by the Boazd or the Authority and the purchasers of the Bonds, if 72 any, and by the Board or the Authority as issuer of the MCCs, as to the exact terms of 73 the Program and the financing therefore and the MCCs. 74 7 5 3. The Bonds may be issued in one or more series at the time or times and pursuant to 7 6 terms deternuned by the Boazd, and be structured so as to take advantage of whatever , � lJi'�f �ti �,�` -G �p 77 means aze available and ue pernutted by law to enhance the securiry for, or 78 mazketability of, the Bonds, provided that any such financing structure must be 7 9 approved by the Board. The MCCs may be issued at the time or times and pursuant to 8 0 terms deternuned by the Board. All such detenninations by the Boazd must comply 81 with the applicable provisions of the Act and the Intemal Revenue Code of 1986, as 8 2 amended, and regulations promulgated thereunder. 83 84 4. The Boazd is authorized to take all actions which may be necessary or desirable in 8 5 connection with the issuance of the Bonds and the MCCs, acting on behalf of the City, 8 6 and no fiuther approval or consent of the City shall be required prior to the issuance of 8 7 tUe Bonds or the MCCs by the Boazd, or priar to the taldng of any action by the Board 8 8 to undertake and implement the Program. 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 S. Nothing in this Resolution or the documents prepared puxsi�urt hereto shall authorize the expenditure of any municipal funds on the Program other than as specified and authorized by separate actions of the City and other than the revenues derived from the Progiam or otherwise granted to the City for this pur�wse. The Bonds sha11 not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funds of the City except the revenues and proceeds pledged to the payment thereof, nar shall the City be subject to any liability thereon. The holders of the Bonds sha11 never have the right to compel any exercise of the taacing power of the City to pay the outstanding principal on the Bonds or the interest thereon, or to enforce payxnent against any properiy of the City. The Bonds shall recite in substance that the principal and interest thereon, are payable solely from the revenues and proceeds pledged to the payxnent thereof. The Bonds shall not constitute a debt of the City within the meaning of any constiturional or statutory limitation of indebtedness. • 6. Any one or more series of the Bonds or the MCCs may be issued by the Authority in lieu of issuance by the Board, at the discretion of the Authority. Pla °' & Econom'c Develo ment & , �� � . .�i . �---`-" � / Adopted by Council: DateC����ay�_���� 116 — 1' � Adopti n Certi£ied by Council Se� tary By: i. Approved by Ma o a e By: _. _ . _ . . __ _ �cil Form A ro d� C' y Attorney � � k' By: q,F� - G G�r f� �-�61� � � �sswx �// f / NUMBERFOR / / !�l � / N�I • � 5 ! ✓ 1[/'l� ^� �u1/ic /�ca.�ir�g . N�%� h�.s OF ,.� PAGES GREEN SHEET ���� No 64155 � arvwnox�v � arrcN& ��MDw, ❑ AIPNt4L480.VCFtDYI ❑ f�YNLYL � � �]�,���,.� Q/ �'_.��� (CLIP ALL L ATIONS FOR SIGNATURE) �Ns� � /�es w�iT�ti a-f?��ooes fGa I998 /I�IP�. /.s�.��-w/ „ `/y �s v S � n� f!"a y ha�,-, �G 1998 �folyl�e Qc,}n �s �I�G�i���y r � . �'; I� �� / JITLc� �14 199R �:, PLANNING COMMISSION CIB COMMITfEE CML 5ERVICE COMMISSION Has this persoMfirm e.tr xrolked under a contract for this depa�tment? VES NO Has ihis personlfirtn everDeen a clty employee7 YES NO Ooes this person/fimi possess a sldll not normaltypossesssd by any current city employee? VES NO is this person?rm a tarpeteC vendoR VES NO etl attach dITIA ING PR BL ` EMlSSUE y O TUN What, When, Where, Why) !_,. _//�i QS,��G'✓',-°`-' !d ��CS t3D` °�T rece,;v2J ctw Q�sYt�ua.0 � Ofisi .F�cv��r � � a,� `�ls, �78, 9�l �rer� Y� �'f�� �i �s� d� � �favs<� �`v�r%f � T.� �7` l / fesoGu�icn �//roves �- /?�vs�� %r�9�'� � s�:�ol�es �cv--�� us� ou�- a,�.-��io-Y��y �`d issu� /ao�s,� �,o"�Ia�Q' Yzv�ve 6o�v �/�sf �-� 1UVH�HU�YYKVvU � � ( � � �� �" y � o-�y� y� �v� - ��o dtO�Yeeow-e.�� �vrG�� � ��-�-c� � �� � ��l�' �L � � �� �� � �� � , s"� �3,�� , /v1! 4�0��2 /'/C-�Z�- f1�US� /' �p � !� /yl b-vf y �2, j ,7v'v n � � 4"S �6-rn �6 /x US ��/ �r�s��, � ; �� � dv� . - d7VAN1ACj�5jF/,iPVHOVFJJ� �ja_ �./��/ /� y ird... _/ �Q�S 1I: g 7'c" ` � u.pi G �. ��,� . e ��.�mti U�"_ �,.�„ �-- � `� r U �. ` trv te�i" � .� /'� �vw� c� /'<c ,DV�NiAGE OTAPPROVED� /`� J l � �� {�� � k/ � �� � T :� ��,p,s ��� � ��a��l,� ,��� ha�sE �--r OF TRANSACTION S �/� COSTIREVENUE BUDGETED (CIRCLE ON� L ,Law --•' / y �� �SSve- /�eey��e �d� V � /�� � �� YES NO SOURCE �.../ ACTNITYNUMBER ��� MFORMATON(EJ�Wl� ' �'"" ��� � ����� � "" ` � � � � � a� -��� Interdepartmental Memorandum CITY OF SAII�IT PAUL To: Council President Bostrom Councilmember Benanav Councilmember Blakey Councilmember Coleman Councilmember Harris Councilmember Lantry Councilmember Reiter From: Pamela Wheelock Date: July 22, 194 Re: Approval of 9 MinneapolisfSaint Paul Single Family Aousing Program and 1998 Home Ownership Program (Citywide) Purpose The purpose of this report is to request approval of the 1998 Minneapolis/Saint Paul Single Family Housing Program and the 1998 Minneapolis/Saint Paul Home Ownership Program (i.e. Middle Income Mortgage Program). Background In 1984, the Cities of Minneapolis and Saint Paul and their respective development agencies created the Minneapolis/Saint Paul Housing Finance Board (Joint Board) for the purpose of providing decent, safe, sanitary, and affordable housing to residents of both cities. Membership of the Joint Board is comprised of three council members from each city. With the retirement of Councilmembers Thune and Megard, Saint Paul's only current member is Councilmember Blakey. Through the Joint Boazd, the two cities sponsar their single family mortgage programs by issuing both tax-exempt mortgage revenue bonds and mortgage credit certificates. Current programs financed through the Joint Board include Take Credit!, which provides a federal tas credit to persons purchasing their first homes in either Saint Paul or Minneapolis and Phase XI of the bond-financed First Time Homebuyer Progam. c��-GGY Program Descriprions Single Family Housing Program: The 1998 Single Family Housing Program, approved by the Joint Board on Ju]y 15, 1498, is inciuded as E�ibit A to the attached Council Reso]ufion. The 1998 Program includes a description of the program eligibilily requirements dictated by federal and state legislation and serves as the basis for future use of Saint Paul's and Minneapolis' entitlement allocations of mortgage revenue bonding authoriTy. Ongoing Program parameters include a masimum purchase price of 90% of average azea purchase price (which cunently translates into $I 12,563 for an existing single family home) and maximum household income of 100% of area median income (currently $60,800). Upon adoption by the Joint Board, the 1998 Program wili be filed with the State Deparhnent of Revenue as required by Minnesota Statutes, Chapter 462C. The attached resolution does not obligate the FIRA or the City to expend any funds. In addition, the resolution specifies that neither the Ciry nor the fIRA will be subject to any liability for bonds or mortgage credit certificates issued to finance the Program. Any bond issues to be used to Implement the 1998 Program wi11 ba brought to the HItA Board for its consideration and approval. 1998 Home Ownership Program: A summaty of the 1998 Home Ownership Program is inciuded as E�ibit B to the attached Council Resolution. With this program, Minneapolis and Saint Paul propose to jointly issue $20,500,000 of single family mortgage revenue refunding bonds to preserve the Cities' authority to operate mortgage programs for middle income, non-first time homebuyers. These bonds will not count as part of the City's entitlement allocation. If approved, the program will offer the following: • $5,327,404 of fust mortgage fmancing for purchase, purchaselrehab, and refinanceJrehab of Saint Paul homes. All financing will consist of 30 year mortgages with a fixed interest rate that is currently estimated at 6.25%. • Two-thirds of the aggregate principal amount of loans originated under the program will be limited to homebuyers with incomes at or below 175% of area median income ($106,400) and a home purchase price at or below three times 110% of area median income ($200,640). • One-third of the loans originated will be open to homebuyers with incomes at or below 200% of median income and a purchase price at or below four times 110°/o of inedian income ($267,520). • All homebuyers qualifying for the City's First Time Homebuyer Program will be served by that program, unless program loan funds are inadequate. a � -�� The 1998 Home Ownership Program team includes: • Issuer: MinneapolislSaint Paul Housing Finance Board • Undenvriters: Dain Bosworth Inc., Piper Jaffray Inc., and Miller & Schroeder Financial Inc. • Financial Advisor: Springsted Inc. • Bond Counsel: Leonard, Street and Deinazd, P.A. • Trustee: Norwest Corporation • Servicer. The Leader Mortgage Corp. • Program Administrator: Miller & 5chroeder Financial Income and Pnrchase Price Limits: On June 23, 1998, President Ciinton declazed eight Minnesota counties, including Ramsey County, disaster areas on the basis of storm damage. This declazation triggers Section 143(k)(11) of the Internal Revenue code of 1986, as amended, which provides that for loans financed with single family mortgage revenue bonds which are secured by residences located in designated disaster areas: (1) the first-time homebuyer requirement does not apply, and (2) the federal limits on purchase grice and incoma sha11 be applied as if the residence were located in a tazgeted area. These modifications are effective for loans made within 2 years of the date of the disaster declaration, and for bonds issued after December 31, 1996 and prior to January 1, 1999. Staff proposes to implement the modified restrictions to stimulate loan originations on the remaining balance of the Phase XI First Time Homebuyer Program funds ($4.5 million out of $10 million issued). Pablic Pnrpose Through its single family mortgage programs, the Joint Board encourages Saint Paul families to become homeowners. In addition, by providing financing which accommodates both the purchase and the rehabilitation of a wide range of single family homes, the Joint Boazd helps the C1ty to meet its goal of improving its housing stock and providing homeownership options for a mix of household incomes.. Budget The action requested has no impact upon the City's or HRA's budget. �� � � Recommendation Staff recommends approval of the attached resolution giving approval to the issuance by the Minneapolis/Saint Paul Aousing Finance Board of single family mortgage revenue bonds and mortgage credit certificates to finance the City's 1998 Single Family Housing Program, including the 1998 Home Ownership Program. Uniess the City Council has objections, staff will proceed to implement the modified income and home purchase price restrictions on the remaining Phase XI First Time Homebuyer Program funds. If you have any questions about this report, please call Allen Carlson at 266-6616 or Bruce Kimmel at 266-6676. Sponsor: Councilmember Blakey \�IINPIEAPOLISISAINT PAUL 1998 5INGLE FAMILY JOINT BOARD PROGRAM EXHIBIT "A" ��i�� The City of Minneapolis, Minnesota {"Minneapolis"), the Minneapolis Community Development Agency (the "Agency"), ihe Ciry of Saint Paul, Minnesota ("Saint Paul'� and the Housing and Redevelopment Authority of the Ciry of Saint Paul, Minnesota (the "Authority"), acting individually or jointiy through the Minneapolis/Saint Paul Housing Finance Board (the °Joint Boazd"� (all together, the "Issuers") propose to issue mortgage credit certificates {"MCCs") under Section 25 of the Internai Revenue Code of 1986, as amended (together with regulations promulgated thereunder, the "Code'�, or new money mortgage revenue bonds and certain mort�age revenue refunding bonds under Section 143 of the Code in one or more series, in either case to finance the single family housing program described herein (the "Program'� pursuant to authority confened by Minnesota Statutes, Chapters 462C, 462A, 469 and 474A, all as amended, (and any other geneaal or special law authority for ttie issuance of obligations to finance a single fanuly housing program or development) (all together, the "Act"). Any action specified herein to be made by the "Issuers" may be made by one or more of them acting in concert or individuaily. In creating this Program, the Issuers find and determine: • that the preservation of the quality of life in Minneapolis and Saint Paul (the "Cities") is dependent upan maintaining an adequate, decent, safe and sanitary housing stock; • that maintaining such housing stock is a public purpose and will benefit the residents of the Cities: ■ that a need e�ists within the Cities to provide additional affordable owner-occupied housing for lo�v and moderate income persons and families; and ■ that a need exists for mortgage credit to be made available for both esisting and new owner-occupied housing, for rehabilitation of existing single family housing and for home improvements. To meet such needs, the Issuers intend to issue one or more series of single family morteage revenue bonds and sinsle family mortgage revenue refunding bonds ("Bonds') to cause the origination of morteaoe loans to finance the acquisition, construction, rehabilitation or improvement of sinele family housing in the Cities (or either of them). In addition to or in lieu of issuing Bonds, the Issuers {or any one or more of them) may issue MCCs to morteagors who obtain mortgage loans to finance the purchase, construction, rehabilitation or improvement of single family housing in the Cities (or either of them). T'he Issuers wiil issue Bonds, or will elect not to issue bonds in favor of MCCs, in an aggregate principal amount equal to the sum of (a} the Cities' 1998 entitlement bond allocation of $36,872,000 (comprised of the Saint Paul allocation of $1�,802.000 and the vlinneapolis allocation of $21,070,000), (b) an amount estimated to be $22,000,000 to refund cenain outstanding middle income mortgage revenue bonds issued by one or 16'_]76? Of a �.�`� more of the Issuers and $25,000,000, to refund certain other outstanding mortgage revenue bonds issued by� one or more of the Issuers, and (c) such principal amount of ta�cable bonds as may be necessary or convenient to further the purposes of this Program. Viortgage loans financed through the issuance of the Bonds or and those in connection with which the MCCs wiit be issued, will be sub,}ect to the following terms (or, for Bonds as to which these requirements do not apply as a matter of law, to such other terms approved by the Board): purchase price - the maximum purchase price for financed homes shall not exceed the lesser of (a) 90% (110% in "targeted areas") of the applicable "average azea purchase price" determined by the United States Department of the Treasury or by the Issuers on the basis of more compiete information, or (b) 3 times the applicable income limit for the Program imposed by Minnesota law (except that in certain areas the purchase price shall not exceed 4 times the applicable income limit to the extent consistent with agplicable federal 1aw); income limits - the maximum income of the mortgagors shall be the lower of (a) the income restrictions imposed by federal tax law or (b) the income restrictions imposed by Minnesota Statutes, Section 462C.03, Subd. 2, inc(uding the restriction of Subd. 7 that for the first six months of the Program, 54% of the money availabie to make mortgage loans or the `'non-issued bond amounP' of MCCs must be reserved for persons and families with adjusted incomes not greater than 90% of the general Program income limits. In connection with this Pro�ram: (i) (a) in connection with any mortga�e loans financed with the proceeds of mortgage revenue bonds, any financial institutions described in Section 4b2C.03, Subd. -1. and other mort�a�e lenders with offices located in the Cities and which are FHA/VA approved sellers of mortsa�e loans as weil as other financial institutions and mort�age lenders which are FHA/VA, or FNMA/FHLMC approved sellers of mortgage loans and are reasonably acceptable to any master servicer acting on behalf of the Issuers, will be eligible for consideration for originaiion of such loans; the Cities will not limit participation in the Program to a single lender unless other lenders are not wiliing to participate for the consideration offered; the Agency and the Authority shall be eligible for consideration for ori�ination ofloans; (b) in connection with issuance of MCCs. MCCs will not be limited to loans originated by� particular lenders but will be available with respect to the origination of qualifying mortgaoe loans by any participating lender; (ii) loans �cill not be made available or set aside for the exclusive use of developers or buiiders except, in the case of mortgage loans financed with the proceeds of mortgage revenue bonds, for new housing described in Section 462C.071, Subd. 2; 162'_]62 01 7 � � �� (iii) the Issuers expect to act as, or to contrnct with, a program administrator and a servicer to provide services to ensure that the Program will be consistent with this Progranz, the Act and applicable federal law; (iv) as indicated above, up to $36,872,000 of the entitlement allocations of the Cities may be used in the Program, provided, however, that no provision of this Program shall in any way prevent either of Minneapolis or Saint Paul from using all or a portion of its respective entitlement allocation(s) for multifamily housing or any other authorized purpose. In addition, any election made by the Cities to issue MCCs in lieu of Bonds may be revoked in whole or in part, at any time during the calendar year in which the election w�as made as permitted by Section 25 of the Intemal Revenue Code and Section 12�-4T(c)(3) of the Treasury Regulations. The resulring unused entitlement allocation may be used to issue bonds for single family housing or other authorized purposes; (v) the Program will meet the needs of low and moderate income families by providing below-market rate financing for the acquisition or rehabilitation of single family homes or by providing a ta.Y credit for mortgage interest paid, thereby enabling such persons to qualif� for mortgages which would be unavailable at mazket rates; (vi) the Issuers hereby request a waiver by the Minnesota Housing Finance Aeency of the pro�'isions of Section 462C.03, Subd. 5; (vii) no homes which are located in previously unincorporated real property annexed by the Cities within one year prior to the date of adopfion of this Program will be financed under this Program; (� iii) prohibitions or limitations on assumption wiil be imposed to the extent required by� federal law relating to the tax exempt status of Bonds or to the continued validitv of MCCs issued pursuant to the Program; provided that the Issuers may impose more stringent limitations at their discretion; (ir) the estimated amount of mortgage loans to be made or purchased pursuant to ihis Program is approximately equal to the aggregate principal amount of Bonds issued and the amount which either of the Issuers may elect not to issue in favor of MCCs; (�) the estimated aggregate principal amount of the Bonds, or estimated "non-issued bond amount' (as such term is used in Section 2�(d)(2)(B) of the Code) of MCCs issued in lieu of the Bonds, is set forth above; (�i) the Bonds, if issued, may be issued in one or more series timed for sale consistent with the needs of the Cities in 1998, or, if any bond ailocation is carried fonvazd, in the first half of 1999; 16_':'6?.01 � J �� "`�� (�cii) refinancing of e�cisting indebtedness will be permitted only where the mortgage loan also finances substantial "rehabilitation" as tY�at term is defined under Minnesota Statutes, Secrion 462C.01 and Section 462C.03, Subd. 11 and under Section 143 of the Code; (xiii) to the estent required by the Act, during the fust ten (10) months of the origination period, loans financed by the Bonds (but not mortgage loans assisted by MCCs) will be made for e.uisting housing; (xiv) the following additional provisions shall appiy oniy to issuance of MCCs pursuant to this Program: (1) the "certificate credit rnte" (as used in Section 25 of the Code) will be 20%; (2) a copy of the form which wiii be used to elect the nonissued bond amount is attached hereto as Exhibit A; and (3) the Issuers wiil ensure compiiance with the requirements of Section 2� of the Code by use of an MCC procedural manual for the Prograzn and by use of the program administrator referenced in item (iii} above. 16??762.01 0 �Y"�� � E�IIBIT A TO JOINT BOARD PROGRAM MORTGAGE CREDIT CERTIFICATE ELECTION (Pursuant to Temp. Reg. § 1.25-4T) (i) Tssuer name: jName] [Address] TIN: [Number] (ii) Issuer s Applicable limit, per § 146 of the Internal Revenue Code of 1986: [ALLOCATION FOR 1998: $ 1 [CARRYFORWARD ALLOCATIOI3 FROM 1997: $ } (iii) The ag�regate amount of qualified mortgage bonds issued during the calendar year:: [Amount] (iv) The amount of the Issuer's applicable limit that it has surrendered to other issuers during the calendar year: [Amount] (v) The date and amount of any previous elections under 1.25-4T(c) for 1998: , [Date and amount] (vi) The amount of qualified mortgage bonds that the issuer elects not to issue: [Amount] State Certification attached. Dated: , 1948 CTTY OF [CITY] By Mayor Ib?=i6? 01 A-1 EXHIBZT "B" f `� 1� ��i 1�eport to the Minneapolis/Saint Paul Houszng Finance Board �ul lo, rg9s $20,500,000 Single Family Mortgage Revenue Refunding Bonds (Fannie Mae and GNMA Mortgage-backed Securities Program — Home Ownership Program) Series 1998 Home Office: S5 East Seventh Place Suite 1D0 St. Paul, MN 55101-2887 (612)223-3000 lOwa OffCe: 100 Court Avenue, Suite 204 Des Moines, IA 50309-2200 (515)244-7505 Minneapolls O�ce: 88 South Sixth Street Suite 900 Mlnneapolis, MN 55402•7800 (612)333-9177 wsconsm OKce: 16655 West Bluemound Roatl Swte 290 Braokfieid, WI 53005-5935 (414) 782-8222 Washington O�ce. Kansas O�ce: 1850 K Street NW 7211 West 98'" Terrace Suite 215 Suite 700 Washington, D.0 20006-2200 Overlantl Park. KS 66272-2257 (202) 466-3344 (913) 345-8062 I SPRINGSTED Riblit Fanmue Adm>on Table of Contents � �� g' _ �1 Pa e s SECTION 1 Summary................ ....�---........................... _.......................................................................... 1-1 History of the Limitation of Issuance .................................................................................. 1-I ProgramStructure ................................................................................................................ 1-2 ProgramCosts ...................................................................................................................... 1-2 Sale OjBonds ....................................................................................................................... 1-3 Timing ................................................................................................................................... 1-3 7948 Home Ownership Program .......................................................................................... l-4 Preliminary Sheet ........................................................................................................ 1-4 SPRINGSTED REPORTSIMMMINNSIP7 OTH 5ection 1 `� _ q �,c. SUMMARY Last year the City of St. Paul estabfished a middle income mortgage program that was funded with bond proceeds and targeted at middle income homebuyers. The program was very successful and this year an issue is proposed that will fund mortgage programs that have the flexibility to target other than first time homebuyers. (First time homebuyers are served by an existing joint program.) The financing proposal recommends that $20,50�,000 of bonds be issued to fund a flexible mortgage program within the two cities. HISTORY OF THE LIMITATION OF ISSUANCE The proposed bond issue is comprised from three sources. They are described below: Tax Exempt Single Family Mortgage Revenue Bonds can only be issued through the application of tax exempt bo�ding authority granted by the state or through the refunding of previously issued tax exempt bonds. Federal and state faws require that certain income and home purchase price limits apply and that only first time homebuyers can access programs established with tax exempt bond proceeds. in 1996, the City of Minneapolis and the Housing and Redevelopment Authority of the City of Saint Paul (the "Issuers") together sold Singie Family Mortgage Revenue Bonds totaling $40,665,000. The 1996 Bonds were issued in variable rate form and refunded previously issued mortgage revenue bonds. The refunded bonds had been sald in 1984 at a time when programs could be established with less restrictive home buyer requirements. Characteristics ofi the 1984 bonds can be conveyed to subsequent refunding bonds, permitting the cities to establish programs into middle irtcome ranges, serving non-first time homebuyers, and at home purchase price limits that are more flexible than programs estabiished with proceeds of bonds issued under current laws. In 1997, the City of Saint Paul used on-half of the 1996 Bonds to establish a fixed rate and ARM mfddle income program. At this time. Minneapolis would like to access some of the remainder of the 1996 Bonds for a specially targeted mortgage program. In 1997, the City of Minneapolis and the City of Saint Paul agreed to participate in a "recycling" refunding program that uses cash deposits to temporarily refund housing 6onds and hoid them in escrow. As they accumulate, they wil{ be aggregated and refunded by �ong term bonds to estab�ish mortgage programs. Some of the bonds that are being refunded through this mechanism have the flexible characteristics that are need for the proposed program. They +nciude refunding of former bonds issued by the Housing Finance Board, by the City of Minneapolis separately and by the Saint Paul H.R.A. separately. Saint Paul has access to $5,327,404, of recycled funds currently. Minneapolis has $3,585,404. In 1995, the City of Minneapolis separately refunded some of its own older housing bonds and estabiished a middle income program referred to as HOP V. The end of the originaliy established period for mortgage origination is soon to expire and the remaining unused proceeds from the HOP V financing are recommended to be refunded into proposed financing. SPRINGSTED Page 1-1 Minneapolis/Saint Paul Housing Finance Board ��� _ q�� The proposed financing will total $20,50�,00� and include the following component parts: (Amounts are current estimates with the exception of the recycfing escrows. Finai amounts will be confirmed prior to the sale based on the exact proceeds availabie from HOP V, however, the issue size will be $20,500,000.) Recycling refunding escrow - St. Paul Recycfing refunding escrow - Minneapolis Refunding unused HOP V proceeds 1996 Bond Refunding TOTAL SOND SiZE PROGRAM STRUCTURE $ 5,327,464 3,585,404 5,000,000 6.587.192 $20 500.000 The proposed bonds will be issued in fixed interest rate form. Participating lenders will otiginate qualifying mortgages. The mortgage wiii be purchased by a master servicer and pooled into GNMA or Fannie Mae securities. The securities wiil then be purchased by the bond trustee. Payment of principal and interest on the securities will be pledged to the repayment of the bonds and payment of associated expenses. Under the bond program, lenders including both Cities wiil originate loans for the purchase and/or rehabilitation of homes within the two cities. Income and purchase price limits wiil be established to expand the prospective users of the program to include middle income home buyers. As mentioned, current program limits are targeted to the low and moderate income level, first time home buyers. initiaf limits for the program are to be estabfished as follows: Income Limit 2/3 of program funds $106,400 1/3 of program funds $121,600 Purchase Price Limit $200, 640 $267,520 The 1997 Saint Paul program featured fixed rate and ARM loans, however, due to current market conditions and the attractive fixed rate Ievel compared to the base mortgage rate under an ARM program, it is recommended that the new program offer only 30 year fixed rate mortgages. PROGRAM COSTS The funds that will be used to pay anticipated issuance costs for the bond issue were generated from the 1996 Bonds. The need for these fiunds was anticipated at the time the refunding was done in 1996. SPRINGSTED Page 1-2 Minneapolis/Saint Paul Housing Finance Board � a v.� � 0 SALE OF BONDS The bonds will be sold pursuant to terms included in the attached Term Sheet. it is expected that they wili be sold through a placement to Fannie Mae with the assistance of Dain Rauscher, Piper Jaffray and Miller & Schroeder Financial as underwriters. if appropriate terms cannot be achieved with Fannie Mae the bonds wiil be pubiicly offered. TIMING It is anticipated that the bonds will be definitively placed the second or third week of July and that the transaction wiil close at the end of July or early August to make mortgage product availabie in August. SPRINGSTED Page 1-3 Minneapalis/Saint Paul Housing Finance Board � G _ �1� � $zo,soo,000 Minneapolis/Saint Paul Housing Finance Soard 1998 Home Ownership Pragram (GNMA and FNMA Mortgage Backed Securities) Series 1998 SPRINGSTED Page 1-4 Preliminary Term Sheet Minneapolis/Saint Paul Housing Finance Board r/ Q � . (,(,l Status: For purposes of this Term Sheet, we have assumed that credit enhancement and servicing fees will total 0.50% annualiv. Rates equal to yields on comparabl offered non-AMT issues (bonds to be (assumed servicing and guarantee fee of .50%; Issuer fee of .50%; and program expenses of Purchase/rehab and refilrehab loans permitted with all mortgage types. No limit on total amount of rehab loans. Issuer requests the same Fannie Mae program waivers and approvals as for prior Issuer wilt pay alI costs of issuance not funded from other available sources; no costs will be paid from bond Aroceeds. Currently estimated to be 0.50% payabfe monthly in arrears based on the Securities outstanding; however, the Issuer wouid like the right to adjust its fee as market conditions initiaily for use in Minneapofis and $5,327,404 will be reserved initially for use in Saint Paui; can be reaflocated with consent of both Issuers. Securfty for the bonds will be GNMA and Fannie Mae Securities, fund and accounts held by the trustee and earninas thereon. Aaa Federal and Minnesota tax-exempt, not Bank Qualified. SPRINGSTED Page 1-5 Council File # \O vb0 0 R l G l N A L Green Sheet # �� ��...7 RESOLUTION OF SAINT PAUL, MINNESOTA �� Presented By Referred To Committee: Date z GIVING APPROVAL TO A SINGLE FAMII,Y HOUSING 3 PROGRAM TO BE FINANCED BY THE ISSUANCE OF SINGLE 4 FAMILY MORTGAGE REVENI.JE BONDS AND MORTGAGE 5 CREDIT CERTIFICATES 7 8 WHEREAS, pursuant to the Minnesota Municipal Housing Act, Muuiesota Statutes, Chapter 9 462C (the "Housing AcY'), the City of Saint Paul, Minnesota (the "City") is authorized to adopt a 10 housing plan and cany out programs for the financing of single family housing for persons of low and 11 moderate income; and 12 13 WHEREAS, the MinneapolislSaint Paul Housing Finance Board (the "Boazd"), a joint powers 14 boazd organized under a Joint Powers Agreement (the "Joint Powers AgreemenY') by and between the 15 Minneapolis Community Development Agency (the "Agency") and the Housing and Redevelopment 16 Authority of the City of Saint Paul, Mixuiesota (the "Authority'� and the City of Mimieapolis, Minnesota 17 ("Minneapolis'� and accepted by the City, and under the laws of the State of Minnesota, proposes to 18 undertake a single family housing program relating to the Minneapolis and the Saint Paui 1998 19 entitlement allocations and certain recycling refunding bonds (the "Program"), to bg financed by the 2 o issuance of one or more series of mortgage revenue obligations, mortgage revenue refunding obligations 21 and/or mortgage credit cer[ificates ("MCCs") pursuant to Mnuiesota Statutes, Sections 469.001 to 2 2 469.047, Cl�apters 462A, 462C and 474A and Section 471.59 (collecrively, the "AcP'); and 23 2 4 WHEREAS, pursuant to the Act, the Boazd is authorized to issue bonds from time to time and 2 5 to use the proceeds of its bonds to make or purchase mortgage loans or to purchase participafions in 2 6 mortgage loans from lending institutions and to issue MCCs in order to finance the conshuction and 27 rehabilitation, and to facilitate the purchase and sale, of single family housing for eligible persons or 2 8 families under the Act and to issue bonds to refund previously issued bonds; and 29 3 0 WHEREAS, the Program will provide below mazket interest rate mortgage loan financing or 31 income taY credits primarily to persons of low or moderate income purchasing single family homes to 3 2 be used as their principal places of residence and which are located within the geographic limits of the 3 3 City or Mimieapolis; and 3? ORIGINAL q 35 WI�REAS, the Act requires adoption of the Progracn after a public hearuig held thereon 3 6 following publication of notice in a newspaper of general circulation in the City and Mivneapolis at least 3 7 fifteen days in advance of the hearing; and 38 3 9 WI�REAS, the City Council has on the date hereof conducted a public hearing on the Program, 4 o after publication of notice as required by the Act; and 41 42 WI�REAS, the Program was submitted to the Metropolitan Council at or before the time of 4 3 publication of notice of the public hearing on such Prog}em, and the Metropolitan Council was afforded 44 an opportunity to present comments at the public hearing, all as required by the Act; and 45 4 6 WHEREAS, the Program provides for the issuance of single family mortgage revenue bonds or 4 7 revenue refunding bonds in one or more series pursuant to the Act (the "Bonds") to make or purchase or 4 8 cause to be made or purchased mortgage loans, or to purchase securities the proceeds of which wouid be 4 9 used to purchase mortgage loans, and the issuance of MCCs to finance the acquisition, prunarily by low 5 � and moderate income persons and families, o£ singie family housing located within the geographic 51 boundaries of the City or Miimeapolis; and 52 53 54 55 56 57 58 59 60 61 62 63 54 VJ�IEREAS, the City's remaining 1997 entiUement allocation carried forwazd for single family purposes has been used for the issuance of Bonds or MCCs in 1998; and WI�REAS, it is proposed that the Program be approved and the Boazd be authorized to issue Bonds and MCCs pursuant to the Program and the Joint Powers Agreement; and WIIEREAS, it appears that the Program and the issuance of Bonds and/or MCCs by the Board or the Authority aze in the best interests of the City. . NOW, THEREFORE, BE IT RESOLVED BY TI� CITY COUNCIL OF TF� CITY OF SAINT PAUL AS FOLLOWS: 6 5 1. The Program is hereby approved in its entirety in substantially the forxn on file with the 6 6 City. The officers of the City and the Boazd are authorized to take all actions as may be 6 7 necessary or appropriate to carry out the Program in accordance with the Act and any 6 8 other applicable laws and regulations. 69 7 0 2. The issuance of the Bonds and/or MCCs pursuant to the Program is hereby approved 71 subject to agreement by the Boazd or the Authority and the purchasers of the Bonds, if 72 any, and by the Board or the Authority as issuer of the MCCs, as to the exact terms of 73 the Program and the financing therefore and the MCCs. 74 7 5 3. The Bonds may be issued in one or more series at the time or times and pursuant to 7 6 terms deternuned by the Boazd, and be structured so as to take advantage of whatever , � lJi'�f �ti �,�` -G �p 77 means aze available and ue pernutted by law to enhance the securiry for, or 78 mazketability of, the Bonds, provided that any such financing structure must be 7 9 approved by the Board. The MCCs may be issued at the time or times and pursuant to 8 0 terms deternuned by the Board. All such detenninations by the Boazd must comply 81 with the applicable provisions of the Act and the Intemal Revenue Code of 1986, as 8 2 amended, and regulations promulgated thereunder. 83 84 4. The Boazd is authorized to take all actions which may be necessary or desirable in 8 5 connection with the issuance of the Bonds and the MCCs, acting on behalf of the City, 8 6 and no fiuther approval or consent of the City shall be required prior to the issuance of 8 7 tUe Bonds or the MCCs by the Boazd, or priar to the taldng of any action by the Board 8 8 to undertake and implement the Program. 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 S. Nothing in this Resolution or the documents prepared puxsi�urt hereto shall authorize the expenditure of any municipal funds on the Program other than as specified and authorized by separate actions of the City and other than the revenues derived from the Progiam or otherwise granted to the City for this pur�wse. The Bonds sha11 not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funds of the City except the revenues and proceeds pledged to the payment thereof, nar shall the City be subject to any liability thereon. The holders of the Bonds sha11 never have the right to compel any exercise of the taacing power of the City to pay the outstanding principal on the Bonds or the interest thereon, or to enforce payxnent against any properiy of the City. The Bonds shall recite in substance that the principal and interest thereon, are payable solely from the revenues and proceeds pledged to the payxnent thereof. The Bonds shall not constitute a debt of the City within the meaning of any constiturional or statutory limitation of indebtedness. • 6. Any one or more series of the Bonds or the MCCs may be issued by the Authority in lieu of issuance by the Board, at the discretion of the Authority. Pla °' & Econom'c Develo ment & , �� � . .�i . �---`-" � / Adopted by Council: DateC����ay�_���� 116 — 1' � Adopti n Certi£ied by Council Se� tary By: i. Approved by Ma o a e By: _. _ . _ . . __ _ �cil Form A ro d� C' y Attorney � � k' By: q,F� - G G�r f� �-�61� � � �sswx �// f / NUMBERFOR / / !�l � / N�I • � 5 ! ✓ 1[/'l� ^� �u1/ic /�ca.�ir�g . N�%� h�.s OF ,.� PAGES GREEN SHEET ���� No 64155 � arvwnox�v � arrcN& ��MDw, ❑ AIPNt4L480.VCFtDYI ❑ f�YNLYL � � �]�,���,.� Q/ �'_.��� (CLIP ALL L ATIONS FOR SIGNATURE) �Ns� � /�es w�iT�ti a-f?��ooes fGa I998 /I�IP�. /.s�.��-w/ „ `/y �s v S � n� f!"a y ha�,-, �G 1998 �folyl�e Qc,}n �s �I�G�i���y r � . �'; I� �� / JITLc� �14 199R �:, PLANNING COMMISSION CIB COMMITfEE CML 5ERVICE COMMISSION Has this persoMfirm e.tr xrolked under a contract for this depa�tment? VES NO Has ihis personlfirtn everDeen a clty employee7 YES NO Ooes this person/fimi possess a sldll not normaltypossesssd by any current city employee? VES NO is this person?rm a tarpeteC vendoR VES NO etl attach dITIA ING PR BL ` EMlSSUE y O TUN What, When, Where, Why) !_,. _//�i QS,��G'✓',-°`-' !d ��CS t3D` °�T rece,;v2J ctw Q�sYt�ua.0 � Ofisi .F�cv��r � � a,� `�ls, �78, 9�l �rer� Y� �'f�� �i �s� d� � �favs<� �`v�r%f � T.� �7` l / fesoGu�icn �//roves �- /?�vs�� %r�9�'� � s�:�ol�es �cv--�� us� ou�- a,�.-��io-Y��y �`d issu� /ao�s,� �,o"�Ia�Q' Yzv�ve 6o�v �/�sf �-� 1UVH�HU�YYKVvU � � ( � � �� �" y � o-�y� y� �v� - ��o dtO�Yeeow-e.�� �vrG�� � ��-�-c� � �� � ��l�' �L � � �� �� � �� � , s"� �3,�� , /v1! 4�0��2 /'/C-�Z�- f1�US� /' �p � !� /yl b-vf y �2, j ,7v'v n � � 4"S �6-rn �6 /x US ��/ �r�s��, � ; �� � dv� . - d7VAN1ACj�5jF/,iPVHOVFJJ� �ja_ �./��/ /� y ird... _/ �Q�S 1I: g 7'c" ` � u.pi G �. ��,� . e ��.�mti U�"_ �,.�„ �-- � `� r U �. ` trv te�i" � .� /'� �vw� c� /'<c ,DV�NiAGE OTAPPROVED� /`� J l � �� {�� � k/ � �� � T :� ��,p,s ��� � ��a��l,� ,��� ha�sE �--r OF TRANSACTION S �/� COSTIREVENUE BUDGETED (CIRCLE ON� L ,Law --•' / y �� �SSve- /�eey��e �d� V � /�� � �� YES NO SOURCE �.../ ACTNITYNUMBER ��� MFORMATON(EJ�Wl� ' �'"" ��� � ����� � "" ` � � � � � a� -��� Interdepartmental Memorandum CITY OF SAII�IT PAUL To: Council President Bostrom Councilmember Benanav Councilmember Blakey Councilmember Coleman Councilmember Harris Councilmember Lantry Councilmember Reiter From: Pamela Wheelock Date: July 22, 194 Re: Approval of 9 MinneapolisfSaint Paul Single Family Aousing Program and 1998 Home Ownership Program (Citywide) Purpose The purpose of this report is to request approval of the 1998 Minneapolis/Saint Paul Single Family Housing Program and the 1998 Minneapolis/Saint Paul Home Ownership Program (i.e. Middle Income Mortgage Program). Background In 1984, the Cities of Minneapolis and Saint Paul and their respective development agencies created the Minneapolis/Saint Paul Housing Finance Board (Joint Board) for the purpose of providing decent, safe, sanitary, and affordable housing to residents of both cities. Membership of the Joint Board is comprised of three council members from each city. With the retirement of Councilmembers Thune and Megard, Saint Paul's only current member is Councilmember Blakey. Through the Joint Boazd, the two cities sponsar their single family mortgage programs by issuing both tax-exempt mortgage revenue bonds and mortgage credit certificates. Current programs financed through the Joint Board include Take Credit!, which provides a federal tas credit to persons purchasing their first homes in either Saint Paul or Minneapolis and Phase XI of the bond-financed First Time Homebuyer Progam. c��-GGY Program Descriprions Single Family Housing Program: The 1998 Single Family Housing Program, approved by the Joint Board on Ju]y 15, 1498, is inciuded as E�ibit A to the attached Council Reso]ufion. The 1998 Program includes a description of the program eligibilily requirements dictated by federal and state legislation and serves as the basis for future use of Saint Paul's and Minneapolis' entitlement allocations of mortgage revenue bonding authoriTy. Ongoing Program parameters include a masimum purchase price of 90% of average azea purchase price (which cunently translates into $I 12,563 for an existing single family home) and maximum household income of 100% of area median income (currently $60,800). Upon adoption by the Joint Board, the 1998 Program wili be filed with the State Deparhnent of Revenue as required by Minnesota Statutes, Chapter 462C. The attached resolution does not obligate the FIRA or the City to expend any funds. In addition, the resolution specifies that neither the Ciry nor the fIRA will be subject to any liability for bonds or mortgage credit certificates issued to finance the Program. Any bond issues to be used to Implement the 1998 Program wi11 ba brought to the HItA Board for its consideration and approval. 1998 Home Ownership Program: A summaty of the 1998 Home Ownership Program is inciuded as E�ibit B to the attached Council Resolution. With this program, Minneapolis and Saint Paul propose to jointly issue $20,500,000 of single family mortgage revenue refunding bonds to preserve the Cities' authority to operate mortgage programs for middle income, non-first time homebuyers. These bonds will not count as part of the City's entitlement allocation. If approved, the program will offer the following: • $5,327,404 of fust mortgage fmancing for purchase, purchaselrehab, and refinanceJrehab of Saint Paul homes. All financing will consist of 30 year mortgages with a fixed interest rate that is currently estimated at 6.25%. • Two-thirds of the aggregate principal amount of loans originated under the program will be limited to homebuyers with incomes at or below 175% of area median income ($106,400) and a home purchase price at or below three times 110% of area median income ($200,640). • One-third of the loans originated will be open to homebuyers with incomes at or below 200% of median income and a purchase price at or below four times 110°/o of inedian income ($267,520). • All homebuyers qualifying for the City's First Time Homebuyer Program will be served by that program, unless program loan funds are inadequate. a � -�� The 1998 Home Ownership Program team includes: • Issuer: MinneapolislSaint Paul Housing Finance Board • Undenvriters: Dain Bosworth Inc., Piper Jaffray Inc., and Miller & Schroeder Financial Inc. • Financial Advisor: Springsted Inc. • Bond Counsel: Leonard, Street and Deinazd, P.A. • Trustee: Norwest Corporation • Servicer. The Leader Mortgage Corp. • Program Administrator: Miller & 5chroeder Financial Income and Pnrchase Price Limits: On June 23, 1998, President Ciinton declazed eight Minnesota counties, including Ramsey County, disaster areas on the basis of storm damage. This declazation triggers Section 143(k)(11) of the Internal Revenue code of 1986, as amended, which provides that for loans financed with single family mortgage revenue bonds which are secured by residences located in designated disaster areas: (1) the first-time homebuyer requirement does not apply, and (2) the federal limits on purchase grice and incoma sha11 be applied as if the residence were located in a tazgeted area. These modifications are effective for loans made within 2 years of the date of the disaster declaration, and for bonds issued after December 31, 1996 and prior to January 1, 1999. Staff proposes to implement the modified restrictions to stimulate loan originations on the remaining balance of the Phase XI First Time Homebuyer Program funds ($4.5 million out of $10 million issued). Pablic Pnrpose Through its single family mortgage programs, the Joint Board encourages Saint Paul families to become homeowners. In addition, by providing financing which accommodates both the purchase and the rehabilitation of a wide range of single family homes, the Joint Boazd helps the C1ty to meet its goal of improving its housing stock and providing homeownership options for a mix of household incomes.. Budget The action requested has no impact upon the City's or HRA's budget. �� � � Recommendation Staff recommends approval of the attached resolution giving approval to the issuance by the Minneapolis/Saint Paul Aousing Finance Board of single family mortgage revenue bonds and mortgage credit certificates to finance the City's 1998 Single Family Housing Program, including the 1998 Home Ownership Program. Uniess the City Council has objections, staff will proceed to implement the modified income and home purchase price restrictions on the remaining Phase XI First Time Homebuyer Program funds. If you have any questions about this report, please call Allen Carlson at 266-6616 or Bruce Kimmel at 266-6676. Sponsor: Councilmember Blakey \�IINPIEAPOLISISAINT PAUL 1998 5INGLE FAMILY JOINT BOARD PROGRAM EXHIBIT "A" ��i�� The City of Minneapolis, Minnesota {"Minneapolis"), the Minneapolis Community Development Agency (the "Agency"), ihe Ciry of Saint Paul, Minnesota ("Saint Paul'� and the Housing and Redevelopment Authority of the Ciry of Saint Paul, Minnesota (the "Authority"), acting individually or jointiy through the Minneapolis/Saint Paul Housing Finance Board (the °Joint Boazd"� (all together, the "Issuers") propose to issue mortgage credit certificates {"MCCs") under Section 25 of the Internai Revenue Code of 1986, as amended (together with regulations promulgated thereunder, the "Code'�, or new money mortgage revenue bonds and certain mort�age revenue refunding bonds under Section 143 of the Code in one or more series, in either case to finance the single family housing program described herein (the "Program'� pursuant to authority confened by Minnesota Statutes, Chapters 462C, 462A, 469 and 474A, all as amended, (and any other geneaal or special law authority for ttie issuance of obligations to finance a single fanuly housing program or development) (all together, the "Act"). Any action specified herein to be made by the "Issuers" may be made by one or more of them acting in concert or individuaily. In creating this Program, the Issuers find and determine: • that the preservation of the quality of life in Minneapolis and Saint Paul (the "Cities") is dependent upan maintaining an adequate, decent, safe and sanitary housing stock; • that maintaining such housing stock is a public purpose and will benefit the residents of the Cities: ■ that a need e�ists within the Cities to provide additional affordable owner-occupied housing for lo�v and moderate income persons and families; and ■ that a need exists for mortgage credit to be made available for both esisting and new owner-occupied housing, for rehabilitation of existing single family housing and for home improvements. To meet such needs, the Issuers intend to issue one or more series of single family morteage revenue bonds and sinsle family mortgage revenue refunding bonds ("Bonds') to cause the origination of morteaoe loans to finance the acquisition, construction, rehabilitation or improvement of sinele family housing in the Cities (or either of them). In addition to or in lieu of issuing Bonds, the Issuers {or any one or more of them) may issue MCCs to morteagors who obtain mortgage loans to finance the purchase, construction, rehabilitation or improvement of single family housing in the Cities (or either of them). T'he Issuers wiil issue Bonds, or will elect not to issue bonds in favor of MCCs, in an aggregate principal amount equal to the sum of (a} the Cities' 1998 entitlement bond allocation of $36,872,000 (comprised of the Saint Paul allocation of $1�,802.000 and the vlinneapolis allocation of $21,070,000), (b) an amount estimated to be $22,000,000 to refund cenain outstanding middle income mortgage revenue bonds issued by one or 16'_]76? Of a �.�`� more of the Issuers and $25,000,000, to refund certain other outstanding mortgage revenue bonds issued by� one or more of the Issuers, and (c) such principal amount of ta�cable bonds as may be necessary or convenient to further the purposes of this Program. Viortgage loans financed through the issuance of the Bonds or and those in connection with which the MCCs wiit be issued, will be sub,}ect to the following terms (or, for Bonds as to which these requirements do not apply as a matter of law, to such other terms approved by the Board): purchase price - the maximum purchase price for financed homes shall not exceed the lesser of (a) 90% (110% in "targeted areas") of the applicable "average azea purchase price" determined by the United States Department of the Treasury or by the Issuers on the basis of more compiete information, or (b) 3 times the applicable income limit for the Program imposed by Minnesota law (except that in certain areas the purchase price shall not exceed 4 times the applicable income limit to the extent consistent with agplicable federal 1aw); income limits - the maximum income of the mortgagors shall be the lower of (a) the income restrictions imposed by federal tax law or (b) the income restrictions imposed by Minnesota Statutes, Section 462C.03, Subd. 2, inc(uding the restriction of Subd. 7 that for the first six months of the Program, 54% of the money availabie to make mortgage loans or the `'non-issued bond amounP' of MCCs must be reserved for persons and families with adjusted incomes not greater than 90% of the general Program income limits. In connection with this Pro�ram: (i) (a) in connection with any mortga�e loans financed with the proceeds of mortgage revenue bonds, any financial institutions described in Section 4b2C.03, Subd. -1. and other mort�a�e lenders with offices located in the Cities and which are FHA/VA approved sellers of mortsa�e loans as weil as other financial institutions and mort�age lenders which are FHA/VA, or FNMA/FHLMC approved sellers of mortgage loans and are reasonably acceptable to any master servicer acting on behalf of the Issuers, will be eligible for consideration for originaiion of such loans; the Cities will not limit participation in the Program to a single lender unless other lenders are not wiliing to participate for the consideration offered; the Agency and the Authority shall be eligible for consideration for ori�ination ofloans; (b) in connection with issuance of MCCs. MCCs will not be limited to loans originated by� particular lenders but will be available with respect to the origination of qualifying mortgaoe loans by any participating lender; (ii) loans �cill not be made available or set aside for the exclusive use of developers or buiiders except, in the case of mortgage loans financed with the proceeds of mortgage revenue bonds, for new housing described in Section 462C.071, Subd. 2; 162'_]62 01 7 � � �� (iii) the Issuers expect to act as, or to contrnct with, a program administrator and a servicer to provide services to ensure that the Program will be consistent with this Progranz, the Act and applicable federal law; (iv) as indicated above, up to $36,872,000 of the entitlement allocations of the Cities may be used in the Program, provided, however, that no provision of this Program shall in any way prevent either of Minneapolis or Saint Paul from using all or a portion of its respective entitlement allocation(s) for multifamily housing or any other authorized purpose. In addition, any election made by the Cities to issue MCCs in lieu of Bonds may be revoked in whole or in part, at any time during the calendar year in which the election w�as made as permitted by Section 25 of the Intemal Revenue Code and Section 12�-4T(c)(3) of the Treasury Regulations. The resulring unused entitlement allocation may be used to issue bonds for single family housing or other authorized purposes; (v) the Program will meet the needs of low and moderate income families by providing below-market rate financing for the acquisition or rehabilitation of single family homes or by providing a ta.Y credit for mortgage interest paid, thereby enabling such persons to qualif� for mortgages which would be unavailable at mazket rates; (vi) the Issuers hereby request a waiver by the Minnesota Housing Finance Aeency of the pro�'isions of Section 462C.03, Subd. 5; (vii) no homes which are located in previously unincorporated real property annexed by the Cities within one year prior to the date of adopfion of this Program will be financed under this Program; (� iii) prohibitions or limitations on assumption wiil be imposed to the extent required by� federal law relating to the tax exempt status of Bonds or to the continued validitv of MCCs issued pursuant to the Program; provided that the Issuers may impose more stringent limitations at their discretion; (ir) the estimated amount of mortgage loans to be made or purchased pursuant to ihis Program is approximately equal to the aggregate principal amount of Bonds issued and the amount which either of the Issuers may elect not to issue in favor of MCCs; (�) the estimated aggregate principal amount of the Bonds, or estimated "non-issued bond amount' (as such term is used in Section 2�(d)(2)(B) of the Code) of MCCs issued in lieu of the Bonds, is set forth above; (�i) the Bonds, if issued, may be issued in one or more series timed for sale consistent with the needs of the Cities in 1998, or, if any bond ailocation is carried fonvazd, in the first half of 1999; 16_':'6?.01 � J �� "`�� (�cii) refinancing of e�cisting indebtedness will be permitted only where the mortgage loan also finances substantial "rehabilitation" as tY�at term is defined under Minnesota Statutes, Secrion 462C.01 and Section 462C.03, Subd. 11 and under Section 143 of the Code; (xiii) to the estent required by the Act, during the fust ten (10) months of the origination period, loans financed by the Bonds (but not mortgage loans assisted by MCCs) will be made for e.uisting housing; (xiv) the following additional provisions shall appiy oniy to issuance of MCCs pursuant to this Program: (1) the "certificate credit rnte" (as used in Section 25 of the Code) will be 20%; (2) a copy of the form which wiii be used to elect the nonissued bond amount is attached hereto as Exhibit A; and (3) the Issuers wiil ensure compiiance with the requirements of Section 2� of the Code by use of an MCC procedural manual for the Prograzn and by use of the program administrator referenced in item (iii} above. 16??762.01 0 �Y"�� � E�IIBIT A TO JOINT BOARD PROGRAM MORTGAGE CREDIT CERTIFICATE ELECTION (Pursuant to Temp. Reg. § 1.25-4T) (i) Tssuer name: jName] [Address] TIN: [Number] (ii) Issuer s Applicable limit, per § 146 of the Internal Revenue Code of 1986: [ALLOCATION FOR 1998: $ 1 [CARRYFORWARD ALLOCATIOI3 FROM 1997: $ } (iii) The ag�regate amount of qualified mortgage bonds issued during the calendar year:: [Amount] (iv) The amount of the Issuer's applicable limit that it has surrendered to other issuers during the calendar year: [Amount] (v) The date and amount of any previous elections under 1.25-4T(c) for 1998: , [Date and amount] (vi) The amount of qualified mortgage bonds that the issuer elects not to issue: [Amount] State Certification attached. Dated: , 1948 CTTY OF [CITY] By Mayor Ib?=i6? 01 A-1 EXHIBZT "B" f `� 1� ��i 1�eport to the Minneapolis/Saint Paul Houszng Finance Board �ul lo, rg9s $20,500,000 Single Family Mortgage Revenue Refunding Bonds (Fannie Mae and GNMA Mortgage-backed Securities Program — Home Ownership Program) Series 1998 Home Office: S5 East Seventh Place Suite 1D0 St. Paul, MN 55101-2887 (612)223-3000 lOwa OffCe: 100 Court Avenue, Suite 204 Des Moines, IA 50309-2200 (515)244-7505 Minneapolls O�ce: 88 South Sixth Street Suite 900 Mlnneapolis, MN 55402•7800 (612)333-9177 wsconsm OKce: 16655 West Bluemound Roatl Swte 290 Braokfieid, WI 53005-5935 (414) 782-8222 Washington O�ce. Kansas O�ce: 1850 K Street NW 7211 West 98'" Terrace Suite 215 Suite 700 Washington, D.0 20006-2200 Overlantl Park. KS 66272-2257 (202) 466-3344 (913) 345-8062 I SPRINGSTED Riblit Fanmue Adm>on Table of Contents � �� g' _ �1 Pa e s SECTION 1 Summary................ ....�---........................... _.......................................................................... 1-1 History of the Limitation of Issuance .................................................................................. 1-I ProgramStructure ................................................................................................................ 1-2 ProgramCosts ...................................................................................................................... 1-2 Sale OjBonds ....................................................................................................................... 1-3 Timing ................................................................................................................................... 1-3 7948 Home Ownership Program .......................................................................................... l-4 Preliminary Sheet ........................................................................................................ 1-4 SPRINGSTED REPORTSIMMMINNSIP7 OTH 5ection 1 `� _ q �,c. SUMMARY Last year the City of St. Paul estabfished a middle income mortgage program that was funded with bond proceeds and targeted at middle income homebuyers. The program was very successful and this year an issue is proposed that will fund mortgage programs that have the flexibility to target other than first time homebuyers. (First time homebuyers are served by an existing joint program.) The financing proposal recommends that $20,50�,000 of bonds be issued to fund a flexible mortgage program within the two cities. HISTORY OF THE LIMITATION OF ISSUANCE The proposed bond issue is comprised from three sources. They are described below: Tax Exempt Single Family Mortgage Revenue Bonds can only be issued through the application of tax exempt bo�ding authority granted by the state or through the refunding of previously issued tax exempt bonds. Federal and state faws require that certain income and home purchase price limits apply and that only first time homebuyers can access programs established with tax exempt bond proceeds. in 1996, the City of Minneapolis and the Housing and Redevelopment Authority of the City of Saint Paul (the "Issuers") together sold Singie Family Mortgage Revenue Bonds totaling $40,665,000. The 1996 Bonds were issued in variable rate form and refunded previously issued mortgage revenue bonds. The refunded bonds had been sald in 1984 at a time when programs could be established with less restrictive home buyer requirements. Characteristics ofi the 1984 bonds can be conveyed to subsequent refunding bonds, permitting the cities to establish programs into middle irtcome ranges, serving non-first time homebuyers, and at home purchase price limits that are more flexible than programs estabiished with proceeds of bonds issued under current laws. In 1997, the City of Saint Paul used on-half of the 1996 Bonds to establish a fixed rate and ARM mfddle income program. At this time. Minneapolis would like to access some of the remainder of the 1996 Bonds for a specially targeted mortgage program. In 1997, the City of Minneapolis and the City of Saint Paul agreed to participate in a "recycling" refunding program that uses cash deposits to temporarily refund housing 6onds and hoid them in escrow. As they accumulate, they wil{ be aggregated and refunded by �ong term bonds to estab�ish mortgage programs. Some of the bonds that are being refunded through this mechanism have the flexible characteristics that are need for the proposed program. They +nciude refunding of former bonds issued by the Housing Finance Board, by the City of Minneapolis separately and by the Saint Paul H.R.A. separately. Saint Paul has access to $5,327,404, of recycled funds currently. Minneapolis has $3,585,404. In 1995, the City of Minneapolis separately refunded some of its own older housing bonds and estabiished a middle income program referred to as HOP V. The end of the originaliy established period for mortgage origination is soon to expire and the remaining unused proceeds from the HOP V financing are recommended to be refunded into proposed financing. SPRINGSTED Page 1-1 Minneapolis/Saint Paul Housing Finance Board ��� _ q�� The proposed financing will total $20,50�,00� and include the following component parts: (Amounts are current estimates with the exception of the recycfing escrows. Finai amounts will be confirmed prior to the sale based on the exact proceeds availabie from HOP V, however, the issue size will be $20,500,000.) Recycling refunding escrow - St. Paul Recycfing refunding escrow - Minneapolis Refunding unused HOP V proceeds 1996 Bond Refunding TOTAL SOND SiZE PROGRAM STRUCTURE $ 5,327,464 3,585,404 5,000,000 6.587.192 $20 500.000 The proposed bonds will be issued in fixed interest rate form. Participating lenders will otiginate qualifying mortgages. The mortgage wiii be purchased by a master servicer and pooled into GNMA or Fannie Mae securities. The securities wiil then be purchased by the bond trustee. Payment of principal and interest on the securities will be pledged to the repayment of the bonds and payment of associated expenses. Under the bond program, lenders including both Cities wiil originate loans for the purchase and/or rehabilitation of homes within the two cities. Income and purchase price limits wiil be established to expand the prospective users of the program to include middle income home buyers. As mentioned, current program limits are targeted to the low and moderate income level, first time home buyers. initiaf limits for the program are to be estabfished as follows: Income Limit 2/3 of program funds $106,400 1/3 of program funds $121,600 Purchase Price Limit $200, 640 $267,520 The 1997 Saint Paul program featured fixed rate and ARM loans, however, due to current market conditions and the attractive fixed rate Ievel compared to the base mortgage rate under an ARM program, it is recommended that the new program offer only 30 year fixed rate mortgages. PROGRAM COSTS The funds that will be used to pay anticipated issuance costs for the bond issue were generated from the 1996 Bonds. The need for these fiunds was anticipated at the time the refunding was done in 1996. SPRINGSTED Page 1-2 Minneapolis/Saint Paul Housing Finance Board � a v.� � 0 SALE OF BONDS The bonds will be sold pursuant to terms included in the attached Term Sheet. it is expected that they wili be sold through a placement to Fannie Mae with the assistance of Dain Rauscher, Piper Jaffray and Miller & Schroeder Financial as underwriters. if appropriate terms cannot be achieved with Fannie Mae the bonds wiil be pubiicly offered. TIMING It is anticipated that the bonds will be definitively placed the second or third week of July and that the transaction wiil close at the end of July or early August to make mortgage product availabie in August. SPRINGSTED Page 1-3 Minneapalis/Saint Paul Housing Finance Board � G _ �1� � $zo,soo,000 Minneapolis/Saint Paul Housing Finance Soard 1998 Home Ownership Pragram (GNMA and FNMA Mortgage Backed Securities) Series 1998 SPRINGSTED Page 1-4 Preliminary Term Sheet Minneapolis/Saint Paul Housing Finance Board r/ Q � . (,(,l Status: For purposes of this Term Sheet, we have assumed that credit enhancement and servicing fees will total 0.50% annualiv. Rates equal to yields on comparabl offered non-AMT issues (bonds to be (assumed servicing and guarantee fee of .50%; Issuer fee of .50%; and program expenses of Purchase/rehab and refilrehab loans permitted with all mortgage types. No limit on total amount of rehab loans. Issuer requests the same Fannie Mae program waivers and approvals as for prior Issuer wilt pay alI costs of issuance not funded from other available sources; no costs will be paid from bond Aroceeds. Currently estimated to be 0.50% payabfe monthly in arrears based on the Securities outstanding; however, the Issuer wouid like the right to adjust its fee as market conditions initiaily for use in Minneapofis and $5,327,404 will be reserved initially for use in Saint Paui; can be reaflocated with consent of both Issuers. Securfty for the bonds will be GNMA and Fannie Mae Securities, fund and accounts held by the trustee and earninas thereon. Aaa Federal and Minnesota tax-exempt, not Bank Qualified. SPRINGSTED Page 1-5 Council File # \O vb0 0 R l G l N A L Green Sheet # �� ��...7 RESOLUTION OF SAINT PAUL, MINNESOTA �� Presented By Referred To Committee: Date z GIVING APPROVAL TO A SINGLE FAMII,Y HOUSING 3 PROGRAM TO BE FINANCED BY THE ISSUANCE OF SINGLE 4 FAMILY MORTGAGE REVENI.JE BONDS AND MORTGAGE 5 CREDIT CERTIFICATES 7 8 WHEREAS, pursuant to the Minnesota Municipal Housing Act, Muuiesota Statutes, Chapter 9 462C (the "Housing AcY'), the City of Saint Paul, Minnesota (the "City") is authorized to adopt a 10 housing plan and cany out programs for the financing of single family housing for persons of low and 11 moderate income; and 12 13 WHEREAS, the MinneapolislSaint Paul Housing Finance Board (the "Boazd"), a joint powers 14 boazd organized under a Joint Powers Agreement (the "Joint Powers AgreemenY') by and between the 15 Minneapolis Community Development Agency (the "Agency") and the Housing and Redevelopment 16 Authority of the City of Saint Paul, Mixuiesota (the "Authority'� and the City of Mimieapolis, Minnesota 17 ("Minneapolis'� and accepted by the City, and under the laws of the State of Minnesota, proposes to 18 undertake a single family housing program relating to the Minneapolis and the Saint Paui 1998 19 entitlement allocations and certain recycling refunding bonds (the "Program"), to bg financed by the 2 o issuance of one or more series of mortgage revenue obligations, mortgage revenue refunding obligations 21 and/or mortgage credit cer[ificates ("MCCs") pursuant to Mnuiesota Statutes, Sections 469.001 to 2 2 469.047, Cl�apters 462A, 462C and 474A and Section 471.59 (collecrively, the "AcP'); and 23 2 4 WHEREAS, pursuant to the Act, the Boazd is authorized to issue bonds from time to time and 2 5 to use the proceeds of its bonds to make or purchase mortgage loans or to purchase participafions in 2 6 mortgage loans from lending institutions and to issue MCCs in order to finance the conshuction and 27 rehabilitation, and to facilitate the purchase and sale, of single family housing for eligible persons or 2 8 families under the Act and to issue bonds to refund previously issued bonds; and 29 3 0 WHEREAS, the Program will provide below mazket interest rate mortgage loan financing or 31 income taY credits primarily to persons of low or moderate income purchasing single family homes to 3 2 be used as their principal places of residence and which are located within the geographic limits of the 3 3 City or Mimieapolis; and 3? ORIGINAL q 35 WI�REAS, the Act requires adoption of the Progracn after a public hearuig held thereon 3 6 following publication of notice in a newspaper of general circulation in the City and Mivneapolis at least 3 7 fifteen days in advance of the hearing; and 38 3 9 WI�REAS, the City Council has on the date hereof conducted a public hearing on the Program, 4 o after publication of notice as required by the Act; and 41 42 WI�REAS, the Program was submitted to the Metropolitan Council at or before the time of 4 3 publication of notice of the public hearing on such Prog}em, and the Metropolitan Council was afforded 44 an opportunity to present comments at the public hearing, all as required by the Act; and 45 4 6 WHEREAS, the Program provides for the issuance of single family mortgage revenue bonds or 4 7 revenue refunding bonds in one or more series pursuant to the Act (the "Bonds") to make or purchase or 4 8 cause to be made or purchased mortgage loans, or to purchase securities the proceeds of which wouid be 4 9 used to purchase mortgage loans, and the issuance of MCCs to finance the acquisition, prunarily by low 5 � and moderate income persons and families, o£ singie family housing located within the geographic 51 boundaries of the City or Miimeapolis; and 52 53 54 55 56 57 58 59 60 61 62 63 54 VJ�IEREAS, the City's remaining 1997 entiUement allocation carried forwazd for single family purposes has been used for the issuance of Bonds or MCCs in 1998; and WI�REAS, it is proposed that the Program be approved and the Boazd be authorized to issue Bonds and MCCs pursuant to the Program and the Joint Powers Agreement; and WIIEREAS, it appears that the Program and the issuance of Bonds and/or MCCs by the Board or the Authority aze in the best interests of the City. . NOW, THEREFORE, BE IT RESOLVED BY TI� CITY COUNCIL OF TF� CITY OF SAINT PAUL AS FOLLOWS: 6 5 1. The Program is hereby approved in its entirety in substantially the forxn on file with the 6 6 City. The officers of the City and the Boazd are authorized to take all actions as may be 6 7 necessary or appropriate to carry out the Program in accordance with the Act and any 6 8 other applicable laws and regulations. 69 7 0 2. The issuance of the Bonds and/or MCCs pursuant to the Program is hereby approved 71 subject to agreement by the Boazd or the Authority and the purchasers of the Bonds, if 72 any, and by the Board or the Authority as issuer of the MCCs, as to the exact terms of 73 the Program and the financing therefore and the MCCs. 74 7 5 3. The Bonds may be issued in one or more series at the time or times and pursuant to 7 6 terms deternuned by the Boazd, and be structured so as to take advantage of whatever , � lJi'�f �ti �,�` -G �p 77 means aze available and ue pernutted by law to enhance the securiry for, or 78 mazketability of, the Bonds, provided that any such financing structure must be 7 9 approved by the Board. The MCCs may be issued at the time or times and pursuant to 8 0 terms deternuned by the Board. All such detenninations by the Boazd must comply 81 with the applicable provisions of the Act and the Intemal Revenue Code of 1986, as 8 2 amended, and regulations promulgated thereunder. 83 84 4. The Boazd is authorized to take all actions which may be necessary or desirable in 8 5 connection with the issuance of the Bonds and the MCCs, acting on behalf of the City, 8 6 and no fiuther approval or consent of the City shall be required prior to the issuance of 8 7 tUe Bonds or the MCCs by the Boazd, or priar to the taldng of any action by the Board 8 8 to undertake and implement the Program. 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 S. Nothing in this Resolution or the documents prepared puxsi�urt hereto shall authorize the expenditure of any municipal funds on the Program other than as specified and authorized by separate actions of the City and other than the revenues derived from the Progiam or otherwise granted to the City for this pur�wse. The Bonds sha11 not constitute a charge, lien or encumbrance, legal or equitable, upon any property or funds of the City except the revenues and proceeds pledged to the payment thereof, nar shall the City be subject to any liability thereon. The holders of the Bonds sha11 never have the right to compel any exercise of the taacing power of the City to pay the outstanding principal on the Bonds or the interest thereon, or to enforce payxnent against any properiy of the City. The Bonds shall recite in substance that the principal and interest thereon, are payable solely from the revenues and proceeds pledged to the payxnent thereof. The Bonds shall not constitute a debt of the City within the meaning of any constiturional or statutory limitation of indebtedness. • 6. Any one or more series of the Bonds or the MCCs may be issued by the Authority in lieu of issuance by the Board, at the discretion of the Authority. Pla °' & Econom'c Develo ment & , �� � . .�i . �---`-" � / Adopted by Council: DateC����ay�_���� 116 — 1' � Adopti n Certi£ied by Council Se� tary By: i. Approved by Ma o a e By: _. _ . _ . . __ _ �cil Form A ro d� C' y Attorney � � k' By: q,F� - G G�r f� �-�61� � � �sswx �// f / NUMBERFOR / / !�l � / N�I • � 5 ! ✓ 1[/'l� ^� �u1/ic /�ca.�ir�g . N�%� h�.s OF ,.� PAGES GREEN SHEET ���� No 64155 � arvwnox�v � arrcN& ��MDw, ❑ AIPNt4L480.VCFtDYI ❑ f�YNLYL � � �]�,���,.� Q/ �'_.��� (CLIP ALL L ATIONS FOR SIGNATURE) �Ns� � /�es w�iT�ti a-f?��ooes fGa I998 /I�IP�. /.s�.��-w/ „ `/y �s v S � n� f!"a y ha�,-, �G 1998 �folyl�e Qc,}n �s �I�G�i���y r � . �'; I� �� / JITLc� �14 199R �:, PLANNING COMMISSION CIB COMMITfEE CML 5ERVICE COMMISSION Has this persoMfirm e.tr xrolked under a contract for this depa�tment? VES NO Has ihis personlfirtn everDeen a clty employee7 YES NO Ooes this person/fimi possess a sldll not normaltypossesssd by any current city employee? VES NO is this person?rm a tarpeteC vendoR VES NO etl attach dITIA ING PR BL ` EMlSSUE y O TUN What, When, Where, Why) !_,. _//�i QS,��G'✓',-°`-' !d ��CS t3D` °�T rece,;v2J ctw Q�sYt�ua.0 � Ofisi .F�cv��r � � a,� `�ls, �78, 9�l �rer� Y� �'f�� �i �s� d� � �favs<� �`v�r%f � T.� �7` l / fesoGu�icn �//roves �- /?�vs�� %r�9�'� � s�:�ol�es �cv--�� us� ou�- a,�.-��io-Y��y �`d issu� /ao�s,� �,o"�Ia�Q' Yzv�ve 6o�v �/�sf �-� 1UVH�HU�YYKVvU � � ( � � �� �" y � o-�y� y� �v� - ��o dtO�Yeeow-e.�� �vrG�� � ��-�-c� � �� � ��l�' �L � � �� �� � �� � , s"� �3,�� , /v1! 4�0��2 /'/C-�Z�- f1�US� /' �p � !� /yl b-vf y �2, j ,7v'v n � � 4"S �6-rn �6 /x US ��/ �r�s��, � ; �� � dv� . - d7VAN1ACj�5jF/,iPVHOVFJJ� �ja_ �./��/ /� y ird... _/ �Q�S 1I: g 7'c" ` � u.pi G �. ��,� . e ��.�mti U�"_ �,.�„ �-- � `� r U �. ` trv te�i" � .� /'� �vw� c� /'<c ,DV�NiAGE OTAPPROVED� /`� J l � �� {�� � k/ � �� � T :� ��,p,s ��� � ��a��l,� ,��� ha�sE �--r OF TRANSACTION S �/� COSTIREVENUE BUDGETED (CIRCLE ON� L ,Law --•' / y �� �SSve- /�eey��e �d� V � /�� � �� YES NO SOURCE �.../ ACTNITYNUMBER ��� MFORMATON(EJ�Wl� ' �'"" ��� � ����� � "" ` � � � � � a� -��� Interdepartmental Memorandum CITY OF SAII�IT PAUL To: Council President Bostrom Councilmember Benanav Councilmember Blakey Councilmember Coleman Councilmember Harris Councilmember Lantry Councilmember Reiter From: Pamela Wheelock Date: July 22, 194 Re: Approval of 9 MinneapolisfSaint Paul Single Family Aousing Program and 1998 Home Ownership Program (Citywide) Purpose The purpose of this report is to request approval of the 1998 Minneapolis/Saint Paul Single Family Housing Program and the 1998 Minneapolis/Saint Paul Home Ownership Program (i.e. Middle Income Mortgage Program). Background In 1984, the Cities of Minneapolis and Saint Paul and their respective development agencies created the Minneapolis/Saint Paul Housing Finance Board (Joint Board) for the purpose of providing decent, safe, sanitary, and affordable housing to residents of both cities. Membership of the Joint Board is comprised of three council members from each city. With the retirement of Councilmembers Thune and Megard, Saint Paul's only current member is Councilmember Blakey. Through the Joint Boazd, the two cities sponsar their single family mortgage programs by issuing both tax-exempt mortgage revenue bonds and mortgage credit certificates. Current programs financed through the Joint Board include Take Credit!, which provides a federal tas credit to persons purchasing their first homes in either Saint Paul or Minneapolis and Phase XI of the bond-financed First Time Homebuyer Progam. c��-GGY Program Descriprions Single Family Housing Program: The 1998 Single Family Housing Program, approved by the Joint Board on Ju]y 15, 1498, is inciuded as E�ibit A to the attached Council Reso]ufion. The 1998 Program includes a description of the program eligibilily requirements dictated by federal and state legislation and serves as the basis for future use of Saint Paul's and Minneapolis' entitlement allocations of mortgage revenue bonding authoriTy. Ongoing Program parameters include a masimum purchase price of 90% of average azea purchase price (which cunently translates into $I 12,563 for an existing single family home) and maximum household income of 100% of area median income (currently $60,800). Upon adoption by the Joint Board, the 1998 Program wili be filed with the State Deparhnent of Revenue as required by Minnesota Statutes, Chapter 462C. The attached resolution does not obligate the FIRA or the City to expend any funds. In addition, the resolution specifies that neither the Ciry nor the fIRA will be subject to any liability for bonds or mortgage credit certificates issued to finance the Program. Any bond issues to be used to Implement the 1998 Program wi11 ba brought to the HItA Board for its consideration and approval. 1998 Home Ownership Program: A summaty of the 1998 Home Ownership Program is inciuded as E�ibit B to the attached Council Resolution. With this program, Minneapolis and Saint Paul propose to jointly issue $20,500,000 of single family mortgage revenue refunding bonds to preserve the Cities' authority to operate mortgage programs for middle income, non-first time homebuyers. These bonds will not count as part of the City's entitlement allocation. If approved, the program will offer the following: • $5,327,404 of fust mortgage fmancing for purchase, purchaselrehab, and refinanceJrehab of Saint Paul homes. All financing will consist of 30 year mortgages with a fixed interest rate that is currently estimated at 6.25%. • Two-thirds of the aggregate principal amount of loans originated under the program will be limited to homebuyers with incomes at or below 175% of area median income ($106,400) and a home purchase price at or below three times 110% of area median income ($200,640). • One-third of the loans originated will be open to homebuyers with incomes at or below 200% of median income and a purchase price at or below four times 110°/o of inedian income ($267,520). • All homebuyers qualifying for the City's First Time Homebuyer Program will be served by that program, unless program loan funds are inadequate. a � -�� The 1998 Home Ownership Program team includes: • Issuer: MinneapolislSaint Paul Housing Finance Board • Undenvriters: Dain Bosworth Inc., Piper Jaffray Inc., and Miller & Schroeder Financial Inc. • Financial Advisor: Springsted Inc. • Bond Counsel: Leonard, Street and Deinazd, P.A. • Trustee: Norwest Corporation • Servicer. The Leader Mortgage Corp. • Program Administrator: Miller & 5chroeder Financial Income and Pnrchase Price Limits: On June 23, 1998, President Ciinton declazed eight Minnesota counties, including Ramsey County, disaster areas on the basis of storm damage. This declazation triggers Section 143(k)(11) of the Internal Revenue code of 1986, as amended, which provides that for loans financed with single family mortgage revenue bonds which are secured by residences located in designated disaster areas: (1) the first-time homebuyer requirement does not apply, and (2) the federal limits on purchase grice and incoma sha11 be applied as if the residence were located in a tazgeted area. These modifications are effective for loans made within 2 years of the date of the disaster declaration, and for bonds issued after December 31, 1996 and prior to January 1, 1999. Staff proposes to implement the modified restrictions to stimulate loan originations on the remaining balance of the Phase XI First Time Homebuyer Program funds ($4.5 million out of $10 million issued). Pablic Pnrpose Through its single family mortgage programs, the Joint Board encourages Saint Paul families to become homeowners. In addition, by providing financing which accommodates both the purchase and the rehabilitation of a wide range of single family homes, the Joint Boazd helps the C1ty to meet its goal of improving its housing stock and providing homeownership options for a mix of household incomes.. Budget The action requested has no impact upon the City's or HRA's budget. �� � � Recommendation Staff recommends approval of the attached resolution giving approval to the issuance by the Minneapolis/Saint Paul Aousing Finance Board of single family mortgage revenue bonds and mortgage credit certificates to finance the City's 1998 Single Family Housing Program, including the 1998 Home Ownership Program. Uniess the City Council has objections, staff will proceed to implement the modified income and home purchase price restrictions on the remaining Phase XI First Time Homebuyer Program funds. If you have any questions about this report, please call Allen Carlson at 266-6616 or Bruce Kimmel at 266-6676. Sponsor: Councilmember Blakey \�IINPIEAPOLISISAINT PAUL 1998 5INGLE FAMILY JOINT BOARD PROGRAM EXHIBIT "A" ��i�� The City of Minneapolis, Minnesota {"Minneapolis"), the Minneapolis Community Development Agency (the "Agency"), ihe Ciry of Saint Paul, Minnesota ("Saint Paul'� and the Housing and Redevelopment Authority of the Ciry of Saint Paul, Minnesota (the "Authority"), acting individually or jointiy through the Minneapolis/Saint Paul Housing Finance Board (the °Joint Boazd"� (all together, the "Issuers") propose to issue mortgage credit certificates {"MCCs") under Section 25 of the Internai Revenue Code of 1986, as amended (together with regulations promulgated thereunder, the "Code'�, or new money mortgage revenue bonds and certain mort�age revenue refunding bonds under Section 143 of the Code in one or more series, in either case to finance the single family housing program described herein (the "Program'� pursuant to authority confened by Minnesota Statutes, Chapters 462C, 462A, 469 and 474A, all as amended, (and any other geneaal or special law authority for ttie issuance of obligations to finance a single fanuly housing program or development) (all together, the "Act"). Any action specified herein to be made by the "Issuers" may be made by one or more of them acting in concert or individuaily. In creating this Program, the Issuers find and determine: • that the preservation of the quality of life in Minneapolis and Saint Paul (the "Cities") is dependent upan maintaining an adequate, decent, safe and sanitary housing stock; • that maintaining such housing stock is a public purpose and will benefit the residents of the Cities: ■ that a need e�ists within the Cities to provide additional affordable owner-occupied housing for lo�v and moderate income persons and families; and ■ that a need exists for mortgage credit to be made available for both esisting and new owner-occupied housing, for rehabilitation of existing single family housing and for home improvements. To meet such needs, the Issuers intend to issue one or more series of single family morteage revenue bonds and sinsle family mortgage revenue refunding bonds ("Bonds') to cause the origination of morteaoe loans to finance the acquisition, construction, rehabilitation or improvement of sinele family housing in the Cities (or either of them). In addition to or in lieu of issuing Bonds, the Issuers {or any one or more of them) may issue MCCs to morteagors who obtain mortgage loans to finance the purchase, construction, rehabilitation or improvement of single family housing in the Cities (or either of them). T'he Issuers wiil issue Bonds, or will elect not to issue bonds in favor of MCCs, in an aggregate principal amount equal to the sum of (a} the Cities' 1998 entitlement bond allocation of $36,872,000 (comprised of the Saint Paul allocation of $1�,802.000 and the vlinneapolis allocation of $21,070,000), (b) an amount estimated to be $22,000,000 to refund cenain outstanding middle income mortgage revenue bonds issued by one or 16'_]76? Of a �.�`� more of the Issuers and $25,000,000, to refund certain other outstanding mortgage revenue bonds issued by� one or more of the Issuers, and (c) such principal amount of ta�cable bonds as may be necessary or convenient to further the purposes of this Program. Viortgage loans financed through the issuance of the Bonds or and those in connection with which the MCCs wiit be issued, will be sub,}ect to the following terms (or, for Bonds as to which these requirements do not apply as a matter of law, to such other terms approved by the Board): purchase price - the maximum purchase price for financed homes shall not exceed the lesser of (a) 90% (110% in "targeted areas") of the applicable "average azea purchase price" determined by the United States Department of the Treasury or by the Issuers on the basis of more compiete information, or (b) 3 times the applicable income limit for the Program imposed by Minnesota law (except that in certain areas the purchase price shall not exceed 4 times the applicable income limit to the extent consistent with agplicable federal 1aw); income limits - the maximum income of the mortgagors shall be the lower of (a) the income restrictions imposed by federal tax law or (b) the income restrictions imposed by Minnesota Statutes, Section 462C.03, Subd. 2, inc(uding the restriction of Subd. 7 that for the first six months of the Program, 54% of the money availabie to make mortgage loans or the `'non-issued bond amounP' of MCCs must be reserved for persons and families with adjusted incomes not greater than 90% of the general Program income limits. In connection with this Pro�ram: (i) (a) in connection with any mortga�e loans financed with the proceeds of mortgage revenue bonds, any financial institutions described in Section 4b2C.03, Subd. -1. and other mort�a�e lenders with offices located in the Cities and which are FHA/VA approved sellers of mortsa�e loans as weil as other financial institutions and mort�age lenders which are FHA/VA, or FNMA/FHLMC approved sellers of mortgage loans and are reasonably acceptable to any master servicer acting on behalf of the Issuers, will be eligible for consideration for originaiion of such loans; the Cities will not limit participation in the Program to a single lender unless other lenders are not wiliing to participate for the consideration offered; the Agency and the Authority shall be eligible for consideration for ori�ination ofloans; (b) in connection with issuance of MCCs. MCCs will not be limited to loans originated by� particular lenders but will be available with respect to the origination of qualifying mortgaoe loans by any participating lender; (ii) loans �cill not be made available or set aside for the exclusive use of developers or buiiders except, in the case of mortgage loans financed with the proceeds of mortgage revenue bonds, for new housing described in Section 462C.071, Subd. 2; 162'_]62 01 7 � � �� (iii) the Issuers expect to act as, or to contrnct with, a program administrator and a servicer to provide services to ensure that the Program will be consistent with this Progranz, the Act and applicable federal law; (iv) as indicated above, up to $36,872,000 of the entitlement allocations of the Cities may be used in the Program, provided, however, that no provision of this Program shall in any way prevent either of Minneapolis or Saint Paul from using all or a portion of its respective entitlement allocation(s) for multifamily housing or any other authorized purpose. In addition, any election made by the Cities to issue MCCs in lieu of Bonds may be revoked in whole or in part, at any time during the calendar year in which the election w�as made as permitted by Section 25 of the Intemal Revenue Code and Section 12�-4T(c)(3) of the Treasury Regulations. The resulring unused entitlement allocation may be used to issue bonds for single family housing or other authorized purposes; (v) the Program will meet the needs of low and moderate income families by providing below-market rate financing for the acquisition or rehabilitation of single family homes or by providing a ta.Y credit for mortgage interest paid, thereby enabling such persons to qualif� for mortgages which would be unavailable at mazket rates; (vi) the Issuers hereby request a waiver by the Minnesota Housing Finance Aeency of the pro�'isions of Section 462C.03, Subd. 5; (vii) no homes which are located in previously unincorporated real property annexed by the Cities within one year prior to the date of adopfion of this Program will be financed under this Program; (� iii) prohibitions or limitations on assumption wiil be imposed to the extent required by� federal law relating to the tax exempt status of Bonds or to the continued validitv of MCCs issued pursuant to the Program; provided that the Issuers may impose more stringent limitations at their discretion; (ir) the estimated amount of mortgage loans to be made or purchased pursuant to ihis Program is approximately equal to the aggregate principal amount of Bonds issued and the amount which either of the Issuers may elect not to issue in favor of MCCs; (�) the estimated aggregate principal amount of the Bonds, or estimated "non-issued bond amount' (as such term is used in Section 2�(d)(2)(B) of the Code) of MCCs issued in lieu of the Bonds, is set forth above; (�i) the Bonds, if issued, may be issued in one or more series timed for sale consistent with the needs of the Cities in 1998, or, if any bond ailocation is carried fonvazd, in the first half of 1999; 16_':'6?.01 � J �� "`�� (�cii) refinancing of e�cisting indebtedness will be permitted only where the mortgage loan also finances substantial "rehabilitation" as tY�at term is defined under Minnesota Statutes, Secrion 462C.01 and Section 462C.03, Subd. 11 and under Section 143 of the Code; (xiii) to the estent required by the Act, during the fust ten (10) months of the origination period, loans financed by the Bonds (but not mortgage loans assisted by MCCs) will be made for e.uisting housing; (xiv) the following additional provisions shall appiy oniy to issuance of MCCs pursuant to this Program: (1) the "certificate credit rnte" (as used in Section 25 of the Code) will be 20%; (2) a copy of the form which wiii be used to elect the nonissued bond amount is attached hereto as Exhibit A; and (3) the Issuers wiil ensure compiiance with the requirements of Section 2� of the Code by use of an MCC procedural manual for the Prograzn and by use of the program administrator referenced in item (iii} above. 16??762.01 0 �Y"�� � E�IIBIT A TO JOINT BOARD PROGRAM MORTGAGE CREDIT CERTIFICATE ELECTION (Pursuant to Temp. Reg. § 1.25-4T) (i) Tssuer name: jName] [Address] TIN: [Number] (ii) Issuer s Applicable limit, per § 146 of the Internal Revenue Code of 1986: [ALLOCATION FOR 1998: $ 1 [CARRYFORWARD ALLOCATIOI3 FROM 1997: $ } (iii) The ag�regate amount of qualified mortgage bonds issued during the calendar year:: [Amount] (iv) The amount of the Issuer's applicable limit that it has surrendered to other issuers during the calendar year: [Amount] (v) The date and amount of any previous elections under 1.25-4T(c) for 1998: , [Date and amount] (vi) The amount of qualified mortgage bonds that the issuer elects not to issue: [Amount] State Certification attached. Dated: , 1948 CTTY OF [CITY] By Mayor Ib?=i6? 01 A-1 EXHIBZT "B" f `� 1� ��i 1�eport to the Minneapolis/Saint Paul Houszng Finance Board �ul lo, rg9s $20,500,000 Single Family Mortgage Revenue Refunding Bonds (Fannie Mae and GNMA Mortgage-backed Securities Program — Home Ownership Program) Series 1998 Home Office: S5 East Seventh Place Suite 1D0 St. Paul, MN 55101-2887 (612)223-3000 lOwa OffCe: 100 Court Avenue, Suite 204 Des Moines, IA 50309-2200 (515)244-7505 Minneapolls O�ce: 88 South Sixth Street Suite 900 Mlnneapolis, MN 55402•7800 (612)333-9177 wsconsm OKce: 16655 West Bluemound Roatl Swte 290 Braokfieid, WI 53005-5935 (414) 782-8222 Washington O�ce. Kansas O�ce: 1850 K Street NW 7211 West 98'" Terrace Suite 215 Suite 700 Washington, D.0 20006-2200 Overlantl Park. KS 66272-2257 (202) 466-3344 (913) 345-8062 I SPRINGSTED Riblit Fanmue Adm>on Table of Contents � �� g' _ �1 Pa e s SECTION 1 Summary................ ....�---........................... _.......................................................................... 1-1 History of the Limitation of Issuance .................................................................................. 1-I ProgramStructure ................................................................................................................ 1-2 ProgramCosts ...................................................................................................................... 1-2 Sale OjBonds ....................................................................................................................... 1-3 Timing ................................................................................................................................... 1-3 7948 Home Ownership Program .......................................................................................... l-4 Preliminary Sheet ........................................................................................................ 1-4 SPRINGSTED REPORTSIMMMINNSIP7 OTH 5ection 1 `� _ q �,c. SUMMARY Last year the City of St. Paul estabfished a middle income mortgage program that was funded with bond proceeds and targeted at middle income homebuyers. The program was very successful and this year an issue is proposed that will fund mortgage programs that have the flexibility to target other than first time homebuyers. (First time homebuyers are served by an existing joint program.) The financing proposal recommends that $20,50�,000 of bonds be issued to fund a flexible mortgage program within the two cities. HISTORY OF THE LIMITATION OF ISSUANCE The proposed bond issue is comprised from three sources. They are described below: Tax Exempt Single Family Mortgage Revenue Bonds can only be issued through the application of tax exempt bo�ding authority granted by the state or through the refunding of previously issued tax exempt bonds. Federal and state faws require that certain income and home purchase price limits apply and that only first time homebuyers can access programs established with tax exempt bond proceeds. in 1996, the City of Minneapolis and the Housing and Redevelopment Authority of the City of Saint Paul (the "Issuers") together sold Singie Family Mortgage Revenue Bonds totaling $40,665,000. The 1996 Bonds were issued in variable rate form and refunded previously issued mortgage revenue bonds. The refunded bonds had been sald in 1984 at a time when programs could be established with less restrictive home buyer requirements. Characteristics ofi the 1984 bonds can be conveyed to subsequent refunding bonds, permitting the cities to establish programs into middle irtcome ranges, serving non-first time homebuyers, and at home purchase price limits that are more flexible than programs estabiished with proceeds of bonds issued under current laws. In 1997, the City of Saint Paul used on-half of the 1996 Bonds to establish a fixed rate and ARM mfddle income program. At this time. Minneapolis would like to access some of the remainder of the 1996 Bonds for a specially targeted mortgage program. In 1997, the City of Minneapolis and the City of Saint Paul agreed to participate in a "recycling" refunding program that uses cash deposits to temporarily refund housing 6onds and hoid them in escrow. As they accumulate, they wil{ be aggregated and refunded by �ong term bonds to estab�ish mortgage programs. Some of the bonds that are being refunded through this mechanism have the flexible characteristics that are need for the proposed program. They +nciude refunding of former bonds issued by the Housing Finance Board, by the City of Minneapolis separately and by the Saint Paul H.R.A. separately. Saint Paul has access to $5,327,404, of recycled funds currently. Minneapolis has $3,585,404. In 1995, the City of Minneapolis separately refunded some of its own older housing bonds and estabiished a middle income program referred to as HOP V. The end of the originaliy established period for mortgage origination is soon to expire and the remaining unused proceeds from the HOP V financing are recommended to be refunded into proposed financing. SPRINGSTED Page 1-1 Minneapolis/Saint Paul Housing Finance Board ��� _ q�� The proposed financing will total $20,50�,00� and include the following component parts: (Amounts are current estimates with the exception of the recycfing escrows. Finai amounts will be confirmed prior to the sale based on the exact proceeds availabie from HOP V, however, the issue size will be $20,500,000.) Recycling refunding escrow - St. Paul Recycfing refunding escrow - Minneapolis Refunding unused HOP V proceeds 1996 Bond Refunding TOTAL SOND SiZE PROGRAM STRUCTURE $ 5,327,464 3,585,404 5,000,000 6.587.192 $20 500.000 The proposed bonds will be issued in fixed interest rate form. Participating lenders will otiginate qualifying mortgages. The mortgage wiii be purchased by a master servicer and pooled into GNMA or Fannie Mae securities. The securities wiil then be purchased by the bond trustee. Payment of principal and interest on the securities will be pledged to the repayment of the bonds and payment of associated expenses. Under the bond program, lenders including both Cities wiil originate loans for the purchase and/or rehabilitation of homes within the two cities. Income and purchase price limits wiil be established to expand the prospective users of the program to include middle income home buyers. As mentioned, current program limits are targeted to the low and moderate income level, first time home buyers. initiaf limits for the program are to be estabfished as follows: Income Limit 2/3 of program funds $106,400 1/3 of program funds $121,600 Purchase Price Limit $200, 640 $267,520 The 1997 Saint Paul program featured fixed rate and ARM loans, however, due to current market conditions and the attractive fixed rate Ievel compared to the base mortgage rate under an ARM program, it is recommended that the new program offer only 30 year fixed rate mortgages. PROGRAM COSTS The funds that will be used to pay anticipated issuance costs for the bond issue were generated from the 1996 Bonds. The need for these fiunds was anticipated at the time the refunding was done in 1996. SPRINGSTED Page 1-2 Minneapolis/Saint Paul Housing Finance Board � a v.� � 0 SALE OF BONDS The bonds will be sold pursuant to terms included in the attached Term Sheet. it is expected that they wili be sold through a placement to Fannie Mae with the assistance of Dain Rauscher, Piper Jaffray and Miller & Schroeder Financial as underwriters. if appropriate terms cannot be achieved with Fannie Mae the bonds wiil be pubiicly offered. TIMING It is anticipated that the bonds will be definitively placed the second or third week of July and that the transaction wiil close at the end of July or early August to make mortgage product availabie in August. SPRINGSTED Page 1-3 Minneapalis/Saint Paul Housing Finance Board � G _ �1� � $zo,soo,000 Minneapolis/Saint Paul Housing Finance Soard 1998 Home Ownership Pragram (GNMA and FNMA Mortgage Backed Securities) Series 1998 SPRINGSTED Page 1-4 Preliminary Term Sheet Minneapolis/Saint Paul Housing Finance Board r/ Q � . (,(,l Status: For purposes of this Term Sheet, we have assumed that credit enhancement and servicing fees will total 0.50% annualiv. Rates equal to yields on comparabl offered non-AMT issues (bonds to be (assumed servicing and guarantee fee of .50%; Issuer fee of .50%; and program expenses of Purchase/rehab and refilrehab loans permitted with all mortgage types. No limit on total amount of rehab loans. Issuer requests the same Fannie Mae program waivers and approvals as for prior Issuer wilt pay alI costs of issuance not funded from other available sources; no costs will be paid from bond Aroceeds. Currently estimated to be 0.50% payabfe monthly in arrears based on the Securities outstanding; however, the Issuer wouid like the right to adjust its fee as market conditions initiaily for use in Minneapofis and $5,327,404 will be reserved initially for use in Saint Paui; can be reaflocated with consent of both Issuers. Securfty for the bonds will be GNMA and Fannie Mae Securities, fund and accounts held by the trustee and earninas thereon. Aaa Federal and Minnesota tax-exempt, not Bank Qualified. SPRINGSTED Page 1-5