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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 . �---`-"
�
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Adopted by Council: DateC����ay�_���� 116
— 1' �
Adopti n Certi£ied by Council Se� tary
By: i.
Approved by Ma o a e
By: _. _ . _ . . __ _
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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 �
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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 `�
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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 ���
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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
$267,520
The 1997 Saint Paul program featured fixed rate and ARM loans, however, due to current
market conditions and the attractive fixed rate Ievel compared to the base mortgage rate under
an ARM program, it is recommended that the new program offer only 30 year fixed rate
mortgages.
PROGRAM COSTS
The funds that will be used to pay anticipated issuance costs for the bond issue were generated
from the 1996 Bonds. The need for these fiunds was anticipated at the time the refunding was
done in 1996.
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Minneapolis/Saint Paul Housing Finance Board �
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SALE OF BONDS
The bonds will be sold pursuant to terms included in the attached Term Sheet. it is expected
that they wili be sold through a placement to Fannie Mae with the assistance of Dain Rauscher,
Piper Jaffray and Miller & Schroeder Financial as underwriters. if appropriate terms cannot be
achieved with Fannie Mae the bonds wiil be pubiicly offered.
TIMING
It is anticipated that the bonds will be definitively placed the second or third week of July and
that the transaction wiil close at the end of July or early August to make mortgage product
availabie in August.
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Minneapalis/Saint Paul Housing Finance Board �
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$zo,soo,000
Minneapolis/Saint Paul Housing Finance Soard
1998 Home Ownership Pragram
(GNMA and FNMA Mortgage Backed Securities)
Series 1998
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Page 1-4
Preliminary Term Sheet
Minneapolis/Saint Paul Housing Finance Board r/
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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
,
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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 . �---`-"
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Adopted by Council: DateC����ay�_���� 116
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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
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YES NO
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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.
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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.
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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.
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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"
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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
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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;
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(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;
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(�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.
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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
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A-1
EXHIBZT "B" f `�
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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
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Riblit Fanmue Adm>on
Table of Contents �
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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 `�
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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.
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Minneapolis/Saint Paul Housing Finance Board ���
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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
$267,520
The 1997 Saint Paul program featured fixed rate and ARM loans, however, due to current
market conditions and the attractive fixed rate Ievel compared to the base mortgage rate under
an ARM program, it is recommended that the new program offer only 30 year fixed rate
mortgages.
PROGRAM COSTS
The funds that will be used to pay anticipated issuance costs for the bond issue were generated
from the 1996 Bonds. The need for these fiunds was anticipated at the time the refunding was
done in 1996.
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Minneapolis/Saint Paul Housing Finance Board �
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SALE OF BONDS
The bonds will be sold pursuant to terms included in the attached Term Sheet. it is expected
that they wili be sold through a placement to Fannie Mae with the assistance of Dain Rauscher,
Piper Jaffray and Miller & Schroeder Financial as underwriters. if appropriate terms cannot be
achieved with Fannie Mae the bonds wiil be pubiicly offered.
TIMING
It is anticipated that the bonds will be definitively placed the second or third week of July and
that the transaction wiil close at the end of July or early August to make mortgage product
availabie in August.
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Minneapalis/Saint Paul Housing Finance Board �
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$zo,soo,000
Minneapolis/Saint Paul Housing Finance Soard
1998 Home Ownership Pragram
(GNMA and FNMA Mortgage Backed Securities)
Series 1998
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Page 1-4
Preliminary Term Sheet
Minneapolis/Saint Paul Housing Finance Board r/
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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.
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