HB-5618, As Passed Senate, October 17, 2012

HOUSE BILL No. 5618

May 10, 2012, Introduced by Reps. Shaughnessy, Zorn and Wayne Schmidt and referred to the Committee on Commerce.

A bill to amend 1966 PA 346, entitled

"State housing development authority act of 1966,"

by amending section 44c (MCL 125.1444c), as amended by 2004 PA 535.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 44c. (1) If the resolution authorizing the issuance of

notes or bonds provides that the notes or bonds are limited and not

general obligations of the authority, are not secured by the

capital reserve capital account, and are secured solely by revenues

and property derived from or obtained in connection with the

housing project, the authority shall use the proceeds of those

notes or bonds to make loans directly, or indirectly by a loan

through a mortgage lender, to a nonprofit housing corporation,

consumer housing cooperative, limited dividend housing corporation,

limited dividend housing association, mobile home park corporation,

mobile home park association, or public body or agency for the

construction, rehabilitation, long-term financing or any

combination of construction, rehabilitation, or long-term financing

of any of the following:

(a) Multifamily housing projects for students or low income or

moderate income persons.

(b) Beginning May 1, 1984, multifamily housing projects in

~~eligible distressed areas~~ in which not less than 20% of the

dwelling units are allotted to individuals of low or moderate

income within the meaning of former section 103(b)(4)(A) of the

internal revenue code of 1954 and in which not more than 80% of the

dwelling units are available for occupancy without regard to

income.

to serve and improve the residential area in which an authority-

financed multifamily housing project is located or is planned to be

located, thereby enhancing the viability of such housing.

(2) To qualify as rehabilitation under this section, the

rehabilitation expenditures with respect to the project must equal

or exceed 30% of the portion of the cost of acquiring the building

and equipment financed with the proceeds of the notes or bonds

issued to acquire and rehabilitate the project. For a project

located in an eligible distressed area, the amount of

rehabilitation may be less than the 30% requirement if the

authority determines ~~and expresses~~ by resolution that the likely

benefit to the community or the proposed residents of the project

merits the use of this financing source. This subsection does not

apply to a project for which the authority has authorized a loan

commitment under this section before December 18, 1985. The

authority shall not provide long-term financing for a project under

this section unless the project is constructed or rehabilitated in

anticipation of authority financing, the construction or

rehabilitation is undertaken with authority financing, long-term

financing is being provided with respect to a housing project for

which regulatory or contractual restrictions assuring occupancy of

some or all of the units by families or persons of low or moderate

income are subject to termination within a 2-year period following

the acquisition of the housing project, or a housing project which

is to be owned and operated by a nonprofit housing corporation

which is qualified under section 501(c)(3) of the internal revenue

code, 26 USC 501(c)(3).

(3) Notwithstanding the provisions of this section, the

authority shall establish by resolution higher income limits for a

housing project financed under either subsection (1)(a) or (b)

~~equal to the income limits of subsection (1)(c)~~ if the authority

determines all of the following:

(a) The owner of the housing project exercised reasonable

efforts to rent the dwelling units to persons and families whose

incomes did not exceed the originally applicable income

limitations.

(b) For any annual period after the first tenant has occupied

the housing project, the owner of the housing project has been

unable to attain and sustain at least a 95% occupancy level at the

housing project.

(4) Notwithstanding the expiration of lending authority under

this section, multifamily housing projects financed under this

section may continue to remain eligible for occupancy by persons

and families whose incomes do not exceed the limits provided in

subsection (1) or (3).

(5) A borrower seeking to qualify for a loan under this

section shall file an application with the authority which includes

the following:

(a) A description of the proposed credit enhancement. The

proposed credit enhancement may be in the form of a letter of

credit, bonding, guarantee, mortgage insurance, or other

appropriate security in an amount sufficient to assure the

authority that repayment of notes or bonds issued by the authority

is reasonably secure.

(b) An undertaking to pay all costs of issuing the notes or

bonds and to provide compensation for, as considered appropriate by

the borrower and at no cost to the authority, any underwriters,

trustees, counsel, and other professionals as are necessary to

complete the financing.

0.0005 multiplied by the principal amount of notes or bonds for

which issuance is requested. For a project located in an eligible

distressed area, the fee required by this subdivision ~~shall be~~ is

refundable if the notes or bonds are not delivered or may be waived

by the authority ~~in the event~~ if the owner of the housing project

is or will be a nonprofit housing corporation qualified under

section 501(c)(3) of the internal revenue code, 26 USC 501(c)(3),

or a limited dividend housing association wholly owned and

controlled by 1 or more nonprofit corporations qualified under

section 501(c)(3) of the internal revenue code, 26 USC 501(c)(3).

In all other cases, the fee is nonrefundable.

(6) So long as there is uncommitted bonding capability under

the limitations of section 32, the authority shall issue a 6-month

commitment to loan funds, subject to sale by the authority of its

notes and bonds in compliance with applicable law and pursuant to

terms and conditions which permit the funding of such loan, either

directly or indirectly by a loan through a mortgage lender, to the

borrower in the amount of the total development cost of the

proposed multifamily housing project or $25,000,000.00, whichever

is less, or if the proposed multifamily housing project is located

in an eligible distressed area, in the amount of the total

development cost of the proposed project or $50,000,000.00,

whichever is less, upon the determination by the authority of all

of the following:

(a) The housing project is eligible for financing under this

section.

(b) The borrower is an eligible borrower under this act.

(d) The borrower has provided evidence of a commitment to

issue a credit enhancement in the form of a letter of credit,

bonding, guarantee, mortgage insurance, or other appropriate

security in a form and amount sufficient to assure the authority

that the repayment of notes or bonds issued by the authority for

purposes of making a loan to the borrower is reasonably secure. If

the authority determines that repayment of the notes or bonds will

be reasonably secure, the authority's review of the credit

enhancement shall take the place of the authority's normal

underwriting and feasibility review.

(e) If the loan is made indirectly by a loan through a

mortgage lender, the requirements of section 44b have been met.

(7) Unless a borrower is either a nonprofit housing

corporation qualified under section 501(c)(3) of the internal

revenue code, 26 USC 501(c)(3), or a limited dividend housing

association that is wholly owned and controlled by 1 or more

nonprofit corporations qualified under section 501(c)(3) of the

internal revenue code, 26 USC 501(c)(3), and may borrow money from

the authority without an allocation of the state volume limitation,

a borrower and any person who is a related person to the borrower

as defined in section 144(a)(3) of the internal revenue code, 26

USC 144(a)(3), shall not have outstanding loan commitments under

this section which total more than the greater of $25,000,000.00 or

the amount of financing approved for a single project under

subsection (6). Once a loan has been made under this section, the

commitment made with respect to the loan shall no longer be

considered to be outstanding.

(8) Simultaneously with the issuance of the loan commitment by

the authority, the borrower shall pay a commitment fee established

by the authority in the amount of not more than 0.1% of the

principal amount of notes or bonds to be issued. The authority

shall credit the amount paid by the borrower as an application fee

under subsection (5) against this commitment fee. The authority

shall extend a 6-month loan commitment issued under subsection (6)

for an additional 6 months upon payment by the borrower of a

nonrefundable extension fee of $5,000.00, which fee shall not be

credited against any other fee or payment to the authority.

(9) Within the period during which the commitment is

effective, the authority, upon a determination that the terms and

conditions of the commitment have been satisfied, shall make its

loan directly, or indirectly through a loan to a mortgage lender,

to the borrower.

(10) Except as otherwise provided in this subsection, upon

issuance of any notes or bonds to finance a housing project under

this section, the borrower shall pay ~~at the time~~ when the notes or

bonds are issued, in addition to any commitment or extension fee

paid under subsection (8), a fee established by the authority of

either not more than 0.9% of the principal amount of the notes or

bonds for a loan made for a project located in an eligible

distressed area or not more than 1.9% of the principal amount of

the notes or bonds for a loan made for a project located in other

than an eligible distressed area. If notes or bonds have been

issued under this section for a project owned by the borrower

located in an eligible distressed area within 180 days before the

issuance of notes or bonds for the next project financed by that

borrower, which next project is located in other than an eligible

distressed area, the fee under this subsection shall be not more

than 0.9% of the principal amount of the notes or bonds. If notes

or bonds have been issued under this section for a project located

in other than an eligible distressed area and the borrower has paid

the 1.9% fee, the authority shall not charge a fee under this

subsection for the next project financed by that borrower if that

next project is located in an eligible distressed area and if the

notes or bonds are issued within 180 days after the notes or bonds

were issued for the project located in other than an eligible

distressed area. In addition to the fee to be paid to the authority

~~at the time~~ when notes or bonds are issued under this section, the

authority may, at its sole discretion, establish an annual fee, or

other administrative fees, to be paid by the borrower during the

term of the loan. All or any portion of the fees due to the

authority under this subsection shall be paid by the borrower to

the authority in annual or semiannual installments, as the

authority shall determine, after the date on which notes or bonds

are issued to finance the related housing project.

(11) Subject to any rights of the holders of any notes or

bonds issued to finance a multifamily housing project under this

section, if the owner of a multifamily housing project financed

under this section provides evidence satisfactory to the authority

that ~~the~~ a prospective new owner of the multifamily housing project

is an eligible borrower under this act and the exemption from

federal income taxation of interest on the notes or bonds issued to

finance the multifamily housing project will not be impaired as a

result of a sale, refinancing, or resyndication, the borrower may

sell, refinance from a source other than the authority, or

resyndicate that housing project at any time. ~~There shall not be a~~

A prepayment penalty or fee shall not be required for the sale,

refinancing, or resyndication ~~in addition to~~ other than any

prepayment penalty or fee owing to the holders of notes or bonds

issued to finance a housing project under this section, except that

the owner shall pay all fees of the authority described in

subsection (10) before or concurrent with the sale, refinancing, or

resyndication. For student housing, a transfer of ownership shall

be approved by a resolution of the college or university board of

trustees for the college or university that approved the initial

financing under this section.

(12) A borrower is allowed distributions equal to a 12% return

on the borrower's investment in a multifamily housing project

financed under this section for the first 12 months of operation of

the housing project following substantial completion. The allowable

return shall be increased by 1% for each 12-month period after the

first 12 months. The maximum allowable return for a housing project

located in other than an eligible distressed area is 25%. Any

return less than the allowable rate in any preceding period may be

received in any subsequent period on a cumulative basis.

(13) Before September 1 of each year, ~~after 1984,~~ the owner of

a housing project financed under this section shall report to the

authority all of the following, which the authority shall include

in the report required by section 32(14):

(a) The incomes of the tenants residing in that housing

project in a manner that preserves the anonymity of those tenants.

(b) The estimated economic and social benefits of that housing

project to the immediate neighborhoods in which it has been

constructed.

project to the city in which it has been constructed.

(d) Information requested by the authority about that housing

project that is needed so that the authority can report the extent

of displacement, direct and indirect, of lower income persons

caused by housing projects financed under this section, the steps

taken by governmental and private parties to ameliorate the

displacement, and the results of those efforts.

(e) Information requested by the authority about that housing

project that is needed so that the authority can report the

estimated extent of additional reinvestment activities by private

lenders attributable to the authority's financing of housing

projects financed under this section.

(f) Except for housing for students, the age, race, family

size, and average income of the tenants of these housing projects.

(g) The estimated economic impact of these housing projects,

including the number of construction jobs created, wages paid, and

taxes and payments in lieu of taxes paid.

(14) Mortgages securing loans made under this section are

authority-aided mortgages.

(15) The authority may inspect and audit projects and records

of projects financed under this section in order to monitor

compliance with the requirements of this section. If there is

noncompliance, the authority, pursuant to the provisions of the

financing and organizational documents applicable to the

transaction, may pursue the remedies that the authority considers

appropriate. Except as is required to ~~assure~~ ensure compliance with

this section or section 46 or otherwise required by purchasers of,

or a third party credit enhancement provider with respect to, notes

or bonds issued to finance a multifamily housing project under this

section, the authority shall not regulate, in any manner, a

multifamily housing project financed under this section. This

section does not preclude the authority from regulating a

multifamily housing project in consideration for other types of

program benefits, incentives, or concessions provided by the

authority ~~over and above~~ in addition to the financing made

available under this section.

(16) Notwithstanding any other provision of this section,

there shall not be any liability on the part of the authority or

its members, officers, employees, or agents, and the assets of the

authority shall not be subject to any liability, as a result of any

act or failure to act under this section on the part of the

authority or its members, officers, employees, or agents.

(17) If notes or bonds have been issued under this section for

a project located in an eligible distressed area within 180 days

before the submission, by the same borrower or a borrower having

the same general partners, of a commitment for credit enhancement,

that borrower's application shall be given priority over the other

applications submitted under this section to finance projects

located in other than eligible distressed areas, except for

projects for which the authority has authorized loan commitments.

The principal amount of notes or bonds issued to finance a project

given priority under this subsection shall not exceed 10 times the

principal amount of the notes or bonds issued to finance the

distressed area project that qualifies the borrower for priority

consideration.

(18) Except for housing projects for which the authority has

adopted an inducement resolution on or before April 1, 1991, loans

shall not be made under this section unless the authority

determines that use of the state's unified volume cap for a project

will not impair the ability of the authority to carry out programs

or finance housing developments or housing units which are targeted

to lower income persons.

(19) Beginning ~~on the effective date of the amendatory act~~

~~that added this subsection~~ January 3, 2005, a person or entity who

proposes a student housing project shall cooperate with the college

or university from which the majority of tenants are proposed to be

drawn by using its best efforts to communicate with the college or

university regarding the location of and the need for the project.

If, in the judgment of the authority, the person or entity

proposing the project does not communicate with the college or

university and the unit of local government where the project is

located regarding the location of and need for the project, the

authority may deny financing for the project. The authority shall

not make a financing commitment for a housing project unless the

board of trustees of the college or university from which a

majority of students are anticipated to be residents of the housing

project adopts a resolution in support of the proposed development.