With the dust of the legislative session now settled, the board was able to enjoy a more typical summer meeting – short and without major controversy. That said, the agency staff shared with the board both the good and the bad news for the agency's financial health. Both are connected to the federal government.
The good news was that HUD had again selected the agency to administer HUD's project based Section 8 contract in Minnesota. While there were no other Minnesota competitors for HUD's business, for two reasons this is still an important agency win. First is the size of the contract between the agency and HUD. This $200 million contract will not only ensure that 18,000 families are well housed, but also pays for over 10 percent of the agency's workforce. Secondly, Minnesota Housing had to make a convincing case to win the contract. HUD put the contracts out for bid after a GAO study found HUD to be overly generous in paying housing finance agencies to manage such contracts. Commissioner Tingerthal said that as a result of the bidding competition, 14 state HFAs lost their contracts with HUD.
The bad news for the agency concerns the fallout of the impasse between Congress and the White House regarding the federal deficit and debt ceiling. The agency was notified that it had received a "negative outlook" from Moody's Investment Service, one of the major rating agencies. This rating change was because much of the agency's debt is secured by mortgages or securities that are federally backed. Two major investors, Fidelity and Schwab, exercised their right to trade back their state housing agency bonds. In Minnesota these bonds were picked up as a good will gesture to their client by the agency's brokers, RBC and Wells Fargo. The board was told that the underlying revenue stream for bond payment, from people paying their mortgages, was sound, so income was available to pay the bonds. Deputy Commissioner Patricia Hippe said that if this financial situation is not resolved, state housing agencies might end up having to buy each other's bonds.
In other business, the board approved a $1.8 million loan to develop City Place, a mixed-use, historic project in downtown Minneapolis. Seeing that the property would contain both residential and commercial space, board member Barb Sanderson asked how the agency would protect the housing in the case of financial losses from the commercial space. Staff responded that the eight story building will be subdivided as two parcels; the two stories of commercial would be separately owned and financed from the six stories of housing. The agency's financing and security will pertain to the top six floors of the property. On an unrelated financial note, the entire property will benefit from $1.1 million in state historic tax credits, the new funding source first passed by the legislature in 2010.
The board also approved a pilot effort to test delivery of homebuyer training via the web. Staff told the board that a number of potential homebuyers work nights or have language barriers that make it difficult for them to access classroom-based homebuyer training. Also, cuts in government funding for homeownership counseling necessitate looking at lower-cost training delivery models. The Home Ownership Center will select two organizations to administer the pilot. The board agreed that homebuyers who successfully complete the pilot homebuyer course, which covers the same content as the classroom course, would meet the education requirement of agency CASA and conventional loans.
