The July board meeting was notable for new investment that will make Minnesota Housing mortgage loans more competitive in the current low-rate mortgage market. In addition, the Agency's role in responding to flooding in northeastern Minnesota was detailed. Finally, the strategic plan was approved, as expected, with a few minor changes.
Mortgage loans to become more competitive
Typically, selling tax-exempt bonds has been an effective way for the Agency to raise capital for its single family mortgage programs. However, the current bond market has made it possible for commercial lenders to offer mortgages that sometimes have lower interest rates than the Agency's mortgages. Thus the Agency's volume of mortgage lending has declined.
Now, new investors may make Agency loans much more competitive. Non-traditional investors identified by RBC Capital Markets, the Agency's lead investment banker, are interested in buying the Agency's bonds at very low interest rates. These investors, not typical buyers of the currently disfavored local and state tax-exempt debt, appear to be willing to purchase the Minnesota Housing bonds backed by federally guaranteed 30-year mortgage-backed securities at a projected interest rate in the 2.75% to 3% range. Chief Financial Officer Don Wyszynski said that this new financing would be the lowest-cost long-term capital ever to be raised by a state housing agency. The board approved the financing plan, which will benefit homebuyers with lower cost mortgage loans, and add up to $50 million to the Agency's loan-making capacity.
Flood assistance to NE Minnesota
Commissioner Tingerthal described the Agency's role in the state response to flooding in northeastern Minnesota. Minnesota Housing employees helped to staff disaster recovery centers that had been created to assist flood victims. More than 300 renters, homeowners or landlords sought information. To address the flooding, Governor Dayton intends to call the legislature back for a special session during week of August 20 or 27. The timing depends on how long it takes FEMA to respond to the state's forthcoming appeal, after the denial of federal funds for individual assistance for this disaster.
Strategic plan approved
The board gave its blessing to the Agency strategic plan. The plan, first reviewed in June, provides high-level strategic direction for the Agency. There were minor revisions to the strategic plan adopted by the board compared to the draft which had been introduced in June. The five Agency priorities (which did not change) are to:
- Promote and support successful homeownership,
- Preserve federally-subsidized rental housing,
- Address specific and critical needs in rental housing markets,
- Prevent and end homelessness,
- Prevent foreclosures and support community recovery.
There were several amendments to the body of the document resulting from the substantial number of comments on the draft plan received by the Agency. For instance, the adopted plan adds language to clarify the importance the Agency places on helping to support local partners in their delivery of Agency programs. And a sixth value was added: "We ensure fair and equal access to affordable housing."
Under the homeownership priority, the commitment to home improvement financing was strengthened in the adopted plan. In the section on principles and cross cutting priorities, the Agency clarified its commitment to fair and equal access to affordable housing.
Only one concern was voiced by the board. Auditor Rebecca Otto asked that the word "ensure" be taken out of the plan. She said that the Agency could not ensure outcomes but could work toward them. Staff will now remove the term wherever it appears, such as in the values statement, mentioned above.
The Agency now will focus on its implementation-oriented planning documents including the Affordable Housing Plan (AHP). The AHP is a one-year business plan and program budget, which is on track to be approved in September before the start of the Agency's funding year on October 1. The AHP in draft will be available mid-August and will be the subject of an Agency webinar planned for August 21.
