NORTH CAROLINA HOUSING FINANCE AGENCY. A. Robert Kucab Executive Director

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1 A. Robert Kucab Executive Director LEGISLATIVE OVERVIEW for JOINT APPROPRIATIONS SUBCOMMITTEE ON GENERAL GOVERNMENT

2 LEGISLATIVE OVERVIEW Table of Contents (Page Numbers) North Carolina Housing Finance Agency (13010) Statutory Authority 2 Mission Statement 2 Goals and Objectives of Programs North Carolina Housing Trust Fund, HOME Match, Home Protection Program 2 Agency Organization 3 Fiscal Data/Continuation Budget Programs 4 (Template 1) Brief description of Programs 5 Summary of Recommended Budget for Agency by Fund Code/Program and Position Count (Template 2) 6 Worksheet I 7 Statistics 8 North Carolina Housing Trust Fund ( ) Statutory Authority 8 Staffing and Expenses 8 Responsibilities 8 Fiscal Data/Continuation Budget 9 5%/10%/15% Reductions 9 Governor s Recommendation 9 HOME Program Match ( ) Statutory Authority 9 Staffing and Expenses 9 Responsibilities 9 Fiscal Data/Continuation Budget 10 5%/10%/15% Reductions 10 Governor s Recommendation 10 Home Protection Program ( ) Statutory Authority 10 Mission Statement 10 Staffing and Expenses 10 Responsibilities 10 Fiscal Data/continuation Budget 11 5%/10%/15% Reductions 11 Governor s Recommendation 11 Page 1

3 Statutory Authority North Carolina General Statutes, Chapter 22 Mission Statement To create affordable housing opportunities for North Carolinians not adequately served by the private market. Goal(s) and Objectives The goals of the Agency s programs are to efficiently create sustainable and affordable housing, to support jobs, and to leverage private funds. The objectives of the Agency s programs in are: 1. The Housing Trust Fund focuses on housing for persons with very low incomes. Thirty percent (30%) of funds each year must benefit persons with incomes at or below 30% of the local median. The Trust Fund will support three programs in Maintaining an appropriation of $10 million will enable the Trust Fund to continue work in , with the actual investments based on housing needs and the most effective use of funds: a) The Rental Production Program will finance 405 apartments for very low-income seniors and working families, including 10% for persons with disabilities, leveraging total development cost of $46.6 million, producing 1,078 jobs, and generating $4.23 million of tax revenue. b) The Supportive Housing Program will finance 240 shared and independent housing units for extremely low-income persons with special needs, leveraging $14 million of total development cost, producing 324 jobs, and generating $1.29 million of tax revenue. c) The Statewide Downpayment Assistance Program will finance 100 low-income, first time home buyers, producing $12.5 million of real estate activity. 2. The HOME Program Match will assist in drawing down $21 million of federal HOME Program funds and will provide affordable monthly rents for 128 extremely low-income persons with disabilities for five years. 3. The Home Protection Program provides loans to make mortgage payments for unemployed workers while they seek or re-train for new jobs. Funding for the Home Protection Program will be replaced by the U.S. Department of Treasury s Hardest Fund and only the statutory authority and a de minimus appropriation will be required, so that we can complete cases in the pipeline and so that the new federally funded program can operate under the umbrella of the Home Protection Program. Page 2

4 Agency Organization The N.C. Housing Finance Agency is a self-supporting, public/private partnership created by the General Assembly in The Agency was established to be entrepreneurial, so it does not use any State appropriations to pay for staff or operating expenses. The Agency issues its own audited financial statements and issues its own bonds, which are all AA rated. All bonds are special obligations of the Agency, and not of the State. Board of Directors Oversight is provided by a 13-member board of directors appointed by the General Assembly and the Governor. By statute, some of the members represent the real estate, construction, and banking industries. Staff The Agency has a staff of 118 professionals, organized in seven business groups. Since the Agency is self-supporting and needs to be nimble, the number and composition of the staff will vary directly based on our business activity. As one measurement, in 2010 the Agency s total staff and noncapital operating expenses were 2.02% of the total value of the real estate that the Agency financed for the year. Page 3

5 Fiscal Data/Continuation Budget, include all Budget Codes Fiscal Data CONTINUATION BUDGET Actual Certified Authorized Recommended Recommended Total Requirements $13,877,996 $12,108,417 $12,108,417 $13,877,996 $13,877,996 Receipts Appropriation $13,877,996 $12,108,417 $12,108,417 $13,877,996 $13,877,996 Less: Recommended Adjustments $ -0- $ -0- $ -0- $(2,081,700) $(2,081,700) Adjusted General Fund Appropriation $13,877,996 $12,108,417 $12,108,417 $11,796,296 $11,796,296 Page 4

6 Programs Funded by the Note: All appropriations to these programs go directly into bricks and mortar, or into assisting homeowners to avoid foreclosure (Home Protection Program). The N.C. Housing Finance Agency pays the cost of operating the programs. North Carolina Housing Trust Fund The Housing Trust Fund was created by the General Assembly in 1987 to increase the supply of affordable and energy-efficient housing. At least 30% of the funds each year must be used for loans to benefit persons with incomes below 30% of median income, and all funds must be loaned to benefit persons below 80% of median income. The Trust Fund is a dynamic collaboration with developers all across the State. Appropriations are used for bricks and mortar only our Agency pays the costs of administration and the program leveraged $6.70 for every $1 of State investment in Since its creation, the Trust Fund has supported over 13,000 jobs in small businesses and has created or preserved housing for over 22,000 households. HOME Program Match The federal HOME Program provides block grants to states to fund affordable housing to benefit persons below 80% of median income. In 2010, North Carolina was eligible to receive $21,658,906 in federal funds, and we drew down the entire amount. Each state must provide a match of at least 25% of the federal funds it draws down each year. Home Protection Program The Home Protection Program was created by the General Assembly in 2004 to provide bridge loans to North Carolina workers who have lost jobs as the result of changing economic conditions to avoid losing their homes to foreclosure. Page 5

7 BUDGET SUMMARY Recommended Recommended Number of Fund Program Name Appropriation Appropriation Positions N.C. Housing Trust Fund $10,000,000 $10,000,000 NA HOME Program Match $1,608,417 $1,608,417 NA Home Protection Program $187,879 $187,879 NA Page 6

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9 Statistics Production of the N.C. Housing Finance Agency All Programs, since ,000 homes financed (new construction, rehab, home purchases) $11.4 billion development 100 counties gained affordable housing All Programs, calendar year ,970 homes built, rehabilitated or financed $405 million of development and home purchases 7,695 jobs for North Carolinians--$254 million in wages $30 million in local and state tax revenues $815 million rippling through the state s economy North Carolina Housing Trust Fund Fund Code Statutory Authority: North Carolina General Statutes, Chapter 122E Organization Chart: No operating expenses are paid from the --all staffing is provided by the Agency. Appropriations are only used for bricks and mortar. Major Responsibilities The Trust Fund addresses the State s toughest housing problems, from domestic violence shelters to homeownership. Its flexibility to meet changing needs is a major strength. The Trust Fund is the State s most effective tool for assisting households at risk of becoming homeless or institutionalized. The Trust Fund appropriation is being used for three loan programs: the Rental Production Program, the Supportive Housing Development Program, and the Statewide Downpayment Assistance Program. The Rental Production Program provides low-interest loans to developers of affordable apartments under the federal Housing Credit Program to increase affordability and to make development possible in rural counties. The apartments are privately owned and managed and are leased to lower-income seniors and working families. The Supportive Housing Development Program provides low-interest loans to developers of housing options for extremely low-income persons with special needs, including developments for homeless veterans, transitional housing for foster care children, permanent housing for persons with mental illness and developmental disabilities, and accessibility modifications for seniors. The Statewide Downpayment Assistance Program provides deferred second-mortgage loans through private lenders to low-income buyers who are purchasing their first home using fixed rate, 30-year mortgages. Some funds will target builder inventory and foreclosed homes to strengthen neighborhood property values. All Housing Trust Fund programs receive at least three applications for every one that can be funded. Page 8

10 CONTINUATION BUDGET: North Carolina Housing Trust Fund Fiscal Data Actual Certified Authorized Recommended Recommended Total Requirements $9,104,166 $10,000,000 $10,000,000 $10,000,000 $10,000,000 Receipts General fund Appropriation $9,104,166 $10,000,000 $10,100,000 $10,000,000 $10,000,000 Less: Recommended Adjustments $ -0- $ -0- $ -0- $ -0- $ -0- Adjusted General Fund Appropriation $9,104,166 $10,000,000 $10,000,000 $10,000,000 $10,000,000 5%/10%/15% reductions : We recommended that no reductions be taken against the Housing Trust Fund Governor s recommended reductions: the Governor recommended no reductions for the Housing Trust Fund. HOME Program Match Fund Code Statutory Authority: Code of Federal Register, and Organization Chart: No operating expenses are paid from the all staffing is provided by the Agency. Major Responsibilities The HOME Program Match provides a portion of the required 25% match that is needed to draw down the full amount of the State sfederal block grant allocation. Our Agency raises the balance of the match largely from bond financing activity, which has declined significantly in the past two years. The state-appropriated HOME Program Match funds are used to provide operating assistance that reduces rents for privately owned apartments that are leased by very low-income persons with disabilities. These are apartments covered by a Targeting Plan, which is an agreement entered into by owners to give priority in occupancy to disabled persons for 10 percent of the units in an apartment community. The plans operate in cooperation with the Department of Health and Human Services and over 400 human service agencies across the state. The program has been recognized with two national awards for its cost-efficiency and effectiveness. Page 9

11 CONTINUATION BUDGET: HOME Program Match Fiscal Data Actual Certified Authorized Recommended Recommended Total Requirements $1,464,329 $1,608,417 $1,608,417 $1,608,417 $1,608,417 Receipts $ -0- $ -0- $ - 0- $ -0- $ -0- Appropriation $1,464,329 $1,608,417 $1,608,417 $1,608,417 $1,608,417 Less: Recommended Adjustments $ -0- $ - 0- $ - 0- $ -0- $ -0- Adjusted General Fund Appropriation $1,464,329 $1,608,417 $1,608,417 $1,608,417 $1,608,417 5%/10%/15% reductions: We recommended that no reductions be taken against the HOME Program Match. Governor s recommended reductions: the Governor recommended no reductions for the HOME Program Match. Home Protection Program Fund Code Statutory Authority: North Carolina General Statutes, Chapter 122A-5.14 Organization Chart: No operating expenses are paid from the all staff is provided by the Agency. Major Responsibilities The Home Protection Program provides bridge loans that make mortgage payments for homeowners who have lost their jobs because of changing economic conditions (plant closings, layoffs), while they re-train for new work or seek new jobs. The Agency decided to expand this work with North Carolina s unemployment rate at 9.8 % in December 2010 and with over 60,000 home foreclosure filings for the year. The average foreclosure results in losses totaling about $79,000 for all the participants (homeowners, lenders, and owners of neighboring properties), as well as a loss of family stability. Page 10

12 Fiscal Data CONTINUATION BUDGET: Home Protection Program Actual Certified Authorized Recommended Recommended Total Requirements $2,731,250 $ $500,000 $2, $2,268,579 Receipts Appropriation $2,731,250 $500,000 $500,000 $2,269,579 $2.269,579 Less: Recommended Adjustments $ -0- $ -0- $ -0- ($2,081,700) ($2,081,700) Adjusted General Fund Appropriation $2,731,250 $500,000 $500,000 $187,879 $187,879 The Home Protection Program was successful, but had limited funding. Consequently, in May 2010 we applied to the U.S. Department of the Treasury for their Hardest Hit Fund. The Hardest Hit Fund was set up to help homeowners who had lost jobs avoid also losing their homes, which is the same purpose as the Home Protection Program. We were approved in September 2010 and we launched the first of three programs statewide in December These three programs have the potential to help 20,000 responsible homeowners over the next 3 to 5 years. The first program replaces the Home Protection Program in making mortgage payments for unemployed workers while they search or re-train for new jobs. Already, over 225 home owners have been approved for these loans. The program relies on a partnership between the Agency, mortgage servicers, and housing counseling agencies. In mid-year, we will offer two smaller loan programs for homeowners who have become re-employed in lower-wage jobs to reduce their mortgage payments to sustainable levels. This new effort is the N.C. Foreclosure Prevention Fund and is offered under the umbrella of the State s Home Protection Program. Leaving a small funding amount in the Home Protection Program enables us to complete cases in the pipeline and use features of the program when it is in the best interests of all parties. 5%/10%/ 15% reductions : We recommended to the Governor that a 15% reduction against the Agency s combined appropriation of $13,877,996 be taken against the Home Protection Program, reducing its recurring appropriation to $187,877. Governor s recommended reductions: the Governor recommended reducing the Home Protection Program by $2,081,700 leaving a balance of $187,877. Page 11