The highlights of this month's Minnesota Housing board meeting included a change in the membership of the Board of Directors, a formal report on the agency's performance, and approval of funding to rehabilitate Brooklyn Center's Shingle Creek development. Shingle Creek was recently sold to non-profit developer Aeon for $1, after Rep. Paulsen encouraged HUD to block the sale of the troubled development to out-of-state landlords notorious for neglect of properties.
Board Member Barb Sanderson to Leave Board
Commissioner Tingerthal mentioned that recently it was discovered that Minnesota Housing was out of compliance with statute due to the composition of its board. By law, the board may include no more than one public member from each of the state's development areas, but Board Members Barbara Sanderson and Joe Johnson both come from the northeastern area of the state. When Sanderson completes her term in January 2012, she will not be reappointed. Tingerthal expressed her sincere regret that Sanderson will not be able to continue as a board member, and thanked Sanderson for her many contributions. (Editor's note: Barbara Sanderson will especially be missed for her important perspective in bringing the concerns of rural areas of the state to the attention of the agency.)
Outlook and Performance
Staff reviewed highlights from the agency's Strategic Plan and 2010-2011 Affordable Housing Plan Final Progress Report. Overall, the report was very positive. Many of the actual production, program, and financial goals came close to their targets. Research Director John Patterson highlighted a few points:
- The Agency committed 96% of available funds during the 2-year AHP period, exceeding the goal of 95%.
- For ending long term homelessness, the agency far exceeded its goal for housing opportunities funded over two years: 808 opportunities were funded compared to a goal of 490.
- For emerging market homeownership, 31% of loans in 2010 and 23% of loans in 2011 were made to households considered to be "emerging markets" (non-white and Latino) compared to only 11% in the overall market.
- Minnesota Housing ranked 1st nationally in the percentage of single family first mortgage borrowers with incomes at or below 50% of the area median, and 4th nationally in the percentage of housing tax credits units that are affordable to households at or below 30% of AMI.
The board congratulated the staff on the agency's good work.
Board member Sanderson asked specifically about low commitment levels for manufactured housing in the report, given the extremely poor condition of this housing in many areas. Staff reported that for the manufactured housing demo program, there were only two transactions. Tingerthal added that ROC USA, which provides financing and technical assistance for manufactured housing projects, recently made some procedural changes that may help increase usage of the demo program, based in part on recent feedback from the agency. Board member Finch requested a follow up analysis of the demo program at a future meeting.
In other performance and outlook news unrelated to the formal report, Tingerthal mentioned that the agency's good credit rating has been reaffirmed. Moody's will be issuing a new AA+ rating to the agency; Standard & Poor's rating is forthcoming.
However, the agency did take a financial loss in the most recent reporting period due to defaults on single family loans. In response, the research department has created a map of loans at greatest risk, which has helped staff devise a strategy to target 200 to 300 loans in this high risk group. Plans will be finalized in the coming weeks and the new strategy will be launched in January.
Also, staff noted that the average loss from sale of REO properties continues to rise. This may indicate that the bottom has not yet been reached in housing market.
Bonding Proposal for Housing Submitted to Governor
The agency's proposal for bonding for housing the upcoming legislative session has been submitted to Governor Dayton. The proposal includes $40 million in bonding, including $10 million for public housing and $30 million in infrastructure bonds. Tingerthal added that activities selected emphasize construction work to help create jobs. She also made an appeal to the board to advocate to the governor for inclusion of the full $40 million. This level of bonding would be a big win for housing, given the rumors that the entire proposed bonding bill will amount to $500 million. In response to a question, the Commissioner added that the agency is also updating its report on jobs generated by investment in housing to aid in advocacy this session.
Approval of Funding for Shingle Creek Towers
In addition to approval of funds for several other multi-family projects, the board approved $1.6 million in loans and grants for the 122 unit Shingle Creek Towers in Brooklyn Center. This project has not been unknown to Minnesota Housing. In 2002, in a financial restructuring it was awarded tax credits and over $7 million including a $5.7 million loan from HUD. The HUD loan went into default in 2009 and the property foreclosed in 2010. The sale of the property was initially set to go to the highest bidder, an out-of-state developer with a poor reputation for managing housing. After staff intervention (and action by Rep. Paulsen), HUD did not approve the sale, and restricted the sale to non-profit developers. Aeon was then awarded the property for $1. At this point, the property is not considered to be sustainable without assistance. While the board did approve funding, it requested an update in the coming months given the property's troubled history.
New Cash-to-Close Loan Type Forthcoming
Fannie Mae will soon be launching a program similar to the Affordable Advantage loan program, which is designed to help borrowers to amass cash to close on their home purchase loans. The Affordable Advantage loan program may sound familiar, as the agency adopted guidelines for this program back in 2010. However, Fannie Mae had since withdrawn this product. With Fannie Mae concerned about such a high concentration of originated loans being FHA insured, it is considering which other entities would be appropriate for sharing risk. State housing finance agencies are good candidates, and the new program is designed with them in mind. Part of the decision to introduce this similar program is good performance of the Affordable Advantage loans previously originated back in 2010, including 122 loans by Minnesota Housing.
