The New York Housing Conference supports S.5396/A.7641. This legislation, which has already passed both houses of the State Legislature, will shortly be before the Governor for executive action. To offer your support send an email with an attached letter of support (on letterhead) to email@example.com . LIST THE BILL NUMBER IN THE SUBJECT AREA OF THE EMAIL.
The legislation, which was sponsored in the Senate by Senators Libous and Young and in the Assembly by Assemblyman Bing, would permit the NYS Housing Finance Agency (HFA) and NYC Housing Development Corporation (HDC) to issue unrated bonds through private placement.
Currently, in order to use tax-exempt bond financing, long term credit enhancement and variable rate bond liquidity must be provided. To date, Fannie Mae and Freddie Mac have been the primary providers of this credit enhancement and liquidity.
Under this newly proposed financing structure, HFA and HDC would be permitted to also issue unrated bonds which would be purchased by a financial institution who would assume the real estate credit risk. By amending the powers of HFA and HDC as set forth in this bill, both HFA and HDC would have the flexibility to issue bonds in accordance with this structure which would enable the developers of these type of projects to have an additional financing alternative without imposing credit risks on HFA and HDC. And should Fannie Mae or Freddie Mac no longer provide bond credit enhancements, this structure may provide the only viable financing option.
Loans financed with proceeds of unrated HFA and HDC bonds issued for private placement offer cost efficiencies to their borrowers. Without the involvement of rating agencies, outside underwriters, and credit enhancers, private placement transactions can be completed at a substantially lower cost to the borrower. These savings are particularly important to smaller 100% affordable projects for which the cost of issuance of a public offering are often prohibitively expensive.
Additionally, by continuing to find vehicles to encourage the development of housing, this method of financing will stimulate job creation throughout the State.
The bill text can be found at http://open.nysenate.gov/legislation/bill/S5396-2011 or by clicking the links above.