Utah Housing Corporation

Minutes of May 10, 2013

UTAH HOUSING CORPORATION

Minutes of Special Meeting

May 10, 2013

PARTICIPANTS
Trustees:
Douglas DeFries, Chair
Kay Ashton, Vice Chair
Mark Cohen, Trustee
Lucy Delgadillo, TrusteeRichard Ellis, Trustee
Ed Leary, Trustee
Robert Whatcott, Trustee / Staff:
Grant Whitaker, UHC President and CEO
Cleon Butterfield, UHC Senior Vice President and CFO
Jonathan Hanks, UHC Senior Vice President and COO
Guests:
Fred Olsen, Ballard Spahr, LLP
Preston Olsen, Ballard Spahr LLP
Ryan Warburton, Ballard Spahr LLP
Stan Dirks, Orrick Herrington & Sutcliffe
Randy Hynote, Wells Fargo

Trustees of the Utah Housing Corporation (UHC or Utah Housing) and UHC staff met in a SpecialMeeting on May10, 2013, at 7:30 AM MST via teleconference and in person at Red Mountain Resort, 1275 E. Red Mountain Circle, Ivins, Utah.

The meeting was called to order by Vice Chair, Kay Ashton. The Vice Chair then determined for the record that a quorum of Trustees was present, as follows:

Douglas DeFries, Chair(via teleconference)

Kay Ashton, Vice Chair

Mark Cohen, Trustee

Lucy Delgadillo, Trustee(via teleconference)

Richard Ellis, Trustee

Ed Leary, Trustee(via teleconference)

Robert Whatcott, Trustee

The Vice Chair excused the following Trustees:

Jon Pierpont, Trustee

Bruce Tucker, Trustee

The President then reported that the Notice of the Special Meeting was given to all Trustees of Utah Housing and that material addressing the agenda items had been distributed to the Trustees in advance of the meeting.

The President then acknowledged a Verification of Giving Notice, evidencing the giving of not less than 24 hours public notice of the date, time, place and summary of agenda of the Utah Housing Corporation Special Meeting in compliance with the requirements of the Open and Public Meetings Act, Section 52-4-202, Utah Code Annotated 1953, as amended; together with the form of Notice of Special Meeting referred to therein; and also the required public notice of the 2013 Annual Meeting Schedule of Utah Housing will be entered into the Minutes.

The Vice Chair called for the first agenda item.

Approval of the Minutes of April 25, 2013,RegularMeeting

The President had provided each Trustee with a copy of the written minutes of the April 25, 2013, Regular Meeting, and the Trustees acknowledged they had sufficient time to review these minutes. Mr. Ashton asked for any discussion on the April 25, 2013,minutes as presented.

Following any discussion, the Vice Chair called for a motion.

MOTION: / TO APPROVE THE WRITTEN MINUTES OF THE REGULARMEETING OF APRIL 25, 2013.
Made by: / Robert Whatcott
Seconded by: / Richard Ellis
Vote: / Unanimous approval

The Vice Chair called for the next agenda item.

Resolution 2013-12Approving the issuance and sale of Multifamily Mortgage Bonds, 2013 Series A Canyon Crossing Apartments, in a total aggregate principal amount not to exceed $21,000,000

RESOLUTION 2013-12

A RESOLUTION OF UTAH HOUSING CORPORATION (THE “CORPORATION”) AUTHORIZING THE ISSUANCE AND SALE BY THE CORPORATION OF ITS MULTIFAMILY HOUSING REVENUE BONDS (CANYON CROSSING AT RIVERWALK PROJECT) SERIES 2013A IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $21,000,000 TO FINANCE THE ACQUISITION, CONSTRUCTION AND EQUIPPING OF A MULTIFAMILY RENTAL HOUSING DEVELOPMENT; AUTHORIZING THE EXECUTION BY THE CORPORATION OF A TRUST INDENTURE, A BOND PURCHASE AGREEMENT, AN OFFICIAL STATEMENT, A LOAN AGREEMENT, A TAX REGULATORY AGREEMENT AND OTHER DOCUMENTS REQUIRED IN CONNECTION THEREWITH; AND AUTHORIZING THE TAKING OF ALL OTHER ACTIONS NECESSARY TO THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS RESOLUTION; AND RELATED MATTERS.

Mr. Ashton introduced the resolution recommending that the Board adopt a motion authorizing the issuance and sale of not to exceed $21,000,000 of the above-referenced Multifamily Housing Mortgage Revenue Bonds. Mr. Ashton asked Grant Whitaker to begin discussion.

Mr. Whitaker began by saying that Housing Plus is a Utah nonprofit corporation and they obtained an allocation of private activity bonds at the December 2012 UHC Board Meeting. This is the first step in enabling UHC to issue a series of bonds to provide financing for the project debt. At our February 2013 UHC Board Meeting, the Board allocated 4% tax credits to the project and approved a reimbursement resolution. Those are two other steps on the way to getting this project going. Today, this resolution authorizes the actual issuance of up to $21 million of tax exempt bonds that will fund a mortgage loan. The bonds will enable the project to utilize the tax credits and obtain the equity investment of approximately $13 million. That tax credit equity will reduce the amount of mortgage needed to complete the project, allowing lower rents to support its smaller loan.

Mr. Whitaker went on to say that the bonds will be publicly offered and issued as conduit debt with UHC having no obligation to pay the bonds. The bonds will be repaid from revenues received by the project and are expected to be outstanding for a fairly short period of time. It is expected that the bond proceeds will be drawn down during construction and repaid with a standard taxable construction loan that will convert into the long term debt. Taxable debt that the developer can get on the project is going to produce a lower long term rate than the tax exempt bonds, but it is necessary to issue the tax exempt bonds, funding at least 50% of the project initially, for them to be able to get the 4% tax credits.

Mr. Whitaker explained that UHC hasnot issued bonds knowing they would be redeemed almost immediately before, although there have been a few projects payoff early for the same reasons. Although there is no risk in having issued the bonds, the redemption does take them off of theUHC books. However, the bonds are notesin the financials rather than as an entry on the balance sheet. Mr. Whitaker indicated that Mr. Cohen is involved in the project and asked him if he would explain more about the project and its current status.

Mr. Cohen stated that there are three Board Members from Housing Plus, of which he is one, and that his is also the Executive Director. The Utah Center for Affordable Housing received an award through the state for neighborhood stabilization. The land was originally purchased with monies from that award. Utah Center for Affordable Housing got together with Housing Plus; they are sister nonprofits; and while Utah Center for Affordable Housing hasa very large board, it is not very easy for them to be an active developer. Housing Plus was set-up to be more of an active developer with three board members who can make decisions fairly easily. The land is being put in at no cost to the project from theneighborhood stabilization money, as is the developer fee.

Mr. Cohen continued by saying that the project cost is at about $37 million, of which only $20 million is debt, and at low interest rates it is going to be a very nice project with affordable rents. It is being built as a geothermal, family oriented, project with 36 two bedroom units, 108 three bedroom units, and 36 four bedroom- three bath units. There are no four bedroom - three bath units in the state of Utah being offered for lease at this time for affordable housing. There will be community gardens and a big play area for kids.

Mr. Cohen stated further that the project is in Midvale at 7200 South and 700 West. There is a grocery store right across the street and the TRAX line half a mile away, so it is going to be a great benefit to the community. Mr. Cohen indicated that the project underwriting is in process at HUD for the mortgage insurance. HUD has received their application and they are working with them on their time frame. Theyare projecting closing inAugust. Because Mr. Cohen is both on the Board and Executive Director, he said he would abstain from the vote for this Resolution.

Mr. Whitaker concluded by stating that the only other thing that needs to be done by Utah Housing before the bonds are issued is that a public hearing will need to be heldbefore the bonds are actually closed. UHC generally does that in the offices of Bond Counsel, Ballard Spahr. . Following that the public hearing, a certificate will be submitted to the Governor’s Office for his approval as required under federal laws.

Mr. Ashton then asked if there were any additional comments or discussion from the Board. Following any additional discussion, Mr. Ashton asked for a motion to adopt the resolution.

MOTION: / TO APPROVE RESOLUTION 2013-12 OF UTAH HOUSING CORPORATION APPROVING THE ISSUANCE AND SALE OF MULTIFAMILY MORTGAGE BONDS, 2013 SERIES A (CANYON CROSSING AT RIVERWALK APARTMENT)S IN A TOTAL AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $21,000,000.
Made by: / Richard Ellis
Seconded by: / Robert Whatcott

Mr. Ashton asked for disclosures of potential conflicts before the vote was taken. Each Trustee was called on and they responded as follows:

Douglas DeFries
Kay R. Ashton
Mark Cohen
Lucy Delgadillo
Richard Ellis
Ed Leary
Robert Whatcott / Yes, as filed with UHC.
Yes, as filed with UHC.
Yes, as filed with UHC.
No interest to disclose.
No interest to disclose.
No interest to disclose.
No interest to disclose.

The President confirmed that each of those Trustees who so indicated such interest had a Disclosure of Potential Interest statement on file with Utah Housing that it includes current pertinent information regarding his or her potential interests and that those statements are available for inspection and would be incorporated into the minutes by reference.

Following further discussion, Mr. Ashton called for a vote in this matter:

Vote: / Approved Unanimously Among Those Who Voted *

* Mr. Cohen abstained from voting stating he has a potential conflict of interest as previously described.

The Vice Chair called for the next agenda item.

Resolution 2013-13Authorizing the issuance of not to exceed $100,000,000 GNMA MBS

RESOLUTION 2013-13

A RESOLUTION OF UTAH HOUSING CORPORATION AUTHORIZING THE PURCHASE OF UP TO $100,000,000 OF SINGLE FAMILY MORTGAGE LOANS, THE EXCHANGE OF SUCH MORTGAGE LOANS FOR GNMA MORTGAGE-BACKED SECURITIES, THE SALE OF SUCH GNMA MORTGAGE-BACKED SECURITIES AND AUTHORIZING ALL DOCUMENTS REQUIRED IN CONNECTION THEREWITH; AND AUTHORIZING THE TAKING OF ALL OTHER ACTIONS NECESSARY TO THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THIS RESOLUTION AND RELATED MATTERS.

Mr. Ashton introduced the resolution recommending that the Board adopt a motion authorizing UHC to issue up to an additional $100,000,000 in GNMA Mortgage Backed Securities (MBS) for the purpose of enabling UHC to purchase single family loans. Mr. Ashton asked Grant Whitaker to begin discussion.

Mr. Whitaker began by saying that the Board most recently approved $100 million at the February 28, 2013, meeting. When UHC first started doing the GNMA transactions, increments of $25 million were being requested. As this program has taken off, this has been moved to $50 million, then $75 million, and then $100 million. We are doing that so it isnot necessary for this approval to happen quite so often. The money is moving rapidly. Mr. Whitaker illustrated that he just got an email from UHC’s Vice President of Mortgage Banking thanking staff for their efforts in processing $12 million last week. These are mortgages that had come in probably 60 days ago. During the real peak season, those numbers will only increase.

Mr. Whitaker went on to say that inthe first part of April of last year, UHC announced the two new loan programs, SCORE and HomeAgain. During the month of April last year, UHC purchased 156 loans for $21.7 million. This year, we purchased more than double at 287 loans for $44.1 million. The fact that the $100 million is needed is because nearly all of thatwhich was approved in February has been committed. The GNMA TBA’s still remain the best execution, so it is being used quickly. The GNMA pool amounts that have been committed this year of $202 million, just in the first four months of the year, equals nearly the full amount that was done last year and equal to the amount that was done in 2011.

Mr. Whitaker said that UHC is also selling taxable bonds issued through Zions Bank. Everything from that source has been funded with mortgages. A $22 million issue was last sold and it is closing in the next few weeks. In 2012, UHC used some taxable bonds and about $130 million of the CRA pool to fund the loans, but the TBAs are continuing to produce good pricingand substantial amounts of revenue. The average premium this year has been 6.2% and the overall since this began in 2009, is just over 4%.

Mr. Whitaker explained that about $11.5 million in earnings,so far this year,have been earned from the TBA premiums. That revenue is important to UHC because it replaces the spreads on loans funded with bond issues and the interest earnings that have both been lower since the beginning of the recession. Wells Fargo Securities has also been added on as one of the broker/dealers who bid on the TBAs. They successfully bid the first couple of transactions with UHC last week. Bids are coming in from each of the sixbroker/dealers on a weekly or more frequent basis and the best pricing is being taken from those.

Mr. Whitaker concluded by stating that UHC is seeing 17% of the loans in the SCORE program, 20% in HomeAgain, and 63% in FirstHome. That has been fairly consistent. Right around 60-66% of the loan program is going to FirstHome. That is principally the first time homebuyers and substantially the same people being helped the entire 30 plus years UHC has been in business.

Mr. Ashton then asked if there were any additional comments or discussion from the Board, and following any additional discussion asked for a motion to adopt the resolution.

MOTION: / TO APPROVE RESOLUTION 2013-13 OF UTAH HOUSING CORPORATION AUTHORIZINGTHE ISSUANCE OF NOT TO EXCEED $100,000,000 GNMA MBS.
Made by: / Mark Cohen
Seconded by: / Richard Ellis

Mr. Ashton asked for disclosures of potential conflicts before the vote was taken. Each Trustee was called on and they responded as follows:

Following further discussion, Mr. Ashton called for a vote in this matter:

Vote: / Approved Unanimously

The Vice Chair called for the next agenda item.

Resolution 2013-14Approving Changes to Single Family Program

RESOLUTION 2013-14

A RESOLUTION OF UTAH HOUSING CORPORATION AUTHORIZING CHANGES TO ITS SINGLE FAMILY MORTGAGE PROGRAM, INCLUDING ADJUSTMENTS TO THE INCOME AND ACQUISITION COST LIMITS, AND AUTHORIZING THE TAKING OF ALL OTHER ACTIONS NECESSARY TO IMPLEMENT CHANGES CONTEMPLATED BY THIS RESOLUTION AND RELATED MATTERS.

Mr. Ashton introduced the resolution recommending that the Board adopt a motion authorizing changes to Utah Housing’s single family mortgage loan program by approving the addition of a conventional, no mortgage insurance loan to expand Utah Housing’s ability to serve low and moderate income households for existing and first time homebuyers. Mr. Ashton asked Grant Whitaker to begin discussion.

Mr. Whitaker began by saying that UHC has done exclusively FHA insured mortgage loans since 1986. Back in the late 70’s and early 80’s, UHC ventured into doing some privately insured mortgage loans and ran into some significant difficulties with the Private Mortgage Insurance (PMI). As we went through a recessionary period in the early 80’s, when we foreclosed on properties, we would have to sell them ourselves. We had a staff of about four people in the organization to handle the sale of the properties and filing of claims with the PMIs. There were 26 realtors under contract with us throughout the state. We had, at one point, 283 foreclosed properties that we were marketing.

Mr. Whitaker went on to say that therewere other issues with the PMI’s,as they indicated that when they approved a loan for insurance they didnot underwrite it. They began doing the underwriting of the loans post default. They would contact borrowers, find out information, such as if they had a gift for their down payment. The PMI would ask questions such as did the home buyer ever intend to pay back the gift and if the answer was yes the PMI would say that was a loan and they would deny the claim.

Mr. Whitaker explained further that UHChad to litigate with one of the larger companies and,even after receiving a large settlement, had to write off a lot of money as a result of the PMI style of paying claims. Thus, in 1986, it was determined that there would be no more privately insured mortgage loans. It has been a good decision because many of our sister housing finance agencies who have portfolios of privately insured loans have been unable to obtain liquidity or have had issues maintaining bond ratings.