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HomeMy WebLinkAbout1979-03-27 - Minutes - i M MINUTES OF =SIDENTIAL HOUSING FACILITIES 21.) MEETING March 27, 1979 41 A meeting of the Residential Housing Facilities Board was held on '':.Tuesday, March 27, 1979, at 4:00 P.M. , in the Chamber of Commerce meeting room, Fayetteville, Arkansas. PRESENT: Chairman F. H. Martin , Board members John Dominick, Ron Pennington, George Faucette, Jr. , and Dale Christy. ABSENT: None. OTHERS PRESENT: City Clerk Angie Medlock, Mayor David Malone, and members of the press. SIZE OF The chairman called the meeting to order and explained that the purpose of BOND the meeting was to arrive at 1) what size bond issue the City of Fayette- ISSUE ville should have, and 2) to allocate the funds among those institutions who requested them. Chairman Martin stated that they had solicited invitations from lending institutions and asked them to formally enter into an agreement to notify the Board what amount of funds they would like to have under the bond pro- gram. He said the responses they received were as follows: First Federal Savings & Loan of Fayetteville $6,500,000 Heritage Federal Savings & Loan/Fayetteville $5,000.000 Commercial National .Mortgage Company of Little Rock $4,000,000 First National Bank of Fayetteville $4,000,000 Mcllroy Bank,bf Fayetteville $4,000,000 Worthen First Mortgage Company $1,000,000 National Morgage Company of Little Rock $1,000,000 Chairman Martin noted that there would be other expenses incurred such as issuance of the bonds and a reserve fund, in setting up the bond program, and John Rauscher, of Rauscher, Pierce, Refsnes, Inc.; stated that $15,000,000 worth of mortgage money would have a. bond issue of approximately $17,800,000. Mr. Rausher said they would not want to flood the mortgage market with available money and noted that recent mortgage loans in Fayetteville have been $2O,OOO,000-$30,000,000.per year. He said he felt a $15,000,000 mortgage issue would be reasonable for Fayette- ville and pointed out that the more bonds you have the more difficult they would be to sell . George Faucette questioned how important the home loan history for the companies applying for funds would be and Mr. Rauscher said he felt as long as people know where the funds are, the funds will be used, but he felt somehistorical lending has to enter into the decision-making. Dale Christy asked Mr. Rauscher if he felt there should be a minimum allocation and Rauscher said he felt each participant should receive a minimum $500,000. He said any smaller allocation would not be profitable Gnw for the lending institution, or it would not be economical to set the computer to handle a smaller amount. George Faucette, Jr. moved that $15,000,000 in mortgage funds be allowedA:A'CRflFtL1 E1 Dale Christy seconded the motion, which passed unanimously. 6A -�LI °�g79 REEL Residential Housing cilities Board March 27, 1979 Page 2 A discussion ensued concerning allocation of the $15,000,000 in mortgage funds. George Faucette noted that Commercial National had loaned less than $1,000,000 in Fayetteville during the last year and ALLOCATION National Mortgage did virtually nothing in Fayetteville last year. He OF noted, however, that National Mortgage is a fairly new institution. FUNDS George Faucette said that he felt all lending institutions which applied for funds should be given at least the minimum amount. He stated, further, that he felt National Mortgage, based upon their history, should be given the minimum. Ron Pennington stated that they should also look at the requirements for VA and FHA loans. George Faucette commented that the state bond issue is coming out in a few weeks and will probably be at a lesser interest rate than the city bond issue, so the local banks will probably not be making very many VA or FHA loans. He said the Little Rock banks may be using their money for VA and FHA loans. John Rauscher pointed out that the VA and FHA money accounts for approximately 15% of the loan market in the Fayetteville area . After further discussion, the board agreed to allow approximately $2,000,000 for the Little Rock banks and agreed to the following allocation: Commercial National $750,000 Worthen First Mortgage $750,000 National Mortgage $500,000-. Dale Christy said he felt the Board should lessen the amount requested by each institution rather than give any institution the entire amount requested. George Faucette noted that the savings and loan institutions "have been the backbone of residential construction" and pointed out that the banks have another part in the bond issue as trustees and paying agents. Chairman Martin commented that First National Bank of Fayette- ville is the trustee for the bond issue. Following discussion, Dale Christy moved the following allocation be authorized: First Federal Savings and Loan $5,500,000 Heritage Savings and Loan $4,000,000 First National Bank $2,000,000 Mcllroy Bank $1,500,000 Commercial National $ 750,000 Worthen First Mortgage $ 750,000 National Mortgage $ 500,000 John Dominick seconded the motion. Dale Christy noted that the proposed allocation would cut First Federal by $1,000,000, Heritage by $1,000,000, First National Bank by $2,000,000, and Mcllroy Bank by $500,000. The motion passed unanimously. Dale Christy pointed out also that the biggest cut is against the bank which is also the trustee of the bonds. Residential Housin acilities Board March 27, 1979 Page 3 George Faucette, Jr. stated that the borrowers will be required to obtain title insurance and suggested the Board try to get a quantity rate from TITLE the two local abstractors. Chairman Martin noted that title insurance is INSURANCE a requirement of the rating agency. Discussion ensued concerning whether it would be legal to mandate to the borrowers that they must use a certain abstract company or that they must obtain title insurance at a certain rate. Dale Christy was concerned that since this is a borrower cost, the Board should not try to mandate where they get the insurance. Chairman Martin said he had discussed this with John Rauscher who did not feel there would be a problem in requiring the borrowers to get title insurance at a certain rate, if they could be assured of that rate being provided by local companies. Mr. Rauscher suggested they negotiate with the twolocal abstract companies to try to get a lower rate and let the borrowers know title insurance is available at that rate. He said the only requirement of the title insurance is that it be in the form of the American Land Title Association, which is basically a standard form. In response to Christy'.s concerns, Chairman Martin said he felt the Board should get involved in the title insurance, since the Board is committed to getting the lowest possible home loans available to buyers. He said one of the main problems in buying a home is the down payment, which for many people may be more of a problem than the monthly payment. He said he felt part of the Board's task is to determine in what ways they can save the borrowers money. John Rauscher said consideration should also be given to how quickly a company could provide the title insurance. David Malone suggested that the Board suggest to the local lenders that they take bids on title insur- ance and possibly different institutions would receive different bids. He said the lenders could then suggest to the borrowers that they get title insurance from a certain company who would be willing to provide a lower rate. Dale Christy suggested the Board check with the abstract companies to see if the group rates would provide a substantial savings and Chairman Martin stated that one of the abstract companies has already indicated to George Faucette, Jr. that it would be a substantial savings. Chairman Martin then appointed George Faucette, Jr. and Ron Pennington to negotiate with the abstract companies on a group rate for title insurance. John Rauscher said the underwriters had contacted the two largest mortgage INSURANCEpool and special hazard insurance policy providers, Verex and MGIC, and they recommend the bid of MGIC, 142 basis points , be taken because 1) it is the.low bid, and 2) MGIC is the largest and most well-known company in this field. He noted that this type of insurance is a requirement for the bond rating and will be paid in the cost of the mortgage. He said they have talked with MGIC and they are ready to proceed with the insurance, which will be issued to the trustee on the Board's behalf. Dale Christy, seconded by George Faucette, Jr. , moved the recommendation be approved. The motion passed unanimously. r - - y 4, u ��' Residential Housir acilities Meeting March 27, 1979 Page 4 John Rauscher stated that they hope to have the final figures on the bond issue to the rating agency by Friday of this week, and should be in a position to start selling bonds within the next week. He said they are anticipating a bond closing approximately April 17. He noted that there would need to be another meeting of the Board to sign the contract with the underwriters. George Faucette questioned when lenders could start taking loan applications and Mr. Rauscher stated that he felt they could start taking applications in a few weeks , with the applications subject to final availability of funds. Chairman Martin noted that a special meeting of the City Board of Directors has been called for Thursday, March 29, to get approval and so they can proceed with making application for a final rating. Martin said the City Board could make their approval contingent upon a certain interest rate or bond rati°ng if they choose to do so. Rauscher stated that one requirement is that within five days the Residential Housing Board will send out a letter to the various lenders notifying them that they have been accepted into the program and notifying them of their allocation and within five days, they would send back a commitment fee check and signed legal document. Rauscher said he would have these letters typed for the chairman of the board to sign.. George Faucette, seconded by Dale Christy, moved the chairman be authorized to sign these letters to the institutions. The motion passed unanimously. There being no further business for_the Board`s consideration, the Chairman declared the meeting adjourned at 5:20 P.M. i