HB 6494 — AN ACT CONCERNING THE DOWN PAYMENT ASSISTANCE PROGRAM, AFFORDABILITY INCENTIVE ZONES AND BONDS OF BOARD MEMBERS AND OTHER EMPLOYEES OF THE CONNECTICUT HOUSING FINANCE AUTHORITY.

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711 inclusion of closing costs in such a case but do not require it.

Second, the bill allows CHFA to establish affordability incentive zones under DAP with alternative lending guidelines, such as a higher total loan amount than the $20,000 currently permitted per homebuyer.

To the extent that CHFA establishes such zones with more generous terms and municipalities participate, CHFA would loan more funds per year and draw down the pool of existing capital more quickly.

DAP is partially funded through General Obligation (GO) bond funds.

As of March 1, 2021, unallocated bond balance available to the program is $9 million.

The bill does not change GO bond authorizations relevant to the program.

Future General Fund debt service costs may be incurred sooner underthebillto thedegreethat it causesauthorizedGO bond funds to be expended more rapidly than they otherwise would have been.

The bill also permits CHFA to procure liability insurance to cover its board of directors, rather than executing surety bonds or a blanket position bond.

This change is anticipated to result in savings to CHFA of approximately $3,000 per year.

Currently, CHFA purchases both the minimum surety bond required under current law and a more comprehensive liability insurance policy.

Under the bill CHFA could eliminate most, if not all, of the $3,650 annual cost for the surety bond by exclusively relying on more cost-effective insurance.

House "A" adds the provision permitting CHFA to rely solely on liability insurance, which is anticipated to result in a savings of approximately $3,000 per year.

The Out Years The annualized ongoing fiscal impact identified above would continue into the future subject to CHFA lending guidelines and the terms of any bonds issued.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely Assembly or either chamber thereof for any purpose.

In general, fiscal impacts are based upon a variety ofneral sHB6494 / File No.

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711 informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

Sources:

Connecticut Housing Finance Authority sHB6494 / File No.

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711 OLR Bill Analysis sHB 6494 (as amended by House "A")* AN ACT CONCERNING THE DOWN PAYMENT ASSISTANCE PROGRAM AND AFFORDABILITY INCENTIVE ZONES.

SUMMARY This bill (1) requires the Connecticut Housing Finance Authority (CHFA), by October 1, 2021, to establish certain guidelines for issuing loans under its homeownership loan program (also called the “Downpayment Assistance Program”)and(2)allowsCHFA to establish affordability incentive zones under the program to incentivize home purchases in municipalities that are subject to the affordable housing appeals procedure (see BACKGROUND).

The bill requires the guidelines to allow CHFA, subject to existing limitations, to provide loans to borrowers with a debt-to-income ratio up to the highest ratio allowed for residential mortgage loans by the Federal Housing Administration, Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac).

The guidelines must also allow CHFA to consider (1) an application regardless of the borrower’s credit score and (2) nontraditional credit references, such as proof of employment or rental and utility payments.

The bill requires loans under the program to include customary and reasonable closing costs if the (1) borrower requests it and (2) loan amount, including the closing costs, does not exceed the maximum allowed loan amount under CHFA’s procedures and guidelines.

By law and excluding loans for condominium conversions, the total loan amount generally cannot exceed 25% of the home’s acquisition cost or value after rehabilitation, if greater.

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711 The bill also allows the chairperson of CHFA’s board of directors to procure an insurance product in lieu of a blanket bond to cover CHFA’s executive director, employees, and board members.

Lastly, the bill makes technical and conforming changes.

*House Amendment “A” adds the provision allowing the CHFA board of directors’ chairperson to obtain an equivalent insurance product in lieu of a blanket position bond.

EFFECTIVE DATE:

Upon passage, except the provision concerning insurance product coverage is effective July 1, 2021.

AFFORDABILITY INCENTIVE ZONES The bill authorizes CHFA to expand access to the homeownership loan program in affordability incentive zones by using different lending guidelinesthanthosethatareusedforbuyinghomesinotherareas.This may include (1) increasing eligibility limits for a home’s purchase price or the maximum loan amount or (2) decreasing the loan’s interest rate.

If CHFA decides to establish zones, the bill allows a municipality that is subject to the affordable housing appeals procedure and not already designated as an affordability incentive zone to ask CHFA, in writing, to be considered one.

At its discretion, CHFA may grant a request after considering available program funding.

CHFA INSURANCE PRODUCT COVERAGE Current law requires each CHFA board member to execute an individual surety bond for at least $50,000, and the executive director to execute one for $100,000, unless the board’s chair executes a blanket bond covering all the authority’s employees, board members, and the executive director.

The bill allows the chair to procure an equivalent insurance product in lieu of a blanket bond.

Similar to the surety bonds, the insurance product must be (1) conditioned upon the faithful performance of the duties of the offices covered, (2) issued by a company (in this case, an insurer) authorized to sHB6494 / File No.

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711 do business in Connecticut, (3) paid for by CHFA, and (4) filed with the office of the Secretary of the State.

The bill also eliminates a requirement that the attorney general approve the bonds.

BACKGROUND Related Bill SB 876 (File 100), as favorably reported by the Housing Committee, also allows CHFA’s board of directors’ chairperson to obtain an equivalent insurance product in lieu of a blanket bond.

Affordable Housing By law, the Department of Housing (DOH) annually publishes a list of housing stock in each municipality that qualifies as affordable housing under the Affordable Housing Land Use Appeals Procedure (CGS §§ 8-30g(k) & 8-37qqq(a)(2)(D)).

Under CGS § 8-30g, municipalities where at least 10% of housing is deemed affordable are generally exempt from the law’s appeals procedure.

Affordable housing stock that counts toward the 10% includes:

(1) certain types of government-assisted housing, (2) housing currently financed by CHFA mortgages, (3) housing subject to deeds and conditions restricting its sale or rental to low- and moderate-income people, and (4) mobile homes or accessory apartments subject to certain deed restrictions.

Homeownership Loan Program CHFA administers the Downpayment Assistance Program to provide, based on financial need, a low-interest loan or deferred loan to help purchase a home or rehabilitate a one-to-four-family home, so long astheloanrecipientlivesinoneoftheunits.Theprogramusesresources allocated by the State Bond Commission to DOH.

COMMITTEE ACTION Banking Committee Joint Favorable Substitute Yea 18 Nay 0 (03/17/2021) sHB6494 / File No.

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711 Housing Committee Joint Favorable Yea 15 Nay 0 (04/29/2021) sHB6494 / File No.

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