Montana Board of Housing Annual Report A part of

Montana Board of Housing FY2007 Annual Report A part of The Department of Commerce Vision To provide decent, safe, sanitary and affordable housing for lower-income individuals and families in the state of Montana. We reach our vision by issuing tax-exempt bonds, administering federal housing programs and working in partnership with many other housing providers throughout Montana. Internal Revenue Service (IRS) - provides authority for bond issuance and allocation of tax credits & Montana cities (Billings, Bozeman, Bridger, Butte, Glendive, Great Falls, Havre, Helena, Kalispell, Laurel, Lewistown, Livingston, Malta, Miles City, Missoula, Red Lodge, Ronan, Shelby, Terry) & Montana counties (Lake, Missoula, Ravalli, Richland, Silver Bow) & Montana public housing authorities & Montana tribal housing organizations & U.S. Department of Agriculture Rural Development (USDA/RD) & U.S. Department of Housing and Urban Development (HUD) The Montana Board of Housing (MBOH) was created by the Montana Housing Act of 1975. It is an agency of the state and operates within the Montana Department of Commerce for administrative purposes. Under the Housing Act, the MBOH does not receive appropriations from the state’s general fund. Substantially all of the funds for MBOH operations and programs are provided by the private sector through the sale of tax-exempt bonds. Governmental Entities: Department of Veterans Affairs (VA) & Federal Housing Administration (FHA) & We are proud to call the following groups, organizations, and entities our partners. originate loans for the MBOH & Brokers that sell bonds issued by the MBOH & Builders that construct homes for Montanans with MBOH financing & Developers and contractors that build multifamily complexes & Fannie Mae & Lenders and realtors that match homebuyers with MBOH financing Private Enterprise: Banks and real estate lenders that Nonprofit Housing Organizations: A and S Enterprise Community & AWARE & Bear Paw Development & Consumer Credit Counseling Services & Elkhorn Affordable Housing Corporation & Glacier Affordable Housing Foundation & Habitat for Humanity & Helena Area Housing Task Force & homeWORD & Human Resource Councils & Lake County CHDO & Montana Home Choice Coalition & Montana HomeOwnership Network, Inc. & National Affordable Housing Network & Neighborhood Housing Services & Western Montana Mental Health Center & North Missoula Community Development Corporation Montana Board of Housing 301 South Park Avenue, Suite 240 P. O. Box 200528 Helena, Montana 59620-0528 Phone: (406) 841-2840 Fax: (406) 841-2841 TDD: (406) 841-2702 Visit the website: housing.mt.gov Message D ear Friends: from the governor I am proud to recognize the Montana Board of Housing (MBOH) as a cornerstone of economic development for Montana; the economic benefits it provides are substantial. Access to affordable housing is one of my priorities and is a key issue considered by businesses looking at expansion or relocation to Montana. Affordable housing enhances the quality of life in our communities by creating a business climate where companies can grow and an environment in which families can prosper. The MBOH has worked hard for over 30 years to provide low-cost, flexible financing, and has to date provided housing for nearly 45,000 Montana families. First-time homebuyers, single parents, senior citizens and those with disabilities and special needs have all benefited from the housing programs provided by the MBOH. In 2007, MBOH invested over $196 million in housing for over 1,925 Montana families by financing home loans and allocating tax credits to developers. Their efforts in 2007 also created nearly 3,900 jobs for our citizens. The MBOH’s hard work over the last year has done exactly what the legislators envisioned decades ago; they have helped make Montana a great place to live, work, and raise our children. Looking into the future, the MBOH faces an ever-increasing challenge in providing affordable housing as housing costs escalate across the state. Keeping housing affordable for the future will require all of our best efforts. I am confident that the Montana Board of Housing is up to the challenge. Governor Brian Schweitzer The Montana Board of Housing’s hard work has done exactly what the legislators envisioned decades ago; they have helped make Montana a great place to live, work, and raise our children. Message W from the Chairman and the Executive Director e are pleased to present the annual report and financial statements of the Montana Board of Housing for fiscal year 2007. We have traveled the State of Montana visiting Hamilton, Glendive, Billings, Kalispell, Lewistown, and Shelby. The constant message we hear at our meetings is that housing is a critical issue all across our state. Whether it is the shortage of housing in eastern Montana due to the increasing energy expansion or the skyrocketing costs in western Montana due to land and development, housing is an ongoing need for all communities. The Montana Board of Housing (MBOH) is an important resource that helped create safe and affordable housing for over 45,000 Montana families since it’s inception in 1975. During that time, MBOH has allocated more than $2.6 billion to finance homes that would otherwise not be built or be affordable. It is a profound record of accomplishment that has yielded benefits for the entire state. When affordable housing is built, local communities thrive with safer, cleaner neighborhoods. Towns and cities prosper with increased real estate tax revenues and more employment. In fiscal year 2007, the MBOH put over $223 million into the state’s economy that created over 3,900 jobs and generated total taxes of nearly $23 million. It is clear that our impact on cities, towns and the State of Montana is far-reaching and linked directly with economic growth. What is even more important is the impact of our programs on the child who will now grow up in a safe and decent home, the elderly Montanan who can continue to live in their own home, and Montana’s working families who can finally afford to buy their first homes. Our statewide partnerships with public, private and nonprofit groups have been instrumental to our success. Our partners share our strong commitment to affordable housing and create excellent public access to our housing programs. Together, we have provided competitive financing for affordable housing to nearly every city, town and county in Montana. Thank you for the opportunity to be of service in 2007. We look forward to a successful and rewarding 2008. Chairman J. P. Crowley & Executive Director Bruce Brensdal J. P. Crowley, Chairman Bruce Brensdal, Executive Director Board T of Directors he powers of the Board are vested in seven members, appointed by the governor and subject to confirmation by the state Senate. The Board provides policy direction to the agency staff, authorizes bond issues, approves development financing and evaluates Montana Board of Housing programs. The commitment of time and energy by Board members has resulted in an improved quality of life for thousands of Montana citizens. The leadership and guidance from the Board is vital to Montana’s efforts to meet its housing needs. In fiscal year 2007, the board provided over $194 million in financing to help 1,641 families obtain the dream of homeownership. The board also allocated $2,355,324 in current and returned low income housing tax credits, which generated $20.7 million in project dollars for 183 units of rental housing. Chairman J. P. Crowley graduated from Montana State University and owns and manages 40 apartment units in Helena. He was elected to the National Council of State Housing Boards in 2006. He has served on several nonprofit boards and formerly worked for U.S. Senator Max Baucus. He is married and has two young children. Mr. Crowley was appointed to the board by Governor Schweitzer in 2005 and elected chairman in 2007. Vice Chairman Elizabeth (Betsy) Scanlin is a Red Lodge attorney and city councilwoman. She is active in historic preservation, performance and fine arts, and local, state and national politics. Ms. Scanlin has worked on local and state growth and housing issues for over a decade. Ms. Scanlin is new to the board in 2005. Secretary Susan Moyer retired as Community Development Director for the city of Kalispell in 2006. She devoted 28 years of her career with the city to implementing affordable and adequate housing projects, as well as addressing economic development issues. She is secretary-treasurer of the Glacier Affordable Housing Foundation and is chair of the United Way’s Food and Emergency Shelter Board. She attended San Jose State. Ms. Moyer has served on the board since 2003. Audrey Black Eagle is the executive director of the Apsaalooke Nation Housing authority in Lodge Grass and has been actively involved in housing for 13 years. Ms. Black Eagle is married to Cedric Black Eagle, who is active in Tribal government. She is new to the board in 2005. Jeff Rupp is the CEO/President of the Human Resource Development Council of District IX in Bozeman. He is a Montana native who has devoted over 27 years of his career to improving the lives of Montana families through community and economic development and social service programs. Mr. Rupp also serves on the Bozeman City Commission. Robert Gauthier has worked for the Confederated Salish and Kootenai Tribes for 26 years in various positions, including consumer credit counselor and director of the housing authority. Bob is a consultant and the chairman of Eagle Bank in Polson. He is currently involved full-time in the development and the management of real estate and has developed specialized training and technical assistance for Indian housing resources. Bob has served on many boards, including as a presidential appointee to the Community Development Financial Institutions (CDFI) Advisory Board. Jeanette McKee is a former legislator, and has served as development officer of the Montana Historical Society Foundation and as an advisor to the National Trust for Historic Preservation. She’s currently a real estate agent in Hamilton and serves on the Daly Mansion Board. She holds a bachelor’s degree in elementary education from the University of Montana. J.P. Crowley Elizabeth Scanlin Jeff Rupp Susan Moyer Jannette McKee Robert Gauthier Audrey Black Eagle Bruce Brensdal Staff Executive: Bruce Brensdal, Penny Cope and Diana Hall Homeownership Program: Doug Jensen, Charlie Brown, Brandon Whitaker, Nancy Leifer, Julie Hope and Jeannene Maas Multifamily Program: Kelly Lynch, Gerald Watne, Mary Bair, Justin Schedel and Mat Rude Accounting: Charles Nemec, Craig Wood, Christine Bullman, Vicki Bauer, and Becky Anseth Homeownership T Program Affordable Mortgages for Montana’s Homebuyers he Montana Homeownership Program helped 1,641 Montana families realize the dream of homeownership by providing $194,193,590 in financing in fiscal year 2007. Since 1977, the Montana Homeownership Program has invested nearly $2.5 billion to help over 39,500 Montana families become homeowners. The financing MBOH provides comes exclusively from the sale of tax-exempt mortgage revenue bonds issued periodically by the board. The tax-exempt status allows the agency to pass on the interest savings to lower income Montana families in the form of low-interest home loans and mortgage tax credits. Homeownership Programs at the Montana Board of Housing include: • The Bond Program, which provides below market, low or no down payment, fixed rate mortgages to qualified first-time homebuyers. • The Mortgage Credit Certificate Program, which helps qualified first-time homebuyers reduce their federal income taxes. In fiscal year 2007, 14 families were able to obtain homeownership with $1.9 million in financing from this program. • Many Set-aside Programs, which help Montana families who can’t qualify for loans through the Bond Program. In fiscal year 2007, 255 families in 46 communities benefited from $23 million in home financing through these programs. Since 1986, 4,545 families have achieved homeownership with $244 million in set-aside/recycled funds from these programs. • The Montana House is a special collaboration between the Montana Board of Housing, the Job Corps, the United Brotherhood of Carpenters and Joiners of America, and the Painters & Allied Trades International Union. By working together, the collaboration produces 4 homes a year that cost between $35,000 and $45,000 depending upon bedrooms. The homes are available for purchase by homebuyers making less than 80% of the area median income. Additional costs for the home includes moving to a location in Montana, foundation, appliances, floor coverings, utility installation, and land. In addition to providing affordable homes, this program helps train young people in the building trades. In 2007, the Blackfeet Tribal Colleges and Miles City Community College each joined in collaboration to produce Montana Houses. More detailed information about the Mortgage Credit Certificate Program and the MBOH Set-aside Programs can be found on the attached disk. When adequate safe and affordable housing is available to families with children, there is increased stability due to the improved physical and emotional environment provided. There are measurable results, such as higher rates of high school graduation, which show the benefit to us all. Multifamily T Program Creative Financing Options for Developers of Affordable Housing he Multifamily Program provides several financing options to help sponsors and developers produce affordable housing for Montana residents. Low Income Housing Tax Credits Low Income Housing Tax Credits provide for the retention, rehabilitation and construction of low-income rental housing. Through tax credits, which are administered by the Multifamily Program, developers and owners of qualified housing projects receive an annual federal tax credit for 10 years. The eligible costs associated with building the projects for low-income Montana families determine the tax credit allocations. Since the inception of the program in 1987, tax credits have been used in the rehabilitation and production of 5,093 low-income housing units in 173 separate Montana projects. The total construction costs of the 173 projects were nearly $374 million. In fiscal year 2007, $2.355 million in current and returned tax credits were allocated to assist in the development of six projects containing 183 low-income housing units. Total development costs of the projects are projected to be over $32 million. Revolving Loan Account The Revolving Loan Account (RLA) was created by the Legislature to provide funding for projects that typically need that last, small piece of financing to make them feasible. A component of the RLA, the Temporary Assistance to Needy Families Program served eight families in seven Montana communities by providing $101,500 in financing to buy homes in FY2007. Multifamily (continued) Program General Obligation Loan Program The General Obligation (GO) Loan Program is a source of permanent mortgage financing for affordable rental housing that is identical to the Risk Share Loan Program (RSL) mentioned below with one exception, there is no mortgage insurance requirement. GO loans are typically available to smaller, multifamily projects that receive multiple sources of funding through other programs. Risk Share Loan Program Under this program, the U. S. Department of Housing and Urban Development (HUD) provides mortgage insurance for multifamily housing projects that have loans underwritten, processed and funded by the MBOH. The risk is shared equally by HUD and the MBOH. Conduit Bond Program This newly started program offers applicants the ability to issue bonds through other qualified entities and receive 4% tax credits similar to the Low Income Housing Tax Credits (LIHTC) listed above but not subject to an annual allocation. One project closed in 2005 and two others were given the go ahead by the Board. These projects are subject to the same compliance requirements as the LIHTC program. Reverse Annuity Loan Program (RAM) The Multifamily Program offers reverse annuity mortgages (RAMs) to eligible senior Montanans. The RAMs, which are 10-year loans, let eligible seniors convert the equity in their homes to cash - all while retaining homeownership. RAMs work much like traditional mortgages, only in reverse. Rather than making a payment to a lender each month, the lender (MBOH in this case) pays the eligible participant. Unlike conventional home equity loans, a RAM from the MBOH does not require any repayment of principal or interest for as long as the participant lives in the home. More detailed information about the Multifamily Program can be found on the attached disk. A house is a home when it shelters the body and comforts the soul. Finance Legal & Professional Board General Counsel Helena, Montana Luxan and Murfitt Legislative Audit Division Kutak Rock Independent Auditor Board Bond Counsel Helena, Montana Omaha, Nebraska Investment Banking Team D. A. Davidson & Co. Merrill Lynch & Co. San Francisco, California Great Falls, Montana New York, New York Minneapolis, Minnesota Minneapolis, Minnesota Piper Jaffray & Co. George K. Baum Citibank RBC Capital Markets UBS Investment Bank Accounting & Reporting The accounting and reporting personnel at the Montana Board of Housing manage approximately 10,000 mortgages totaling over $816 million. This includes reconciling all mortgages on a monthly basis from reports received from 36 contracted loan servicers. In fiscal year 2007, the staff also accounted for $143 million in mortgage loan collections. The staff accounts for principal and interest on bonds payable for approximately $917 million in 27 bond issues. In addition, the staff processed $132 million in bond calls and maturities and accounted for approximately $1 billion of investment purchases, sales and maturities. Sellers Group Denver, Colorado New York, New York Trustees U.S. Bank Wells Fargo Bank The Reverse Annuity Mortgage has allowed 144 seniors to stay in their own home as long as they have wanted to. Since 1977, the Montana Homeownership Program has invested nearly $2.5 billion to help over 39,500 Montana families become homeowners. These condensed financial statements are based on audited financial statements. Complete audited financial statements are available in the accompanying disk, at our website at www.housing.mt.gov or upon request. Montana Board of Housing A Component Unit of the State of Montana Statement of Net Assets As of June 30, 2007 and 2006 FY 2007 ASSETS Current Assets Cash and Cash Equivalents Investments Mortgage Loans Receivable Interest Receivable Due from Primary Government Due from Other Governments Security Lending Collateral Prepaid Expense Total Current Assets Noncurrent Assets Investments Mortgage Loans Receivable Mortgage Backed Securities Deferred Bond Issuance Costs, Net Capital Assets, Net Total Noncurrent Assets TOTAL ASSETS LIABILITIES Current Liabilities Accounts Payable Due to Primary Government Security Lending Liability Accrued Interest - Bonds Payable Bonds Payable, Net Arbitrage Rebate Payable to U.S. Treasury Department Accrued Compensated Absences Total Current Liabilities Noncurrent Liabilities Bonds Payable, Net Deferred Refunding Costs Arbitrage Rebate Payable to U.S. Treasury Department Accrued Compensated Absences Total Noncurrent Liabilities TOTAL LIABILITIES $905,594,144 (2,475,726) 606,900 82,982 $903,808,300 $920,948,293 $794,476,577 (1,991,845) 826,928 88,018 $793,399,678 $808,433,981 $563,873 19,158 4,165,248 11,735,000 590,054 66,660 $17,139,993 $440,673 21,524 41,971 3,519,431 10,650,000 314,204 46,500 $15,034,303 $23,059,234 799,347,698 2,361,544 8,718,872 52,210 $833,539,558 $1,067,186,133 $26,540,652 710,945,504 7,758,388 55,004 $745,299,548 $948,433,114 $13,817,978 198,334,275 16,178,048 5,241,313 8,232 1,525 65,204 $233,646,575 $7,870,436 177,112,947 13,191,347 4,677,039 7,328 41,972 232,497 $203,133,566 FY 2006 NET ASSETS Invested in Capital Assets, Net Restricted for Bondholders: Unrealized (losses) gains on investments Single Family Programs Various Recycled Mortgage Programs Multifamily Programs Multifamily Project Commitments Reverse Annuity Mortgage Program Restricted for Affordable Revolving Loan Program TOTAL NET ASSETS $52,210 $55,004 583,279 101,362,438 23,152,201 10,339,931 216,412 7,658,025 2,873,344 $146,237,840 1,606,245 86,521,510 34,085,292 9,838,105 220,867 4,825,002 2,847,108 $139,999,133 These condensed financial statements are based on audited financial statements. Complete audited financial statements are available in the accompanying disk, at our website at www.housing.mt.gov or upon request. Montana Board of Housing A Component Unit of the State of Montana Statement of Revenues, Expenses, and Changes in Net Assets For the years ended June 30, 2007 and 2006 FY 2007 OPERATING REVENUES Interest Income - Mortgage Loans Interest Income - Investments Fee Income Federal Financial Assistance Net Increase (Decrease) in Fair Value of Investments Other Income Securities Lending Gross Income Total Operating Revenues (1,022,965) 64,270 91 $55,352,893 (2,958,275) 65,519 609 $46,154,311 $44,069,482 11,546,853 316,117 379,045 $38,553,706 9,578,702 315,600 598,450 FY 2006 OPERATING EXPENSES Interest on Bonds Servicer Fees Contracted Services Amortization of Bond Issuance Costs General and Administrative Arbitrage Rebate Expense Loss on Redemption Securities Lending Expense Total Operating Expenses $41,455,972 2,860,236 1,144,148 1,058,667 1,647,275 356,308 591,218 91 $49,113,915 $37,272,424 2,534,834 1,039,470 362,622 1,645,907 300,379 947,732 609 $44,103,978 Operating Income (Loss) Before Transfers Payment to Primary Government Increase (Decrease) in Net Assets 6,238,978 (271) $6,238,707 2,050,333 2,050,333 Net Assets, Beginning of Year Prior Period Adjustment 139,999,133 - 137,960,360 (11,560) Net Assets, End of Year $146,237,840 $139,999,133 The need for safe, affordable housing effects every man, woman and child during every day of their lives. We are proud of our efforts to ensure there is an adequate supply for all Montanans. 500 copies of this public document were published at an estimated cost of $4.46 per copy, for a total cost of $2,230.00, which includes $2,230.00 for printing and $0.00 for distribution.