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HB 819 Public Comment from NW MT Community Land TrustFrom:Kim Morisaki To:Kalispell Meetings Public Comment Cc:Lorraine Clarno; ericaw@nmar.com Subject:EXTERNAL HB 819 Date:Thursday, January 9, 2025 5:37:17 PM Attachments:HB 819 - 5.3.23.pdfCRO Info.pdfHB 819 Flyer.pdf [NOTICE: This message includes an attachment -- DO NOT CLICK on links or open attachments unless you know the content is safe.] City Council Members, I am writing in response to the Mayor’s comments on Monday related to House Bill 819 and the County Commissioners failure to partner with a CRO and therefor give $4.5 million of local taxpayer money to other counties. It is an unfortunate choice as it would have been a tool to provide 0% interest loans to homebuyers that they would then pay back when they sold the home. This tool would have grown over time and been an asset for the community for generations. It seemed that some additional background information might be helpful, especially about the $100,000,000 infrastructure money also designated in HB819 for use in municipalities. Homebuyers using HB819 funds would have worked with local banks to secure a 1st mortgage that they could afford and then be referred to NeighborWorks MT for the 2nd 0% mortgage. Banks are not typically in the business of lending to people they don’t believe are capable of making the monthly payment, so the hand wringing over getting home buyers into situations they wouldn’t be able to manage seemed a bit dramatic. There was also a lot of concern about the 1% annual cap on equity. Caps on equity do not equate to people not paying their property taxes or maintaining their homes. The truth is some people buy homes to ensure that their families have a roof over their head and that they are not exposed to the unpredictability of having a landlord sell the home out from under them (lots of that happening in the Flathead in the last 4 years!). Not everyone buys a home with the idea that it will make them rich. However, everyone seems to have forgotten that the legislation allows people to buy out of the equity cap by refinancing. If after owning the home for a number of years, the homeowner is capable of making a larger monthly payment they could refinance the two mortgages into one, pay off the CRO and not be restricted to the 1% cap. The CRO would then lend the money to the next homebuyer. It is true that the legislation was not well written. It took the Governor’s office well over a year to put guardrails into place in a way that any organization would be willing to act as the CRO. The CRO flyer clarifies who NeighborWorks MT is and how they would work with the County. The Mayor mentioned that the legislation does not require that the “windfall” that would come from selling a home purchased with HB819 funds be recouped and then lent out again, but that is what NeighborWorks MT was proposing to do. They have been doing this kind of lending for 25 years and working with local banks. This is not their first rodeo and their mission is to create resources for more and better housing for Montana citizens. That is the joy of nonprofits! The Mayor mentioned that he made a spreadsheet showing that if you took the required down payment of, say $20,000, and then invested it in the market for 30 years that would be a better return on investment than the 1% annual equity cap. ($400,000 house, $4000/year, live in the house for 10 years and the equity is $40,000, homeowner gets $440,000 at the sale of the home out of which they pay back the 2 mortgages and keep the difference - so still better than renting). I would like to take a look at that spreadsheet. I think it might be missing a few columns. Here are some things to consider: Have you ever looked at how much you will pay in interest on your own home mortgage if you pay the loan for 30 years? It is jaw dropping. There is an argument to be made that maybe all of us should invest in the market instead of taking out mortgages to buy homes. Think how much less interest you would pay if 30% of your mortgage was 0%. I’m not sure that a $20,000 cash downpayment would be required. Homeowners would likely have to come to the table with $8,000 to $12,000 in cash for bank fees and 1st years home insurance, etc. But if you rent you also have to come up with 1st, Last and Security deposit at a bare minimum and you are probably looking at needing $6000 or more to get into a rental. Any of these scenarios would require planning for most working families. Nice to have $20,000 to invest, but you still have to have cash up front to rent in that scenario. The spreadsheet doesn’t take in to account the insecurity of renting or the future opportunity to possibly buy-out of the equity cap. I thought that the three attached flyers might help clear up some questions and that you might like to see the Area Median Income examples. Flyer HB819 5.3.23 might be of particular interest because HB819 also has $100 million in infrastructure loans for affordable housing development and Kalispell might be asked to partner on one of these projects. This $100 million is Part 2 of HB819. The CRO funding for the Counties was Part 1. This might be more than 3 minutes of public comment, but I hope that it will help to clarify how we need more creative tools in our toolbox if you want affordable workforce housing in the Flathead. We can’t keep doing the same thing and expecting different results. We want our kids and their friends to be able to live, work and raise families in the Flathead. We should not throw out a perfectly good power drill in our toolbox just because it is not a hammer. Thank you for your time and your work on behalf of the citizens of Kalispell. Kim Morisaki 406.261.8831 WHAT IS A COMMUNITY REINVESTMENT ORGANIZATION? CRO is a new type of organization created by HB819. Qualified and interested organizations applied to become a CRO on or before September 30, 2024. The state will approve or deny these applications on or before December 31, 2024. HB819 ascribes program oversight to Community Reinvestment Organizations (CRO). CROs must be federally recognized charitable organizations. For a county to access the funds allocated to them, the county must sign a resolution to select a CRO CROs are entirely responsible for execution of the program, including loan underwriting, loan servicing, and raising match. COMMUNITY REINVESTMENT ORGANIZATION HB819 In 2023 the Montana Legislature passed House Bill 819 which allocates $50M to a Home Buyer Assistance program for homebuyers in Montana. Each county is earmarked a certain amount of the $50M based on County Gross Domestic Product Program Pillars The program will provide homebuyers 30% of the cost of the home as a loan or an investment In exchange for this assistance homebuyers agree to an equity cap of 1% per year Households are eligible if they earn between 60% and 140% of Area Median Income (AMI) The program also requires Community Reinvestment Organizations to provide a 1:1 match of program funding, making the total pool $100M. WHO IS NEIGHBORWORKS MONTANA? NeighborWorks Montana (NWMT) is a statewide organization established in 1998 that creates homeownership opportunities for Montana’s workforce through collaboration with local partners in communities across Montana. NWMT is a Community Development Financial Institution (CDFI) certified by the U.S. Treasury, dedicated to providing access to financing that supports housing opportunities. NWMT has been providing down payment assistance loans successfully in Montana for 25+ years. NWMT has tailored programs to support specific homebuyers or markets in cooperation with local partners. NeighborWorks Montana employs the values of collaboration, transparency, and responsibility in all of its work. NWMT is not requiring counties to contribute toward match. NWMT will be responsible for raising match. Counties are encouraged to contribute in any way they find meaningful regarding program design. Some counties are interested in identifying certain parts of the workforce intentional access to this funding, for example (teachers, firefighters, first responders, etc.). NWMT understands its role as a CRO is to rely on local guidance to understand and serve the needs of each community. NWMT is not requiring counties to contribute toward match. NWMT has 25 years of experience raising capital from many different sources: government, philanthropy and private sources. NWMT’s current loan assets across down payment and real estate finance exceed $50M. NWMT is pursuing potential match sources, and once approved as a CRO will secure the match dollars required. As with NWMT’s current Down Payment Assistance products, homebuyers will begin with home buyer education and/or housing counseling. Educators and counselors help homebuyers prepare for the responsibility of homeownership. Homebuyers will then identify a first mortgage lender. First mortgage lenders will apply to NWMT on behalf of their borrower. NWMT will do all underwriting and approvals of the CRO loans and will be the loan servicer. What is expected of a county by selecting NWMT as CRO? What is NWMT’s plan regarding match? FAQ How do homebuyers access this funding? Why has NWMT applied to become a CRO and why does NWMT want to serve your county? As a CDFI working statewide in Montana for more than 25 years, NWMT has a sense of responsibility to ensure the program established in HB819 is executed with responsibility, transparency and collaboration. This is a unique opportunity where a large sum of taxpayer funding has been allocated to housing and we want to make this opportunity work in the best way possible for the people it is intended to support: Montana’s workforce. NWMT is a statewide HUD-certified housing counseling and education intermediary, providing HUD- approved housing counseling and education statewide through subgrantee housing counseling agencies. NWMT has been an approved FHA secondary lender and an approved bona fide not-for- profit with the State of Montana Division of Banking & Financial Institutions since 2010. MORE ABOUT NWMT $24M+ lent in down payment assistance $12M current down payment assistance loan portfolio 1.38% down payment assistance default rate (national average: 1.73%) NWMT keeps default rates low by providing homebuyers with comprehensive housing counseling and home buyer education, access to financial coaches and post purchase counseling, and intentional and personal loan servicing support. HB 819 – CREATES THE MONTANA COMMUNITY REINVESTMENT PLAN Funds are distributed to regional “Community Reinvestment Organizations” (CROs) based on each region’s percentage of gross domestic product (GDP). CROs include Certified Regional Development Corporations, Certified Development Corporations, Community Housing Development Organizations, and Community Development Financial Institutions. CROs establish a revolving fund with its share of the money and a match from the local governments in its region. The revolving fund, minus up to a 5% set aside to cover administrative expenses, is then used to buy down up to 30% of the purchase price of a home for an eligible buyer. Eligible buyers are between 60 and 140% Median Household Income. Each home will be deed restricted to limit the equity and future sales price of the home to ensure the taxpayer-funded dollars stay with the home and the cost of the home remains attainable for the workforce in the future. An employee can buy out the deed restriction or sell the home with the proceeds going back into the CRO’s revolving fund to be used for another eligible employee buydown opportunity. The MCRP proposes creating and utilizing an employer pool to leverage private sector involvement and investment to effectively “reload” the MCRP Fund so that the MCRP can grow without requiring additional public funds. Part 1 $56 million to Community Reinvestment Organizations $100 million in loans are for infrastructure projects, including water, wastewater, stormwater, streets, roads, curb and gutter, and sidewalks. Loans may not exceed $1 million or 50% of the project’s total cost. Must be for infrastructure for residential developments at the minimum gross density of 10 units per acre. Local governments receiving loans must waive all impact fees at least up to the loan amount. Housing built using infrastructure funded in part by these loans must contain a deed restriction to preserve long-term affordability of the housing. $1 million to provide grants to local and tribal governments for planning and zoning reforms to increase the housing supply. $7 million of the loans are for counties with less than 15,000 inhabitants located within a 30-mile radius of a facility that houses at least 100 state inmates or behavioral health patients. Part 2 $107 million for the Montana Housing Infrastructure Revolving Loan Fund HB 819 – CREATES THE MONTANA COMMUNITY REINVESTMENT PLAN Must be in counties with less than 15,000 inhabitants located within a 30-mile radius of a state-owned facility that houses at least 100 state inmates or behavioral health patients. Funds can be used to: buy down construction interest on employee housing; provide matching funds for CROs; provide loans for up to 50% of the cost of infrastructure; assist employees with housing costs; and purchase housing for employees with a 10- year plan to make it privately owned. Part 4 $12 million for Housing for Targeted Communities WHO SUPPORTS HB 819? $65 Million available for loans, NOT grants, for multifamily rental housing. Loans are paid back to the Coal Trust, creating a revolving loan fund with interest equal to the coal trust fund investment performance. Coal trust in first position on the loans Strict oversight and income qualifications All properties pay property taxes, except those on tribal land. Loans can be used to develop or preserve mobile home parks. Proven initiative that built 7 developments with 252 apartment homes with the first $14.2 million. Part 3 A $50 million increase in authority for the Multifamily Coal Trust Homes Program Hospitality and Development Association of Montana Great Falls Montana Development Authority Montana Human Resources Development Councils Lewistown Area Chamber of Commerce Hospitality and Development Association of Montana Montana Independent Bankers Association Big Sky Community Housing Trust Montana Building Industry Association Montana Housing Coalition Montana Attainable Housing Alliance Montana Chamber of Commerce Montana Association of Realtors Billings Chamber of Commerce Big Sky Economic Development - Billings Helena Area Chamber of Commerce Plumbers and Pipefitters’ Union Montana League of Cities and Towns Montana Economic Developers Association Shelter Whitefish Montana Women Vote AFL-CIO Montana's Credit Unions Big Sky 55+ Trust Montana Laborers’ Union GL Development LLC Montana Bankers Association Montana Contractor's Association Kalispell Chamber of Commerce kim@nwmtclt.org406-261-8831Questions? Households who are 60% - 140% AreaMedian Income (AMI) Borrowers who can qualify for a small conventional mortgage. Flathead Valley Citizens in the Workforce Who is Eligible? 60% AMI County Employee, 1 adult & two children Annual Income $48,000 Mortgage Capacity approximately $200,000*What Happens whenthe House is Sold? An organization approved by the legislature becomes the CRO, manages the funds and secures the $4.5 million in private match from investors required by the legislation. This makes up to $9 million available in Flathead County. Homebuyers work with a local lender to determine the size of the first mortgage they can afford. This first loan will be 70% or more of the purchase price of the home. The CRO works with local lenders to make a 2nd loan to homebuyer that will be up to 30% of the home’s purchase price. This 2nd loan will 0% interest and does not have to be paid back until the home is sold. How Does it Work? The 2023 Legislature funded HB 819 to set aside $50 million to increase workforce homeownership opportunities through a new type of lending/investment organization called a Community Reinvestment Organization (CRO). Flathead County has been designated $4.5 million of the these funds. Increasing WorkforceHomeownership in the Flathead HOUSE BILL 819 LEGISLATION The home is sold on the open market and the homeowner receives 100% of what they paid for the home and 1% of the purchase price additionally for every year the home is owned. From the amount the homeowner receives the remainder of the 1st loan is paid off to the bank and all of the 2nd loan is paid off to the CRO from the income from the sale. In this way the original funds lent by the CRO are returned to the CRO to be lent to another homebuyer. The difference between the open market sales price and the amount received by the first homeowner will go to the CRO. Private investors will receive a fair return on their investment from this income. The rest of the funds are then recycled by the CRO and lent to a new homebuyer under the same conditions. Creating a sustainable program for Flathead homebuyers. Households who are 60% - 140% AreaMedian Income (AMI) AMI Examples and Buying Power 100% AMI Hospital Employee + City Employee 2 adults & 2 children Annual Income $88,000 Mortgage Capacity approximately $340,000* 140% AMI Self Employed Contractor & Nonprofit Employee 2 adults & 3 children Annual Income $127,000 Mortgage Capacity approximately $450,000* 80% AMI Police Officer or Firefighter 1 adult Annual Income $48,000 Mortgage Capacity approximately $210,000* The County: New Homeowners Pay Property Taxes at the Same Rate asAll Others Local Business Hoping toRetain Workforce Local Citizens Struggling with Increasing Home and Land Prices Who Benefits? What Is the Risk? Flathead County Commissioners are required to vote to partner with a CRO in order for Flathead County citizens to benefit from this program. Who Decides? NeighborWorks Montana has a 25 year history of working in the housing finance arena as a nonprofit. They will create a CRO and propose to partner with Flathead County to leverage the funds designated by HB 819 with no financial risk to the County. They will secure the required 1:1 match from private investors, oversee the program for the long term and work to keep it sustainable and benefitting the community for decades. However, to ensure that the $4.5 million designated to Flathead County does not go to another county, Flathead County Commissioners must partner with a CRO that can provide the $4.5 million match by the end of 2024. Please contact your County Commissioners and encourage them to make this opportunity available to Flathead County citizens. What Can You Do To Help? Bui ACTION REQUIRED Local Builders Trying toBuild Starter Homes at a Price the Average Person in the Flathead Can Afford. There is no financial risk to Flathead County. In partnering with a CRO the county is agreeing to allow the CRO to accept and manage the funds the state legislature allocated to the Flathead County. The financial risk and responsibility is assumed by NeighborWorks Montana as who must be approved by the State of Montana to act as a CRO. Commissioner Pam Holmquist pholmquist@flathead.mt.gov Commissioner Brad Abell babell@flathead.mt.gov Commissioner Randy Brodehl rbrodehl@flathead.mt.gov 800 South Main, Room 302 Kalispell, MT 59901 406-758-5503 CROs will be designated by the State of Montana in December 2024. Any county that is not aligned with a CRO by January 15, 2025 will forfeit their opportunity to participate in this program and the funds designated to that county will given to other counties.