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HFA Initiative Webinar. Monday, November 23, 2009 2 p.m. – 4 p.m. Agenda. Accomplishments Securitization Calendar Resolution of Outstanding Issues. Accomplishments. Program Announced – October 19 Applications Submitted – October 27. Allocations Released – November 19, 2009.
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HFA Initiative Webinar Monday, November 23, 2009 2 p.m. – 4 p.m.
Agenda • Accomplishments • Securitization Calendar • Resolution of Outstanding Issues
Accomplishments • Program Announced – October 19 • Applications Submitted – October 27 • Allocations Released – November 19, 2009 NOTE: NIBP Allocation Includes Bond Credit Enhancement
Accomplishments • Customer Communication • Hosted 6 nationwide webinars with total participation of over 1,000 people. • Prepared detailed answers to over 250 questions submitted through the HFA Initiative mailbox. • Customer Outreach • Over 100 people from Treasury, FHFA and the GSEs have contributed to the development and implementation of this Program. • Among both GSEs, over 40 deal managers and attorneys are working side-by-side with nearly 150 individual state and local housing issuers to help execute and close over 300 discrete transactions by the end of 2009.
Accomplishments • Program Materials • In conjunction with Treasury and FHFA, provided detailed fact sheets, program applications, due diligence submission materials, and detailed Program Term Sheets. • Program Legal Documents include: • New Issue Bond Program: • Settlement Agreement (SF/MF) • Placement Agreement (SF/MF) • Temporary Credit and Liquidity Program: • Reimbursement Agreement (SF/MF) • Temporary Credit and Liquidity Facility (SF/MF) • Supplement to Indenture (SF) • Supplement to Indenture (MF)
Resolution of Outstanding Issues • 1. Allocations • Rate Lock Process • State Street Global Advisors (SSgA), acting as Treasury’s Agent, will provide long-term permanent interest rates for those HFAs fixing their interest rate in in 2009. Guidance on the specific process for obtaining rates will be provided by SSgA on Wednesday, November 25 and posted to the trade association web sites. • Redistribution of Unexpended Allocation • As previously discussed, to the extent there is unused local or state allocation capacity, there may be a reallocation of unused capacity. This reallocation is still under consideration with Treasury and details and timing will be announced when available.
Resolution of Outstanding Issues 2. Role of GSE Special Counsel: NIBP • The overall objectives of the GSE Special Counsel for the NIBP are: • Assist HFAs and their counsels in working through Program issues, as well as integrating the Program Indenture and its unique provisions into HFA Resolutions or Indentures; • Provide coordination between the bond issuance process and the securitization process, which is unprecedented in this form of housing bond financing; and • Assure and certify to the GSEs and ultimately to Treasury that all appropriate requirements and conditions of the Program are met.
Resolution of Outstanding Issues 2. Role of GSE Special Counsel: TCLP • The overall objective of the GSE Special Counsel for the TCLP are: • Prepare new transaction documents and review a wide variety of issuer documents in order to resolve any conflicts with current VRDOs and assure consistency with the Program • Support the development of securitization documents and protocols to support a securitization process for the financing of Bank Bonds • Certify to the GSEs and ultimately to Treasury that all documents meet the particular requirements of the Program.
Resolution of Outstanding Issues 3. Legal Fees
Resolution of Outstanding Issues • 4. Legal Documents • Six HFA Program Legal Documents are currently available on association web sites, 2 additional documents will be available shortly. • Completed and Posted: • New Issue Bond Program (updated forms week of 11/23) : • SF & MF Settlement Agreements • SF & MF Placement Agreements • Temporary Credit and Liquidity Program: • Reimbursement Agreement (SF/MF) • Temporary Credit and Liquidity Facility (SF/MF) • Supplement to Indenture (SF) • Supplement to Indenture (MF) • Pending Completion: • Supplement to Indenture (SF) • Supplement to Indenture (MF)
Resolution of Outstanding Issues • Special Advisor • In order to ensure the successful settlement of the Program Bonds and the GSE Securities, HFAs must: • do all things necessary to register the Program Bonds with DTC so they can be settled, released and credited to the Closing Agent on the pre-settlement day, and • provide the GSEs with a 10b-5 opinion with respect to the Official Statement issued for the Program Bonds. • The Special Advisor may be any experienced party able to successfully perform the duties detailed in the Placement and Settlement Agreements with regard to properly setting up and processing bonds through DTC. • The 10b-5 opinion need not be delivered by counsel to the Special Advisor so long as an acceptable 10b-5 opinion is delivered to the GSEs.
Resolution of Outstanding Issues • 6. Replacement Refundings • Focus on New Mortgage Originations • For the purposes of this Program, the objective of a replacement refunding should be to carry forward unused volume cap from preexisting issues of bonds into a new issue of bonds, resulting in new mortgage originations. • Use of Market Bonds • For the purposes of this Program, Market Bond proceeds may be used for: • replacement refundings, • absorbing any economic refunding associated with replacement refundings, and • refunding previously issued bonds, the proceeds from which have been partially invested in mortgage loans.
Resolution of Outstanding Issues • 6. Replacement Refundings (cont) • Use of Program Bonds • Based on the parameters described, Program Bond proceeds may be used for replacement refundings only if: • all Market Bond proceeds have first been applied to replacement refundings, and • Program Bond proceeds applied to replacement refundings are exclusively for the origination of new mortgages.
Resolution of Outstanding Issues • NIBP - Withdrawals from Indentures • Covenants in the supplemental indentures for the NIBP have been revised to provide additional flexibility to Issuers to withdraw funds from the lien of the Indenture, as follows: • (a) The Issuer shall take all steps necessary to assure that all assets and revenues of any description pledged to the payment of the Program Bonds and all other bonds issued under the Indenture shall be applied strictly in accordance with, and solely for the purposes and in the amounts specified and permitted by, the terms of the Indenture. • (b) The Issuer shall not exercise any rights it may have to make voluntary withdrawals of cash or other assets from the lien of the Indenture except under the following circumstances and within the following limits: • (1) No withdrawals whatsoever shall be made during any period when any of the long term credit ratings on the Program Bonds are below the initial long term credit ratings of the Program Bonds required in connection with the Single Family New Issue Bond Program.
Resolution of Outstanding Issues • NIBP - Withdrawals from Indentures (cont) • (2) No withdrawals whatsoever shall be made to the extent that such withdrawal would adversely affect any of the long term credit ratings on the Program Bonds that are effective immediately prior to such withdrawal. • (3) The withdrawal is made only for internal purposes of the Issuer, including, but not limited to, funding a program sponsored by the Issuer or paying administrative expenses of the Issuer. • (4) Withdrawals shall be made only to (i) fund programs sponsored by, or other administrative expenses of, the Issuer which have been historically funded with the proceeds of withdrawals from the Indenture, and the annual amount of such withdrawals shall be consistent with the annual amount of past withdrawals for such purpose; or (ii) permit the Issuer to withdraw cash for internal purposes of the Issuer if the amount to be withdrawn is: • (A) a return of capital previously contributed to the Indenture by the Issuer in cash or as a cash equivalent; or
Resolution of Outstanding Issues • NIBP - Withdrawals from Indentures (cont) • (B) an unpaid administrative fee payable to the Issuer, unreimbursed expense incurred by the Issuer on behalf of the Indenture, unpaid ratable allocation of overheads of the Issuer to its various indentures and housing programs of the Issuer, unpaid contribution to an official housing program of the Issuer, or an unpaid item of a similar nature inuring to the benefit of the Issuer or any of its housing programs, from a prior period where: (i) under the terms of the Indenture, as in effect during such period, the payment or withdrawal could have been made from the Indenture for such purpose; and (ii) if the payment or withdrawal was then permitted under the applicable financial release requirements of the Indenture; the Issuer took official action to retain the amount in the Indenture under terms where the payment or withdrawal was deferred to a later time.
Resolution of Outstanding Issues • NIBP - Withdrawals from Indentures (cont) • (5) The Program Bonds are then rated by a Rating Agency and prior to and as a condition to each withdrawal, the Issuer shall obtain and furnish to the GSEs and to Treasury a confirmation from each of the Rating Agencies then maintaining a long term rating on the Program Bonds that, immediately after such proposed withdrawal: (i) the rating on the Program Bonds will be not less than [specify exact rating of the Program Bonds as of the issue date]; and (ii) the rating outlook assigned to the Program Bonds will be either “Stable” or “Positive” or the equivalent. • (6) Prior to and as a condition to each withdrawal, the Issuer shall provide a written certification to the GSEs and to Treasury specifying the amount and purpose of the withdrawal and that the requirements of this subpart (b) have been met with respect to such withdrawal.
Resolution of Outstanding Issues • 8. I/O Strips • The original position on I/O strips is reaffirmed. I/O strips from Program Bonds or mortgage loans are not permitted. • 9. Investment of Escrow Proceeds • The specific investment vehicle used for the escrow proceeds is still being determined.
Resolution of Outstanding Issues 10. Q&As • Effective Monday, November 23 at 5 p.m. eastern time, the GSEs will no longer be responding to questions submitted through the Kutak website. • Instead, we urge issuers and members of their working groups to pose questions directly to their GSE Deal Teams. The Deal Teams will respond directly to specific deal questions posed by their assigned issuers and answers to general program questions will continue to be coordinated between the GSEs and disseminated through the association websites in the form of Q&As.
