HOUSE AMENDED PRIOR PRINTER'S NOS. 1751, 1961, 2072 PRINTER'S NO. 2154
No. 1407 Session of 1972
INTRODUCED BY SESLER, STAUFFER, COPPERSMITH, HOWARD, HOBBS, OESTERLING, FRAME, DWYER, STAPLETON, HILL, MELLOW, MESSINGER, ROVNER, MAZZEI, LAMB and WADE, MAY 9, 1972
AS REPORTED FROM COMMITTEE ON STATE GOVERNMENT, HOUSE OF REPRESENTATIVES, AS AMENDED, OCTOBER 3, 1972
AN ACT 1 Amending the act of December 3, 1959 (P.L.1688), entitled "An 2 act to promote the health, safety and welfare of the people 3 of the Commonwealth by broadening the market for low-priced 4 private homes and alleviating shortages thereof, and by 5 assisting in the provision of housing for elderly persons 6 through the creation of the Pennsylvania Housing Agency as a 7 public corporation and government instrumentality; providing 8 for the organization, membership and administration of the 9 agency, prescribing its general powers and duties and the 10 manner in which its funds are kept and audited, empowering 11 the agency to make housing loans to eligible mortgagors upon 12 the security of insured mortgages, defining eligible 13 mortgagors and providing for priorities among them in certain 14 instances, prescribing interest rates and other terms of 15 housing loans, permitting the agency to make agreements with 16 financial institutions and Federal agencies, permitting the 17 agency to sell housing loans, providing for the promulgation 18 of regulations and forms by the agency, prescribing penalties 19 for furnishing false information, empowering the agency to 20 borrow money upon its own credit by the issuance and sale of 21 bonds and notes and by giving security therefor, permitting 22 the refunding, redemption and purchase of such obligations by 23 the agency, prescribing remedies of holders of such bonds and 24 notes, exempting bonds and notes of the agency, the income 25 therefrom, and the income and revenues of the agency from 26 taxation, except transfer, death and gift taxes; making such 27 bonds and notes legal investments for certain purposes; and 28 indicating how the act shall become effective," extending 29 the act to rental housing and to persons of low and moderate 30 income; changing the name of the act and the name and 31 membership of the administering agency; further providing for
1 the powers and duties of the agency; and providing penalties. 2 The General Assembly of the Commonwealth of Pennsylvania 3 hereby enacts as follows: 4 Section 1. The title and sections 101, 102, 103, 201 and 5 202, act of December 3, 1959 (P.L.1688), known as the "Housing 6 Agency Law," clause (7) of section 102 amended July 31, 1968 7 (P.L.914), are amended to read: 8 AN ACT 9 To promote the health, safety and welfare of the people of the 10 Commonwealth by broadening the market for [low-priced private 11 homes] housing for persons and families of low and moderate 12 income and alleviating shortages thereof, and by assisting in 13 the provision of housing for elderly persons through the 14 creation of the Pennsylvania Housing Finance Agency as a 15 public corporation and government instrumentality; providing 16 for the organization, membership and administration of the 17 agency, prescribing its general powers and duties and the 18 manner in which its funds are kept and audited, empowering 19 the agency to make housing loans to [eligible] qualified 20 mortgagors upon the security of insured and uninsured 21 mortgages, defining [eligible] qualified mortgagors and 22 providing for priorities among [them] tenants in certain 23 instances, prescribing interest rates and other terms of 24 housing loans, permitting the agency to acquire real or 25 personal property, permitting the agency to make agreements 26 with financial institutions and Federal agencies, providing 27 for the purchase by persons of low and moderate income of 28 housing units, and approving the sale of housing units, 29 permitting the agency to sell housing loans, providing for 30 the promulgation of regulations and forms by the agency, 19720S1407B2154 - 2 -
1 prescribing penalties for furnishing false information, 2 empowering the agency to borrow money upon its own credit by 3 the issuance and sale of bonds and notes and by giving 4 security therefor, permitting the refunding, redemption and 5 purchase of such obligations by the agency, prescribing 6 remedies of holders of such bonds and notes, exempting bonds 7 and notes of the agency, the income therefrom, and the income 8 and revenues of the agency from taxation, except transfer, 9 death and gift taxes; making such bonds and notes legal 10 investments for certain purposes; and indicating how the act 11 shall become effective. 12 Section 101. Short Title.--This act shall be known and may 13 be cited as the "Housing Finance Agency Law." 14 Section 102. Findings and Declaration of Policy.--It is 15 hereby determined and declared as a matter of legislative 16 finding that-- 17 (1) The welfare of the Commonwealth is threatened by the 18 fact that throughout Pennsylvania the supply of [low-priced] 19 private homes and rental units for persons and families of low 20 and moderate income is inadequate to meet the need for such 21 housing created by an expanding population, the wearing out of 22 older dwellings and the elimination of substandard dwellings by 23 governmental action, and by a shortage of suitable dwellings for 24 elderly persons. 25 (2) Because of higher construction costs, a scarcity of 26 financing available for housing and the resulting increase in 27 interest rates, the housing need which exists in fact has not 28 been able to find economic expression in a market demand 29 sufficient to encourage greater production of [low-priced] homes 30 and rental housing [for elderly persons] by private industry for 19720S1407B2154 - 3 -
1 persons and families of low and moderate income, including the 2 elderly. 3 (3) Persons and families whose residences are condemned by 4 governmental action in the prosecution of necessary public works 5 in urban slum clearance programs and under regulatory laws 6 protecting health and safety, face insuperable difficulties in 7 finding new [homes which are] housing which is adequate, safe 8 and sanitary. Many such persons and families are not eligible to 9 occupy public housing administered by governmental agencies and 10 are also unable to rent or purchase adequate, safe and sanitary 11 [private] housing because of the economic conditions described. 12 Unless it becomes economically feasible for these persons and 13 families to acquire [private] housing in place of the dwellings 14 now being eliminated by urban renewal programs in blighted areas 15 and other dwellings removed by reason of other public works, 16 such necessary governmental activities face serious curtailment 17 or interruption. 18 (4) The Commonwealth has a strong moral responsibility to 19 assist in providing opportunity for the rental or purchase of 20 relocation housing by persons and families who are displaced by 21 necessary governmental action, as well as a general and 22 continuing responsibility to eliminate conditions which prevent 23 private industry from supplying [homes] housing to relieve the 24 general shortage of [dwellings] housing. 25 (5) [Private industry, if provided with market and financial 26 conditions warranting greater expenditure of private capital for 27 housing and for the development of technological advances in 28 housing construction, can supply the low-priced private homes 29 needed in this Commonwealth.] Private industry alone has been 30 and now is unable to provide the financing necessary, at a cost 19720S1407B2154 - 4 -
1 which persons and families of low and moderate income can 2 afford, for housing for such persons and families and therefore, 3 the specialized financing provided for in this act will 4 encourage greater expenditure of private capital for housing. 5 (6) The relationship of a sufficient provision of adequate, 6 safe and sanitary housing to the advancement of the public 7 health and morals and to the prevention of fire, accident and 8 crime is clear. 9 (7) Therefore, it is hereby declared to be the policy of the 10 Commonwealth of Pennsylvania to promote the health, safety and 11 welfare of its inhabitants by the creation of a body corporate 12 and politic, to be known as the "Pennsylvania Housing Finance 13 Agency," which shall exist and operate for the purposes of 14 alleviating the hardship which results from insufficient 15 production of [low-priced] private homes and of rental housing 16 for [elderly] persons and families of low and moderate income, 17 including the elderly, the hardship resulting from the 18 relocation of persons displaced by governmental action, the 19 deleterious effect of inadequate housing upon the general 20 welfare of the Commonwealth, and the disadvantages, resulting 21 from economic conditions, which bar private industry from 22 satisfying a vital need, by broadening the market for [low- 23 priced] private homes and for housing for [elderly] persons and 24 families of low and moderate income, including the elderly, 25 through the provision of specialized financing secured by 26 [insured] mortgages to [persons or to agencies who] 27 corporations, individuals, joint ventures, partnerships, limited 28 partnerships, trusts, cooperatives and condominiums, which are 29 unable to obtain such financing in the general market or who are 30 unable to participate in specialized Federal housing programs 19720S1407B2154 - 5 -
1 because of lack of available Federal funds, and through 2 cooperation with and assistance to the Pennsylvania Department 3 of Community Affairs as such department carries into effect the 4 powers and duties vested in it, thus improving and stimulating 5 the distribution of investment capital for housing. Such 6 purposes are public purposes for which public money may be 7 spent. 8 Section 103. Definitions.--As used in this act unless 9 otherwise indicated-- 10 (1) "Agency" means the "Pennsylvania Housing Finance 11 Agency," the public body, corporate and politic, created by this 12 act. 13 (2) "Board" means the governing body of the agency. 14 (3) "Bonds" and "notes" mean the bonds and notes which the 15 agency is authorized to issue pursuant to article V.-A of this 16 act. 17 (4) "Federal agency" means the United States of America, the 18 President or any department of the United States or any 19 corporation, agency or instrumentality, heretofore or hereafter 20 created, designated or established by the United States. 21 (5) "Mortgage" means a first mortgage on a fee simple estate 22 in real estate located in Pennsylvania, given to secure advances 23 on or the unpaid purchase price of the real estate under the 24 laws of Pennsylvania, together with the credit instruments, if 25 any, secured thereby; the term "mortgage," unmodified by the 26 word "insured," includes both insured mortgages and those which 27 are not insured. 28 (6) "Insured mortgage" means a mortgage insured or approved 29 to be insured [by the Federal Housing Administration, pursuant 30 to the National Housing Act of June 27, 1934, and its amendments 19720S1407B2154 - 6 -
1 and supplements, heretofore and hereinafter enacted] or 2 guaranteed by a Federal agency and shall include instruments or 3 certificates which are guaranteed by a Federal agency and 4 secured by insured or guaranteed mortgages 5 (7) "Act" means this act and the rules and regulations 6 adopted by the agency hereunder. 7 (8) "Annual income" shall mean the total annual income of 8 all members of a family, from whatever source derived, including 9 but not limited to, pension, annuity, retirement and social 10 security benefits; provided, however, that there may be excluded 11 from income (i) such reasonable allowances for dependents, (ii) 12 such reasonable allowances for medical expenses, (iii) all or 13 any proportionate part of the earnings of gainfully employed 14 minors or family members other than the chief wage earner, or 15 (iv) such income as is not received regularly, as the agency by 16 rule or regulation may determine. 17 (9) "Earned surplus" shall have the same meaning as in 18 generally accepted accounting standards. 19 (10) "Elderly or elderly person or persons" shall mean any 20 individual who is qualified, by reason of age, to draw benefits 21 from Federal Old Age and Survivors Insurance or from any other 22 pension or annuity in which the age of the recipient is the 23 criterion for entitlement, or in the absence of entitlement to 24 insurance of the above types, one who has attained the age at 25 which Federal Old Age and Survivors Insurance benefits would be 26 payable if the individual had been covered by that insurance 27 system. 28 (11) "Mortgagor" shall mean individuals, joint ventures, 29 partnerships, limited partnerships, trusts, corporations, 30 cooperatives and condominiums, whether nonprofit or organized 19720S1407B2154 - 7 -
1 for profit. 2 (12) "F.H.A." shall mean the Federal Housing Administration, 3 United States Department of Housing and Urban Development and 4 any successor to its functions. 5 (13) "Low income persons or families" and "moderate income 6 persons or families" shall mean families and persons who cannot 7 afford to pay the amounts at which private enterprise, without 8 the assistance of this act is providing a substantial supply of 9 decent, safe and sanitary housing. The income limits for the 10 admission of such families and persons to projects shall be 11 those established pursuant to the rules and regulations 12 established by the agency. 13 (14) "Moderate rentals" shall mean rent charges less than 14 those rents generally charged for new dwelling units of 15 comparable size and location built by the unassisted efforts of 16 private enterprise and financed at then current market interest 17 rates. 18 (15) "Low rentals" shall mean rent charges at least ten per 19 cent lower than moderate rentals. 20 (16) "Rent" or "rentals" shall mean the charges paid by 21 moderate and low-income persons for occupancy in a project under 22 this act, whether the project is operated on a landlord-tenant 23 basis or as a condominium or cooperative. 24 (17) "Project" shall mean a number of dwelling units 25 constructed, rehabilitated or converted to a cooperative or 26 condominium with the assistance of a mortgage loan from the 27 agency, including the acquisition, construction or 28 rehabilitation of lands, buildings, equipment, improvements and 29 other ancillary facilities such as, but not limited to streets, 30 sewers, utilities, parks, site preparation, landscaping, and 19720S1407B2154 - 8 -
1 such ancillary facilities, offices and other nonhousing 2 facilities such as administrative, community, health, 3 recreational, educational and welfare facilities as the agency 4 determines to be necessary, convenient or desirable 5 appurtenances AND INCLUDING THE ACQUISITION, CONSTRUCTION OR <-- 6 REHABILITATION OF SUCH ANCILLARY COMMERCIAL FACILITIES AS THE 7 AGENCY DETERMINES TO BE NECESSARY TO MAKE THE REMAINDER OF THE 8 PROJECT ECONOMICALLY FEASIBLE. 9 (18) "Total project cost" means the sum total of all costs 10 incurred in the development of a project, which are approved by 11 the agency as reasonable and necessary, which costs shall 12 include, but are not necessarily limited to, (i) cost of land 13 acquisition and any buildings thereon, (ii) cost of site 14 preparation, demolition and development, (iii) architect, 15 engineer, legal, agency and other fees paid or payable in 16 connection with the planning, execution and financing of the 17 project, (iv) cost of necessary studies, surveys, plans and 18 permits, (v) insurance, interest, financing, tax and assessment 19 costs and other operating and carrying costs during 20 construction, (vi) cost of construction, reconstruction, 21 fixtures, and equipment related to the real property, (vii) cost 22 of land improvements, (viii) necessary expenses in connection 23 with initial occupancy of the project, (ix) a reasonable profit 24 or fee to the builder and developer, (x) an allowance 25 established by the agency for working capital and contingency 26 reserves, and reserves for any anticipated operating deficits 27 during the first two years of occupancy, (xi) the cost of such 28 other items, including tenant relocation, as the agency shall 29 determine to be reasonable and necessary for the development of 30 the project, less any and all net rents and other net revenues 19720S1407B2154 - 9 -
1 received from the operation of the real and personal property on 2 the project site during construction. 3 All costs shall be subject to approval and audit by the 4 agency. The agency may adopt rules and regulations specifying in 5 detail the types and categories of cost which shall be allowable 6 if actually incurred in the construction or reconstruction of a 7 project. 8 Section 201. Agency Creation.--A body corporate and politic, 9 named the "Pennsylvania Housing Finance Agency," is hereby 10 created as a public corporation and government instrumentality 11 to have continuing succession until its existence shall be 12 terminated by law. 13 Section 202. Agency Membership.--The members of the agency 14 shall be the Secretary of [Commerce] Community Affairs, his 15 successors in office, and six additional members whom the 16 Governor shall appoint. The members initially appointed shall 17 serve for terms of one, two, three, four, five and six years, 18 respectively, the particular term of each to be designated by 19 the Governor at the time of appointment. The terms of all their 20 successors shall be six years each, except that any person 21 appointed to fill a vacancy shall serve only for the unexpired 22 term. Every member's term shall extend until his successor is 23 appointed and qualified. Any appointment of a member of the 24 agency made hereafter shall be subject to the advice and consent 25 of two-thirds of all the members of the Senate. Any appointed 26 member of the agency shall be eligible for reappointment. The 27 members of the agency shall not receive compensation for their 28 services as members, but shall receive reimbursement for all 29 necessary expenses incurred in connection with the performance 30 of their duties as members. 19720S1407B2154 - 10 -
1 Section 2. Section 204 of the act is repealed. 2 Section 3. Section 205 of the act, clauses (5), (7.1) and 3 (13), amended or added July 31, 1968 (P.L.914), is amended to 4 read: 5 Section 205. Agency Powers.--The agency shall have the 6 following powers: 7 (1) To adopt, use and alter at will a corporate seal. 8 (2) To make and alter bylaws for the management and 9 regulation of its affairs and to make and from time to time 10 amend and repeal rules and regulations governing the conduct of 11 the business of the agency. 12 (3) To enter into contracts of all kinds and to execute all 13 instruments necessary or convenient for carrying on its 14 operations. 15 (4) To accept grants and subsidies from and to enter into 16 agreements or other transactions with any Federal agency or 17 agency of the Commonwealth or other entity. 18 (5) To accept grants-in-aid, gifts, donations, legacies or 19 usages of money made or extended by individuals, organizations, 20 public or private corporations, departments or instrumentalities 21 of the Commonwealth, or the Federal government, and to return 22 money advanced for its usage not otherwise required for its 23 purposes or for the Capital Reserve Fund created in accordance 24 with section [508] 504-A of this act. 25 (6) To be a party litigant in any court having jurisdiction 26 according to law in any form of action whatsoever. 27 (7) In accordance with the provisions of [article III. and 28 article IV. of] this act to make commitments to purchase and to 29 purchase, service and sell [insured] mortgages, and to make 30 loans directly upon the security of [insured] mortgages. 19720S1407B2154 - 11 -
1 (7.1) To cooperate with and assist the Pennsylvania 2 Department of Community Affairs as such department carries into 3 effect the powers and duties vested in it. 4 (8) To acquire, hold and dispose of personal property, 5 tangible and intangible. 6 (9) To acquire, hold and dispose of real property, or any 7 interest therein, to be used by the agency for the purpose of 8 its offices and operations. 9 (10) [To acquire real property, or any interest therein, by 10 purchase or foreclosure, where such acquisition is necessary or 11 appropriate to protect any loan in which the agency has an 12 interest; to sell, transfer and convey any such property to a 13 buyer and in the event such sale, transfer or conveyance cannot 14 be effected with reasonable promptness or at a reasonable price, 15 to lease such property to a tenant.] Acquire by purchase, gift 16 or foreclosure any real or personal property, or any interest 17 therein, to enter into any lease of property and to hold, sell, 18 assign, lease, encumber, mortgage or otherwise dispose of any 19 real or personal property, or any interest therein, or mortgage 20 lien interest owned by it or under its control, custody or in 21 its possession and release or relinquish any right, title, 22 claim, lien, interest, easement or demand however acquired, 23 including any equity or right of redemption, in property 24 foreclosed by it and to do any of the foregoing by public or 25 private sale, with or without public bidding, notwithstanding 26 the provisions of any other law. 27 (11) To borrow money for the operation and work of the 28 agency by the making of notes and by the issuance of bonds in 29 accordance with the provisions of article V.-A of this act. 30 (12) To invest any funds held in reserves or sinking funds, 19720S1407B2154 - 12 -
1 or any funds not required for immediate disbursement, in such 2 investments as may be lawful for fiduciaries under any law of 3 the Commonwealth, including insured mortgages, which for such 4 temporary purposes alone, need not be made by a mortgagor or 5 involve real estate located in Pennsylvania. 6 (13) To conduct housing studies and to enter into contracts 7 with the Department of Community Affairs and to do all things 8 necessary or convenient to carry out the powers granted by this 9 act or other acts. 10 (14) Employ an executive director and such other officers, 11 agents, employes, professional and business advisers as may from 12 time to time be necessary in its judgment and to fix their 13 compensation; and to promote and discharge such officers, 14 employes and agents. 15 (15) Appear in its own behalf before boards, commissions, 16 departments or other agencies of government, municipal, State or 17 Federal. 18 (16) Procure insurance against any loss in connection with 19 its property in such amounts, and from such insurers, as may be 20 necessary or desirable. 21 (17) To do all things necessary or convenient to carry out 22 the powers granted by this act or other acts. 23 Section 4. Articles III., IV., V. and VI. of the act are 24 repealed and four articles are added to read: 25 ARTICLE III.-A 26 Housing Purchase Program 27 Section 301-A. Housing Purchase Program.--(a) The agency may 28 make loans to any mortgagor for the construction, reconstruction 29 or rehabilitation of housing units for sale to individual 30 purchasers of low or moderate income as provided by the agency 19720S1407B2154 - 13 -
1 in its rules and regulations and to any such individual 2 purchaser for the long-term financing of a housing unit. A loan 3 under this section may be in an amount not to exceed one hundred 4 per cent of the total project cost as approved by the agency. 5 (b) While such loan is outstanding, any sale by the 6 mortgagor or any subsequent resale shall be subject to approval 7 by the agency and the agency shall provide in its rules and 8 regulations concerning such sales and resales that the price of 9 the housing unit sold, the method of making payments thereafter, 10 the security afforded and the interest rates, fees and charges 11 to be paid shall at all times be sufficient to permit the agency 12 to make the payments on its bonds and notes plus any 13 administrative or other costs of the agency in connection with 14 the transactions. Housing units shall be sold under terms that 15 provide for monthly payments including principal, interest, 16 taxes and insurance. 17 (c) While such loan is outstanding, the agency shall, prior 18 to the approval of sale by the mortgagor or any subsequent 19 resale, satisfy itself that such sale or resale is to persons of 20 low or moderate income. 21 (d) Upon the sale by the mortgagor of any housing unit to an 22 individual purchaser of low or moderate income under this 23 subsection to whom a loan is being made by the agency, such 24 housing unit shall be released from the mortgage running from 25 the mortgagor to the agency and such mortgage shall be replaced 26 as to the housing unit by a mortgage running from the individual 27 purchaser to the agency. 28 (E) LOANS MAY, IN ADDITION, BE MADE DIRECTLY TO INDIVIDUAL <-- 29 PURCHASERS OF LOW OR MODERATE INCOME FOR THE CONSTRUCTION, 30 RECONSTRUCTION, OR REHABILITATION OF HOUSING UNITS BY THEM, NOT 19720S1407B2154 - 14 -
1 IN EXCESS OF ONE HUNDRED PER CENT OF THE COST OF SUCH 2 CONSTRUCTION, RECONSTRUCTION, OR REHABILITATION. THE AGENCY 3 SHALL PROVIDE IN ITS RULES AND REGULATIONS CONCERNING SUCH LOANS 4 THAT THE AMOUNT OF THE LOAN, THE METHOD OF MAKING PAYMENTS 5 THEREAFTER, THE SECURITY AFFORDED AND INTEREST RATES, FEES AND 6 CHARGES TO BE PAID SHALL AT ALL TIMES BE SUFFICIENT TO PERMIT 7 THE AGENCY TO MAKE THE PAYMENTS ON ITS BONDS AND NOTES PLUS ANY 8 ADMINISTRATIVE OR OTHER COSTS OF THE AGENCY IN CONNECTION WITH 9 THE TRANSACTIONS. 10 ARTICLE IV.-A 11 Rental Housing Program 12 Section 401-A. Rental Housing Program.--To accomplish the 13 declared purpose of this act of providing rental housing to 14 persons and families of low and moderate income the agency is 15 hereby authorized to: 16 (1) Make first mortgage loans secured by real property or a 17 leasehold estate, including mortgages insured by a Federal 18 agency, to finance projects designed and planned to be available 19 for low and moderate income persons and families or elderly 20 persons and others. 21 (2) Sell, at public or private sale, with or without 22 bidding, any mortgage or other obligation securing a mortgage 23 loan, including sales of mortgages to the United States of 24 America or the Commonwealth or any agencies, instrumentalities 25 or departments thereof. 26 (3) Consent, subject to the provisions of any contract with 27 noteholders or bondholders, whenever it deems it necessary or 28 desirable in the fulfillment of the purposes of this act, to the 29 modification, with respect to rate of interest, time of payment 30 of any installment of principal or interest, or any other terms 19720S1407B2154 - 15 -
1 of any mortgage, mortgage loan, mortgage loan commitment, 2 contract or agreement of any kind to which the agency is a 3 party. 4 (4) In the event of a violation by the mortgagor of the 5 terms of any agreement between the agency and the eligible 6 mortgagor or in the event of a violation by the mortgagor of 7 this act or of the terms of the mortgage loan agreement or of 8 any rules and regulations of the agency duly promulgated 9 pursuant to this act, or in the event the agency shall determine 10 that any loan, or part thereof, made pursuant to this act is in 11 jeopardy of not being repaid, the agency may remove any or all 12 of the existing owners, partners, officers or directors of such 13 mortgagor and appoint such person or persons who the agency in 14 its sole discretion deems advisable, including officers or 15 employes of the agency, as new officers or directors to serve in 16 place of those removed. Officers or directors so appointed need 17 not be stockholders or meet other qualifications which may be 18 prescribed by the certificate of incorporation or bylaws of such 19 mortgagor. In the absence of fraud or bad faith, officers or 20 directors so appointed shall not be personally liable for debts, 21 obligations or liabilities of such mortgagor. Officers or 22 directors so appointed shall serve only for a period coexistent 23 with the duration of such violation or until the agency is 24 assured in a manner satisfactory to it that such violation, or 25 violations of a similar nature, have not and will not reoccur. 26 Officers or employes of the agency who are so appointed as 27 officers or directors shall serve in such capacity without 28 compensation, but shall be entitled to be reimbursed, if and as 29 the certificate of incorporation or bylaws of such mortgagor may 30 provide, for all necessary expenses incurred in the discharge of 19720S1407B2154 - 16 -
1 their duties as officers or directors so appointed of such 2 mortgagor and such other necessary expenses incurred in the 3 discharge of their duties as officers or directors of such 4 eligible mortgagor as determined by the agency. 5 Section 402-A. Mortgage Loans.--(a) Purpose. The agency may 6 make mortgage loans to mortgagors for such projects as in the 7 judgment of the agency have promise of supplying well planned, 8 well designed apartment units which will provide housing for low 9 and moderate income persons or families or the elderly and 10 others in locations where there is a need for such housing. Such 11 loans may include construction loans as well as permanent loans. 12 The agency shall require the mortgagor receiving a loan or its 13 contractor to post labor and materials, and construction 14 performance, surety bonds in amounts related to the project cost 15 as established by regulation or to execute other assurances and 16 guarantees as the agency may deem necessary and may require its 17 principals or stockholders to also execute such other assurances 18 and guarantees as the agency may deem necessary. 19 (b) Interest and Charges. The agency shall have authority 20 to set from time to time the interest rates at which it shall 21 make loans, consistent with the agency's cost of borrowing 22 money, cost of operation and its responsibilities to the holders 23 of its bonds. In connection with the making of mortgage loans 24 and commitments therefor, and in addition to such interest 25 charges, the agency may make and collect such fees and charges, 26 including but not limited to reimbursement of the agency's 27 financing costs, service charges, insurance premiums and 28 mortgage insurance premiums, as the agency determines to be 29 reasonable. 30 (c) Limited Profit. A mortgagor may not make distributions 19720S1407B2154 - 17 -
1 in any one year, with respect to a project financed by the 2 agency, in excess of six per cent EIGHT PER CENT of the <-- 3 mortgagor's equity in such project, except that the right to 4 such distribution shall be cumulative. The mortgagor's equity in 5 a project shall consist of the difference between the mortgage 6 loan and the total project cost. A loan may be in an amount not 7 to exceed one hundred per cent of the project cost as approved 8 by the agency in the case of a non-profit housing corporation or <-- 9 individual purchaser MORTGAGOR and in an amount not to exceed <-- 10 ninety per cent of the project cost as approved by the agency in 11 the case of a limited dividend housing corporation ALL OTHER <-- 12 CASES. With respect to every project, the agency shall, pursuant 13 to regulations adopted by it, establish the mortgagor's equity 14 at the time of the making of the final mortgage advance and for 15 purposes of this paragraph, that figure shall remain constant 16 during the life of the agency's mortgage on such project. In the 17 case of a nonprofit mortgagor receiving a mortgage loan in the 18 amount of one hundred per cent of the total project cost, no 19 distributions shall be permitted. 20 (d) Use of Nondistributed Profits. Whenever a mortgagor 21 accumulates earned surplus in addition to such reserves for 22 replacement as the agency may require, in excess of ten per cent 23 of the current annual rent roll for the project, rents in the 24 project shall be reduced to the extent necessary to lower the 25 earned surplus accumulation to such ten per cent figure in the 26 following fiscal year. 27 (e) Regulatory Agreement. The loan shall be subject to an 28 agreement between the agency and the mortgagor which will 29 subject said mortgagor and its principals or stockholders to 30 limitations established by the agency as to rentals and other 19720S1407B2154 - 18 -
1 charges, builders' and developers' profits, dividends and fees, 2 and the disposition of its property and franchises to the extent 3 more restrictive limitations are not provided by the law under 4 which the borrower is incorporated or organized. 5 (f) Nondiscrimination. The agency shall require that 6 occupancy of all housing financed or otherwise assisted under 7 this act be open to all persons regardless of race, national 8 origin, religion, or creed, and that mortgagors, contractors and 9 subcontractors engaged in the construction, rehabilitation, sale 10 or rental of such housing, shall provide equal opportunity for 11 employment without discrimination as to race, national origin, 12 religion or creed. 13 (g) Amortization and Refinancing. The ratio of loan to 14 project value and the amortization period of loans made under 15 this act which are insured by F.H.A. shall be governed by the 16 F.H.A. mortgage insurance commitment for each project concerned, 17 but shall not exceed fifty years. In the case of a mortgage loan 18 not insured by F.H.A., the ratio of loan to project value and 19 the amortization period of loans shall be determined in 20 accordance with regulations formulated and published by the 21 agency. 22 (h) Project Cost Certification. No loan shall be made 23 unless the mortgagor agrees (i) to certify upon completion of 24 project construction or rehabilitation, subject to audit and 25 determination by the agency, the actual total project cost as 26 defined herein, and (ii) to pay forthwith to the agency, for 27 application to reduction of the principal of the loan, the 28 amount, if any, subject to audit and determination by the 29 agency, of loan proceeds received in excess of the allowable 30 loan based upon the percentage of loan to total project cost 19720S1407B2154 - 19 -
1 authorized by the agency. Notwithstanding the provisions of this 2 subsection, the agency may accept, in lieu of any certification 3 of total project cost as provided herein, such other assurances 4 of the said total project cost, in any form or manner 5 whatsoever, as will enable the agency to determine with 6 reasonable accuracy the amount of said total project cost. 7 Section 403-A. Rental Charges.--In order to encourage 8 developments which are not economically homogeneous and to 9 achieve rent charges which will make units available to persons 10 and families of low income at low rentals and moderate income at 11 moderate rentals the agency and a mortgagor may use measures 12 including, but not limited to: direct rental assistance in the 13 form of partial rent subsidy from any county, municipal, 14 Commonwealth or Federal source, allocation of lower rents, and 15 the raising of rents in the majority of apartments in the 16 project in order to lower the rents of those in the lower rent 17 charge category. With respect to each project the agency shall, 18 prior to initial occupancy, allocate and prescribe the number of 19 lower rental units and the rents to be charged therefor. The 20 allocation may be reviewed and adjusted from time to time. The 21 method of achieving lower rental charges shall, in each 22 instance, be prescribed by the agency. 23 Section 404-A. Tenants.--(a) Prior to making a loan 24 commitment under this article, the agency shall approve a tenant 25 selection plan submitted by the applicant for such a loan. The 26 agency shall make regulations from time to time governing the 27 terms of such tenant selection plans. Such plans shall include 28 criteria for tenant selection based upon the established income 29 limits for eligible tenants which may vary with the size and 30 circumstances of the person or family. Such income limits shall 19720S1407B2154 - 20 -
1 be sufficiently flexible to avoid undue economic homogeneity 2 among the tenants of a project. Tenant selection plans shall 3 provide that as between applicants equally in need and eligible 4 for occupancy of the unit, preference may be given to the 5 elderly and to persons displaced by public action or natural 6 disaster. 7 (b) The agency shall by rules and regulations provide for 8 the periodic examination of the annual income of any person or 9 family residing in any project constructed or rehabilitated with 10 a loan from the agency. In the event that the annual income of a 11 person or family residing in any such project increases and 12 exceeds the income limits prescribed by applicable rules and 13 regulations of the agency but is not more than twenty-five per 14 cent above the annual income so prescribed for admission to the 15 project, the owner or managing agent of such project shall 16 permit the person or family to continue to occupy the unit. The 17 agency or (with the approval of the agency) the mortgagor of any 18 project constructed or rehabilitated with a loan from the 19 agency, may terminate the tenancy or interest of any person or 20 family residing in such project whose annual income exceeds one 21 hundred twenty-five per cent of that prescribed by applicable 22 rules and regulations of the agency and which continues to 23 exceed the same for a period of six months or more: Provided, 24 That no tenancy or interest of any such person or family in any 25 such project shall be terminated except upon reasonable notice 26 and opportunity to obtain suitable alternate housing, in 27 accordance with rules and regulations of the agency: Provided 28 further, That any such person or family, with the approval of 29 the agency, may be permitted to continue to occupy the unit, 30 subject to payment of a rent or carrying charge surcharge to the 19720S1407B2154 - 21 -
1 mortgagor in accordance with a schedule of surcharges fixed by 2 the agency. The agency may require the mortgagor to make payable 3 such surcharge to the agency's general fund. 4 ARTICLE V.-A 5 Bonds and Notes 6 Section 501-A. Issuance of Bonds and Notes.--(a) The agency 7 shall have the power and is hereby authorized from time to time 8 to issue its negotiable bonds, either as serial bonds maturing 9 in annual installments or as term bonds, or any combination 10 thereof, and notes in such principal amount as, in the opinion 11 of the agency, shall be necessary to provide sufficient funds 12 for achieving its corporate purposes, including the housing 13 programs established in Articles III-A and IV-A, the payment of 14 interest on bonds and notes of the agency, establishment of 15 reserves to secure such bonds and notes, and all other 16 expenditures of the agency incident to and necessary or 17 convenient to carry out its corporate purposes and powers. The 18 agency shall have power, from time to time, to issue renewal 19 notes, to issue bonds to pay notes and whenever it deems 20 refunding expedient to refund any bonds by the issuance of new 21 bonds, whether the bonds to be refunded have or have not 22 matured, and to issue bonds partly to refund bonds then 23 outstanding and partly for any other purpose. The refunding 24 bonds shall be sold and the proceeds applied to the purchase, 25 redemption or payment of the bonds to be refunded. 26 (b) The notes and bonds shall be authorized by resolution of 27 the members, shall bear such date or dates, and shall mature at 28 such time or times, in the case of any such note, or any 29 renewals thereof, not exceeding five years from the date of 30 issue of such original note, and in the case of any such bond 19720S1407B2154 - 22 -
1 not exceeding fifty years from the date of issue, as such 2 resolution or resolutions may provide. The notes and bonds shall 3 bear interest at such rate or rates, be in such denominations, 4 be in such form, either coupon or registered, carry such 5 registration privileges, contain such terms and provisions 6 relating to, but not limited to, pledges of the agency's assets, 7 setting aside of reserves, limitations on additional notes and 8 bonds, and such other matters as may affect the security or 9 protection of the notes and bonds, be executed in such manner, 10 be payable in such medium of payment, at such place or places 11 and be subject to such terms of redemption as such resolution or 12 resolutions may provide. The notes and bonds of the agency may 13 be sold at public or private sale, at such price or prices as 14 the agency shall determine. 15 (c) Neither the members of the agency nor any person 16 executing the notes or bonds shall be liable personally on the 17 notes or bonds or be subject to any personal liability or 18 accountability by reason of the issuance thereof. 19 (d) The agency, subject to such agreement with noteholders 20 or bondholders as may then exist, shall have power out of any 21 funds available therefor to purchase its notes or bonds, which 22 shall thereupon be cancelled, at a price not exceeding (i) if 23 the notes or bonds are then redeemable, the redemption price 24 then applicable plus accrued interest to the next interest 25 payment date thereupon, or (ii) if the notes or bonds are not 26 then redeemable, the redemption price applicable on the first 27 date after such purchase upon which the notes or bonds become 28 subject to redemption plus accrued interest to such date. 29 Section 502-A. Credit of Commonwealth or Any Subdivision 30 Thereof Not Pledged.--Except as may otherwise be expressly 19720S1407B2154 - 23 -
1 provided by the agency, its bonds and notes shall be general 2 obligations of the agency payable out of any moneys or revenues 3 of the agency, including the proceeds of mortgage loans made 4 under this act, reserve funds created therefor by the agency, 5 any mortgage insurance contracts pertaining thereto and other 6 lawfully available money, subject only to any agreements with 7 holders of the bonds or notes pledging any receipts or revenues. 8 Bonds and notes issued under the provisions of this act shall 9 not be deemed to constitute a debt of the Commonwealth or of any 10 political subdivision thereof or a pledge of the faith and 11 credit of the Commonwealth or of any such political subdivision. 12 All such bonds and notes shall contain on the face thereof a 13 statement to the effect that neither the agency nor the 14 Commonwealth nor any political subdivision thereof shall be 15 obligated to pay the same or the interest thereon except from 16 such proceeds, reserve fund or mortgage insurance contracts and 17 that neither the faith and credit nor the taxing power of the 18 Commonwealth or any political subdivision thereof is pledged to 19 the payment of the principal of or the interest on such bonds. 20 Section 503-A. General Fund.--The agency shall create and 21 establish a general fund, herein referred to as the "General 22 Fund," and shall pay into such General Fund any moneys 23 appropriated and made available by the Commonwealth for the 24 purposes of such General Fund, and any other moneys which may be 25 available to the agency for its general purposes from any source 26 or sources other than proceeds from the issuance and sale of 27 notes or bonds by the agency. 28 Section 504-A. Capital Reserve Fund.--(a) The agency shall 29 create and establish a separate special fund, herein referred to 30 as the "Capital Reserve Fund," and shall pay into such Capital 19720S1407B2154 - 24 -
1 Reserve Fund any moneys appropriated and made available by the 2 Commonwealth for the purposes of such fund, any proceeds of sale 3 of notes or bonds to the extent provided in the resolution of 4 the agency authorizing issuance thereof, and any other moneys 5 which may be available to the agency for the purpose of such 6 fund from any other source or sources. All moneys held in the 7 Capital Reserve Fund, except as hereinafter provided, shall be 8 used solely for the payment of the principal of bonds of the 9 agency as the same mature, required payments to any sinking fund 10 established for the amortization of term bonds (hereinafter 11 referred to as "sinking fund payments"), the purchase of bonds 12 of the agency, the payment of interest on such bonds of the 13 agency or the payment of any redemption premium required to be 14 paid when such bonds are redeemed prior to maturity: Provided, 15 however, That moneys in such fund shall not be withdrawn 16 therefrom at any time in such amount as would reduce the amount 17 of such fund to less than the maximum amount of principal and 18 interest maturing and becoming due and sinking fund payments 19 required to be made in any succeeding calendar year on all bonds 20 of the agency then outstanding, except for the purpose of paying 21 the principal, interest and sinking fund payments becoming due 22 on such bonds of the agency maturing and becoming due and for 23 the payment of which other moneys of the agency are not 24 available. For the purpose of this subdivision, in computing the 25 maximum amount of principal maturing in any succeeding calendar 26 year, the principal amount of any term bonds which are to be 27 authorized by sinking fund payments shall not be included in the 28 computation. Any income or interest earned by, or increment to, 29 the Capital Reserve Fund due to the investment thereof may be 30 transferred to the General Fund or any other fund of the agency 19720S1407B2154 - 25 -
1 to the extent it does not reduce the amount in such Capital 2 Reserve Fund below the maximum amount of principal and interest 3 maturing and becoming due and sinking fund payments required to 4 be made in any succeeding calendar year on all bonds of the 5 agency then outstanding and secured by such Capital Reserve 6 Fund. 7 (b) The agency shall not issue bonds at any time if the 8 maximum amount of principal and interest maturing and becoming 9 due and sinking fund payments required to be made in a 10 succeeding calendar year on such bonds then to be issued and on 11 all other bonds of the agency then outstanding will exceed the 12 amount of the Capital Reserve Fund at the time of issuance 13 unless the agency, at the time of issuance of such bonds, shall 14 deposit in such fund from the proceeds of the bonds so to be 15 issued, or otherwise, an amount which together with the amount 16 then in such fund, will be not less than the maximum amount of 17 principal and interest maturing and becoming due and sinking 18 fund payments required to be made in any succeeding calendar 19 year on such bonds then to be issued and on all bonds of the 20 agency then outstanding. 21 (c) To assure the continued operation and solvency of the 22 agency for the carrying out of the public purposes of this act, 23 provision is made in subsection (a) for the accumulation in the 24 Capital Reserve Fund of an amount equal to the maximum amount of 25 principal and interest maturing and becoming due and sinking 26 fund payments required to be made in any succeeding calendar 27 year on all bonds of the agency then outstanding. IN ORDER <-- 28 FURTHER TO ASSURE SUCH MAINTENANCE OF THE CAPITAL RESERVE FUND 29 THE AGENCY, AT LEAST THIRTY DAYS BEFORE THE BEGINNING OF EACH 30 LEGISLATIVE SESSION, SHALL SUBMIT TO THE GOVERNOR AND GENERAL 19720S1407B2154 - 26 -
1 ASSEMBLY AN ESTIMATE OF ANY FUNDS EXPECTED TO BE NECESSARY 2 DURING THE FOLLOWING YEAR TO MAKE UP ANY DEFICIENCIES IN THE 3 CAPITAL RESERVE FUND OR OTHERWISE TO AVOID DEFAULT IN THE 4 PAYMENT OF INTEREST OR PRINCIPAL UPON BONDS OR NOTES ISSUED BY 5 THE AGENCY, OR IN SINKING FUND PAYMENTS REQUIRED TO BE MADE, AND 6 THE GOVERNOR SHALL CAUSE THE AMOUNT OF SUCH DEFICIENCY, IF ANY, 7 TO BE PLACED IN THE BUDGET OF THE COMMONWEALTH FOR THE NEXT 8 SUCCEEDING FISCAL YEAR, SO THAT THE GENERAL ASSEMBLY SHALL BE 9 ENABLED TO PROVIDE APPROPRIATION SUFFICIENT TO MAKE UP ANY SUCH 10 DEFICIENCY OR OTHERWISE TO AVOID ANY DEFAULT. SUCH AMOUNT 11 APPROPRIATED, IF ANY, SHALL BE REPAID TO THE COMMONWEALTH AS 12 SOON AS POSSIBLE BY THE AGENCY FROM MONEYS IN THE GENERAL FUND 13 IN EXCESS OF THE AMOUNT REQUIRED TO MAKE AND KEEP THE AGENCY 14 SELF-SUPPORTING. 15 (d) In computing the amount of the Capital Reserve Fund for 16 the purposes of this section, securities in which all or a 17 portion of such fund are invested shall be valued at par, or if 18 purchased at less than par, at their cost to the agency. 19 Section 505-A. Trust Agreement.--In the discretion of the 20 agency, bonds and notes issued by it shall be secured by a trust 21 agreement by and between the agency and a trustee, which may be 22 any trust company or bank within the Commonwealth having the 23 powers of a trust company. Either the resolution providing for 24 the issuance of bonds and notes or such trust agreement may 25 contain such provisions for protecting and enforcing the rights 26 and remedies of the bondholders as may be reasonable and proper 27 and not in violation of law, including covenants setting forth 28 the duties of the agency in relation to the custody, 29 safeguarding and application of all moneys. 30 It shall be lawful for any bank or trust company incorporated 19720S1407B2154 - 27 -
1 under the laws of the Commonwealth to act as depository of the 2 proceeds of bonds and notes or of revenues and to furnish such 3 indemnifying bonds or to pledge such securities as may be 4 required by the agency. Such trust agreement may set forth the 5 rights and remedies of the bondholders and noteholders and of 6 the trustee, and may restrict the individual right of action by 7 bondholders and noteholders. In addition to the foregoing, such 8 trust agreement may contain such other provision as the agency 9 may deem reasonable and proper for the security of the 10 bondholders and noteholders. All expenses incurred in carrying 11 out the provisions of such trust agreement may be treated as a 12 part of the cost of the operation of the agency. 13 Section 506-A. Bonds and Notes Tax Exempt.--The creation of 14 the agency is in all respects for the benefit of the people of 15 the Commonwealth and for the improvement of their health, 16 safety, welfare, comfort and security, and its purposes are 17 public purposes and the agency will be performing an essential 18 governmental function. The Commonwealth covenants with the 19 purchasers and all subsequent holders and transferees of the 20 notes and bonds issued by the agency, in consideration of the 21 acceptance of any payment for the notes and bonds, that the 22 notes and bonds of the agency, issued pursuant to this act and 23 the income therefrom, the income and revenues of the agency, and 24 the agency and its property shall at all times be free from 25 taxation or assessment of every kind and nature except for 26 inheritance, estate, gift and transfer taxes. 27 Section 507-A. Notes and Bonds as Legal Investments.--The 28 notes and bonds of the agency are securities in which all public 29 officers and bodies of the Commonwealth and all municipalities 30 and municipal subdivisions, all insurance companies and 19720S1407B2154 - 28 -
1 associations, and other persons carrying on an insurance 2 business, all banks, trust companies, savings banks and savings 3 associations, saving and loan associations, investment 4 companies, all administrators, guardians, executors, trustees 5 and other fiduciaries, and all other persons whatsoever who are 6 now or may hereafter be authorized to invest in bonds or other 7 obligations of the Commonwealth, may properly and legally invest 8 funds, including capital, in their control or belonging to them. 9 Section 508-A. Covenant by Commonwealth Not to Limit or 10 Alter Powers Vested in Agency.--The Commonwealth of Pennsylvania 11 does hereby pledge to and covenant and agree with the holders of 12 any bonds, bond anticipation notes or other obligations issued 13 pursuant to the authority of this act that the Commonwealth will 14 not limit or alter the rights or powers hereby vested in the 15 agency to perform and fulfill the terms of any agreement made 16 with the holders of such bonds, bond anticipation notes or other 17 obligations, or in any way impair the rights or remedies of such 18 holders, until such bond, bond anticipation notes and other 19 obligations, together with interest thereon, with interest on 20 any unpaid installments of interest, and all costs and expenses 21 in connection with any action or proceedings by or in behalf of 22 such holders, are fully met and discharged or provided for. The 23 agency may include this pledge and agreement of the Commonwealth 24 in any agreement with the holders of bonds, bond anticipation 25 notes and other obligations issued by the agency. 26 ARTICLE VI.-A 27 Liberal Construction, Fraud Penalty and Effective Date 28 Section 601-A. Liberal Construction.--This act, being 29 necessary for the welfare of the Commonwealth and its 30 inhabitants, shall be liberally construed to effect the purposes 19720S1407B2154 - 29 -
1 thereof. 2 Section 602-A. Fraud Penalty.--Any person who attempts to or 3 obtains financial aid for a project hereunder or occupancy or 4 continual occupancy of a dwelling unit therein by false or 5 misleading information or who shall violate this act or who 6 shall by fraud attempt to obtain moneys from the agency or its 7 approval for the payment of moneys or shall fraudulently attempt 8 to or does prevent the collection of any moneys due to the 9 agency shall, for each offense, be guilty of a misdemeanor, and, 10 upon conviction thereof, shall be sentenced to pay a fine not 11 exceeding three hundred dollars ($300) or undergo imprisonment 12 not exceeding one year, or both. 13 Section 603-A. Effective Date; Proclamation.--This act shall 14 become effective when the Governor by proclamation declares that 15 sufficient funds are available to administer this act. For the 16 purposes of this determination and then thereafter, in addition 17 to any appropriations as are made to the agency, the 18 Commonwealth is authorized to accept for the account of the 19 agency grants-in-aid, donations and gifts of every manner and 20 type from the Federal Government or from any other private or 21 public corporation or person. Upon such declaration, such funds 22 as have been collected shall immediately be paid to the 23 treasurer of the agency, or if a treasurer has not been 24 appointed, to such other person as the Governor may designate as 25 acting treasurer. D26L32CM/19720S1407B2154 - 30 -