HB-4658, As Passed Senate, June 26, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 4658

A bill to amend 1966 PA 346, entitled

"State housing development authority act of 1966,"

by amending sections 22, 58, 58a, and 58c (MCL 125.1422, 125.1458,

125.1458a, and 125.1458c), section 22 as amended by 2002 PA 385 and

sections 58, 58a, and 58c as added by 2004 PA 480.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 22. The authority shall possess all powers necessary or

convenient to carry out this act, including the following powers in

addition to other powers granted by other provisions of this act:

(a) To sue and to be sued; to have a seal and to alter the

seal at pleasure; to have perpetual succession; to make and execute

contracts and other instruments necessary or convenient to the

exercise of the powers of the authority; and to make, amend, and

repeal bylaws and rules.

(b) To undertake and carry out studies and analyses of housing

needs within this state and ways of meeting those needs, including

data with respect to population and family groups, the distribution

of population and family groups according to income, and the amount

and quality of available housing and its distribution according to

rentals and sales prices, employment, wages, and other factors

affecting housing needs and the meeting of housing needs; to make

the results of those studies and analyses available to the public

and the housing and supply industries; and to engage in research

and disseminate information on housing.

financial assistance.

(d) To survey and investigate housing conditions and needs,

both urban and rural, throughout this state and make

recommendations to the governor and the legislature regarding

legislation and other measures necessary or advisable to alleviate

any existing housing shortage in this state.

(e) To establish and collect fees and charges in connection

with the sale of the authority's publications and the authority's

loans, commitments, and servicing, including but not limited to,

the reimbursement of costs of financing by the authority, service

charges, and insurance premiums as the authority determines to be

reasonable and as approved by the authority. Fees and charges shall

be determined by the authority and shall not be considered to be

interest. The authority may use any accumulated fees and charges

and interest income for achieving any of the corporate purposes of

the authority, to the extent that the fees, charges, and interest

income are not pledged to the repayment of bonds and notes of the

authority or the interest on those bonds and notes.

(f) To encourage community organizations to assist in

initiating housing projects as provided in this act.

(g) To encourage the salvage of all possible usable housing

scheduled for demolition because of highway, school, urban renewal,

or other programs by seeking authority for the sponsors of the

programs to use funds provided for the demolition of the buildings,

to be allocated to those sponsors approved by the authority to

defray moving and rehabilitation costs of the buildings.

(h) To engage and encourage research in, and to formulate

demonstration projects to develop, new and better techniques and

methods for increasing the supply of housing for persons eligible

for assistance as provided in this act; and to provide technical

assistance in the development of housing projects and in the

development of programs to improve the quality of life for all the

people of this state.

(i) To make or purchase loans, including loans for condominium

units as defined in section 4 of the condominium act, 1978 PA 59,

MCL 559.104, and including loans to mortgage lenders, which are

unsecured or the repayments of which are secured by mortgages,

security interests, or other forms of security; to purchase and

enter into commitments for the purchase of securities, certificates

of deposits, time deposits, or mortgage loans from mortgage

lenders; to participate in the making or purchasing of unsecured or

secured loans and undertake commitments to make or purchase

unsecured or secured loans; to sell mortgages, security interests,

notes, and other instruments or obligations evidencing or securing

loans, including certificates evidencing interests in 1 or more

loans, at public or private sale; in connection with the sale of an

instrument or obligation evidencing or securing 1 or more loans, to

service, guarantee payment on, or repurchase the instrument or

obligation, whether or not it is in default; to modify or alter

mortgages and security interests; to foreclose on any mortgage,

security interest, or other form of security; to finance housing

units; to commence an action to protect or enforce a right

conferred upon the authority by law, mortgage, security agreement,

contract, or other agreement; to bid for and purchase property that

was the subject of the mortgage, security interest, or other form

of security, at a foreclosure or at any other sale, and to acquire

or take possession of the property. Upon acquiring or taking

possession of the property, the authority may complete, administer,

and pay the principal and interest of obligations incurred in

connection with the property, and may dispose of and otherwise deal

with the property in any manner necessary or desirable to protect

the interests of the authority in the property. If the authority or

an entity that provides mortgage insurance to the authority

acquires property upon the default of a borrower, the authority may

make a mortgage loan to a subsequent purchaser of that property

even if the purchaser does not meet otherwise applicable income

limitations and purchase price limits.

(j) To set standards for housing projects that receive loans

under this act and to provide for inspections to determine

compliance with those standards. The standards for construction and

rehabilitation of mobile homes, mobile home parks, and mobile home

condominium projects shall be established jointly by the authority

and the mobile home commission, created in the mobile home

commission act, 1987 PA 96, MCL 125.2301 to 125.2349. However,

financing standards shall be established solely by the authority.

(k) To accept gifts, grants, loans, appropriations, or other

aid from the federal, state, or local government, from a

subdivision, agency, or instrumentality of a federal, state, or

local government, or from a person, corporation, firm, or other

organization.

(l) To acquire or contract to acquire from a person, firm,

corporation, municipality, or federal or state agency, by grant,

purchase, or otherwise, leaseholds or real or personal property, or

any interest in a leasehold or real or personal property; to own,

hold, clear, improve, and rehabilitate and to sell, assign,

exchange, transfer, convey, lease, mortgage, or otherwise dispose

of or encumber any interest in a leasehold or real or personal

property. This act shall not impede the operation and effect of

local zoning, building, and housing ordinances, ordinances relating

to subdivision control, land development, or fire prevention, or

other ordinances having to do with housing or the development of

housing.

(m) To procure insurance against any loss in connection with

the property and other assets of the authority.

(n) To invest, at the discretion of the authority, funds held

in reserve or sinking funds, or money not required for immediate

use or disbursement, in obligations of this state or of the United

States, in obligations the principal and interest of which are

guaranteed by this state or the United States, or in other

obligations as may be approved by the state treasurer.

(o) To promulgate rules necessary to carry out the purposes of

this act and to exercise the powers expressly granted in this act

in accordance with the administrative procedures act of 1969, 1969

PA 306, MCL 24.201 to 24.328.

(p) To enter into agreements with nonprofit housing

corporations, consumer housing cooperatives, limited dividend

housing corporations, mobile home park corporations, and mobile

home park associations that provide for regulation by the authority

of the planning, development, and management of any housing project

undertaken by nonprofit housing corporations, consumer housing

cooperatives, limited dividend housing corporations, mobile home

park corporations, and mobile home park associations and that

provide for the disposition of the property and franchises of those

corporations, cooperatives, and associations.

(q) To appoint to the board of directors of a nonprofit

housing corporation, consumer housing cooperative, limited dividend

housing corporation, mobile home park corporation, or mobile home

park association, a number of new directors sufficient to

constitute a majority of the board notwithstanding other provisions

of the articles of incorporation or other provisions of law.

Directors appointed under this subsection need not be stockholders

or members or meet other qualifications that may be described by

the certificate of incorporation or bylaws. In the absence of fraud

or bad faith, directors appointed under this subsection shall not

be personally liable for debts, obligations, or liabilities of the

corporation or association. The authority may appoint directors

under this subsection only if 1 or more of the following occur:

(i) The nonprofit housing corporation, consumer housing

cooperative, limited dividend housing corporation, mobile home park

corporation, or mobile home park association has received a loan or

advance, as provided for in this act, and the authority determines

that the loan or advance is in jeopardy of not being repaid.

(ii) The nonprofit housing corporation, consumer housing

cooperative, limited dividend housing corporation, mobile home park

corporation, or mobile home park association received a loan or

advance as provided for in this act and the authority determines

that the proposed housing project for which the loan or advance was

made is in jeopardy of not being constructed.

(iii) The authority determines that some part of the net income

or net earnings of the nonprofit housing corporation is inuring to

the benefit of a private individual, firm, corporation,

partnership, or association; the authority determines that an

unreasonable part of the net income or net earnings of the consumer

housing cooperative is inuring to the benefit of a private

individual, firm, corporation, partnership, or association; or the

authority determines that some part of the net income or net

earnings of the limited dividend housing corporation, in excess of

that permitted by other provisions of this act, is inuring to the

benefit of a private individual, firm, corporation, partnership, or

association.

(iv) The authority determines that the nonprofit corporation or

consumer housing cooperative is in some manner controlled by, under

the direction of, or acting in the substantial interest of a

private individual, firm, corporation, partnership, or association

seeking to derive benefit or gain from, or seeking to eliminate or

minimize losses in any dealings or transactions with, the nonprofit

corporation or consumer housing cooperative. However, this

subparagraph shall apply to individual cooperators in consumer

housing cooperatives only in circumstances defined by the authority

in its rules.

(v) The authority determines that the nonprofit housing

corporation, consumer housing cooperative, limited dividend housing

corporation, mobile home park corporation, or mobile home park

association is in violation of the rules promulgated under this

section.

(vi) The authority determines that the nonprofit housing

corporation, consumer housing cooperative, limited dividend housing

corporation, mobile home park corporation, or mobile home park

association is in violation of 1 or more agreements entered into

with the authority that provide for regulation by the authority of

the planning, development, and management of a housing project

undertaken by the nonprofit housing corporation, consumer housing

cooperative, limited dividend housing corporation, mobile home park

corporation, or mobile home park association or that provide for

the disposition of the property and franchises of the corporation,

or cooperative, or association.

(r) To give approval or consent to the articles of

incorporation submitted to the authority by a corporation seeking

approval as a nonprofit housing corporation, consumer housing

cooperative, limited dividend housing corporation, or mobile home

park corporation under chapter 4, 5, 6, or 8; to give approval or

consent to the partnership agreement, joint venture agreement,

trust agreement, or other document of basic organization of a

limited dividend housing association under chapter 7 or mobile home

park association under chapter 9.

(s) To engage the services of private consultants on a

contract basis for rendering professional and technical assistance

and advice.

(t) To lease real or personal property and to accept federal

funds for, and participate in, federal programs of housing

assistance.

(u) To review and approve rental charges for authority-

financed housing projects and require whatever changes the

authority determines to be necessary. The changes shall become

effective after not less than 30 days' written notice is given to

the residents of the affected authority-financed housing projects.

(v) To set forth in the various loan documents of the

authority those restrictions on the sale, conveyance by land

contract, or transfer of residential real property, housing

projects, or housing units for which a note is held by the

authority and restrictions on the assumption by subsequent

purchasers of loans originated by and held by, or originated for

purchase by and held by, the authority as the authority determines

to be necessary in order to comply with requirements of federal

statutes, federal rules or regulations promulgated under sections

551 to 559 of title 5 of the United States Code, 5 ~~U.S.C.~~ USC 551

to 559, state statutes, or state rules promulgated under the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, or to obtain and maintain the tax exempt status of

authority bonds and notes. However, the authority shall not use a

due on sale or acceleration clause solely for the purpose of

renegotiating the interest rate on a loan made with respect to an

owner-occupied single-family housing unit. Without limiting the

authority's power to establish other restrictions, as provided in

this section, on the sale, conveyance by land contract, or transfer

of residential real property, housing projects, or housing units

for which a note is held by the authority and the assumption by

subsequent purchasers of loans made or purchased by the authority,

the authority shall provide in its loan documents relating to a

single family loan that the single family loan may be assumed by a

new purchaser only when the new purchaser qualifies under the

authority income limitations rules except where such a restriction

diminishes or precludes the insurance or a guarantee by an agency

of the federal government with respect to the single family loan. A

loan made for a mobile home that the borrower does not intend to

permanently affix to real property shall become immediately due and

payable in the event the mobile home is moved out of the state. Any

restrictions on conveyance by sale, conveyance by land contract, or

transfer that are authorized in this section shall apply only to

loans originated by and held by, or originated for purchase by and

held by, the authority and may, at the option of the authority, be

enforced by accelerating and declaring immediately due and payable

all sums evidenced by the note held by the authority. An

acceleration and declaration of all sums to be due and payable on

conveyance by sale, land contract, or transfer is not an

unreasonable restraint on alienation. An acceleration and

declaration, unless otherwise prohibited in this subdivision, of

all sums to be due and payable under this subdivision is

enforceable in any court of competent jurisdiction. This

subdivision is applicable to secured and unsecured loans. This

subdivision is also applicable to loan documents utilized in

conjunction with an authority-operated program of residential

rehabilitation by an entity cooperating or participating with the

authority under section 22a(4), which loans are originated with the

intent to sell those loans to the authority.

(w) To set forth in the various loan documents of the

authority those remedies for the making of a false statement,

representation, or pretense or a material misstatement by a

borrower during the loan application process. Without limiting the

authority's power to pursue other remedies, the authority shall

provide in its loan documents that, if a borrower makes a false

statement, representation, or pretense or a material misstatement

during the loan application process, the authority, at its option,

may accelerate and declare immediately due and payable all sums

evidenced by the note held by the authority. An acceleration and

declaration of all sums to be due as authorized under this

subdivision and payable as provided in this subdivision is

enforceable in any court of competent jurisdiction. This

subdivision is applicable to secured and unsecured loans.

(x) To collect interest on a real estate loan, the primary

security for which is not a first lien on real estate, at the rate

of 15% or less per annum on the unpaid balance. This subdivision

does not impair the validity of a transaction or rate of interest

that is lawful without regard to this subdivision.

(y) To encourage and engage or participate in programs to

accomplish the preservation of housing in this state available for

occupancy by persons and families of low or moderate income.

(z) To verify for the state treasurer statements submitted by

a city, village, township, or county as to exempt properties under

section 7d of the general property tax act, 1893 PA 206, MCL

211.7d.

(aa) For the purpose of more effectively managing its debt

service, to enter into an interest rate exchange or swap, hedge, or

similar agreement with respect to its bonds or notes on the terms

and payable from the sources and with the security, if any, as

determined by a resolution of the authority.

(bb) To make working capital loans to contractors or

subcontractors on housing projects financed by the authority. The

authority shall submit an annual report to the legislature

containing the amount, recipient, duration, circumstance, and other

related statistics for each capital loan made to a contractor or

subcontractor under this subdivision. The authority shall include

in the report statistics related to the cost of improvements made

to adapt property for use by disabled individuals as provided in

section 32b(5) or (6) or section 44(2)(a).

(cc) Subject to rules of the civil service commission, to

adopt a code of ethics with respect to its employees that requires

disclosure of financial interests, defines and precludes conflicts

of interest, and establishes reasonable post-employment

restrictions for a period of up to 1 year after an employee

terminates employment with the authority.

(dd) To impose covenants running with the land in order to

satisfy requirements of applicable federal law with respect to

housing assisted or to be assisted through federal programs such as

the low income housing tax credit program or the home investment

partnerships program by executing and recording regulatory

agreements between the authority or such municipality or other

entity as may be designated by the authority and the person or

entity to be bound. These covenants shall run with the land and be

effective with respect to the parties making the covenants and

other intended beneficiaries of the covenants, even though there is

no privity of estate or privity of contract between the authority

and the persons or entities to be bound.

(ee) To impose covenants running with the land in order to

satisfy requirements of applicable state or federal law with

respect to housing financed by the authority by executing and

recording regulatory agreements between the authority and the

person or entity to be bound. These covenants shall run with the

land and be effective with respect to the parties making the

covenants and other intended beneficiaries of the covenants, even

though there is no privity of estate or privity of contract between

the authority and the persons or entities to be bound. With respect

to the application of any applicable environmental laws, this

subdivision shall not be construed to grant to the authority any

additional rights, privileges, or immunities not otherwise afforded

to a private lender that is not in the chain of title for the land.

(ff) To participate in programs designed to assist persons and

families whose incomes do not exceed 115% of the greater of

statewide median gross income or the area median gross income

become homeowners where loans are made by private lenders for

purchase by the government national mortgage association, federal

national mortgage association, federal home loan mortgage

corporation, or other federally chartered organizations.

Participation may include providing or funding homeownership

counseling and providing some or all of a reserve fund to be used

to pay for losses in excess of insurance coverage.

(gg) To invest up to 20% of funds held by or for the authority

in escrow accounts for the benefit of the authority or mortgagors

of authority-financed housing in loans originated or purchased by

the authority, under the conditions prescribed in this subdivision

and without the consent of the escrow depositors. In connection

with loans described in this subdivision, the authority may charge

and retain fees in amounts similar to those charged with respect to

similar loans for which the source of funding does not come from

escrow funds. The investment authorized by this subdivision shall

not be made unless both of the following requirements are met:

(i) The return on the loan is approximately equivalent to that

which could be obtained from investments of substantially similar

credit quality and maturity, as determined by the authority.

(ii) The authority agrees to repurchase from its own funds and

at the same prices at which the loans were sold to the escrow

funds, as adjusted for the accretion of discount or amortization of

premium, plus accrued interest, any loans that become delinquent in

excess of 30 days. This subdivision does not obligate the authority

to purchase a delinquent loan so long as with respect to that loan

the authority advances money from its own funds in the amount of

the delinquent payments. The authority's election to advance

payments does not in any manner abate or cure the delinquency of

the loan and the authority may resort to any remedies that would

exist in the absence of that payment.

(hh) To acquire, develop, rehabilitate, own, operate, and

enter into contracts with respect to the management and operation

of real and personal property to use as office facilities by the

authority and to enter into leases with respect to facilities not

immediately necessary for the activities of the authority.

(ii) To make loans to certain qualified buyers and resident

organizations and to make grants to resident organizations as

provided in the following:

(i) The urban homestead act, 1999 PA 127, MCL 125.2701 to

125.2709.

(ii) The urban homesteading on vacant land act, 1999 PA 129,

MCL 125.2741 to 125.2748.

(iii) The urban homesteading in single-family public housing

act, 1999 PA 128, MCL 125.2761 to 125.2770.

(iv) The urban homesteading in multifamily public housing act,

1999 PA 84, MCL 125.2721 to 125.2734.

(jj) To implement and administer a housing and community

development program as described in this act.

Sec. 58. (1) The definitions in section 11 apply to this

chapter unless otherwise provided in this chapter.

(2) As used in this chapter:

(a) "Adjacent neighborhood" means a residential area as

determined by the authority immediately adjoining or near a

downtown area within the same municipality.

(b) ~~(a)~~ "Adjusted household income" means that term as defined

in rules of the authority.

~~(b) "Affordable housing" means residential housing that is~~

~~occupied by low income, very low income, or extremely low income~~

~~households, and results in monthly housing costs equal to no more~~

~~than approximately 1/3 of the adjusted household income of the~~

~~occupying household.~~

properties have been planned, zoned, or used for commercial

purposes for 50 or more years and where a majority of the buildings

are built adjacent to each other as determined by the authority and

up to the public right-of-way. In order to be a downtown area, the

area shall contain a significant number of multilevel, mixed use

buildings and property in the downtown area must be owned by more

than 3 private owners.

(d) ~~(c)~~ "Eligible applicant" means a not-for-profit

corporation, a for-profit corporation, a municipality, a land bank

fast track authority organized under the land bank fast track act,

2003 PA 258, MCL 124.751 to 124.774, or a partnership that is

approved by the authority and that is organized for the purpose of

developing and supporting affordable housing for low income, very

low income, or extremely low income households or projects located

in a downtown area or adjacent neighborhood.

(e) ~~(d)~~ "Extremely low income household" means a person, a

family, or unrelated persons living together whose adjusted

household income is not more than ~~25%~~ 30% of the area median

income, as determined by the authority.

(f) ~~(e)~~ "Fund" means the Michigan housing and community

development fund created in section 58a.

(g) ~~(f)~~ "Low income household" means a person, a family, or

unrelated persons living together whose adjusted household income

is more than 50% but not more than 60% of the area median income,

as determined by the authority.

(h) "Mixed use buildings" means buildings that can be used for

more than 1 purpose, and in any combination, including, but not

limited to, residential housing combined with either commercial or

retail space.

(i) ~~(g)~~ "Multifamily housing" means a building or buildings

providing housing to 2 or more households, none of which is owner

occupied.

(j) "Project" means those activities defined under section

58c.

(k) "Supportive housing" means a rental housing project in

which some or all of the units are targeted to people with

household incomes at or below 30% of area median income and that

provide services, either directly or contracted for, to those

people that include, but are not limited to, mental health,

substance abuse services, counseling services, and daily living

services.

(l) ~~(h)~~ "Very low income household" means a person, a family,

or unrelated persons living together whose adjusted household

income is not more than ~~25% but not more than~~ 50% of the area

median income, as determined by the authority.

Sec. 58a. ~~(1) The Michigan housing and community development~~

~~fund is created in the department of treasury. The fund shall be~~

~~administered by the authority and shall be expended only as~~

~~provided in this chapter.~~

~~(2) The state treasurer shall credit to the fund all of the~~

~~following:~~

~~(a) All receipts, including, but not limited to, dividends and~~

~~interest on the investment of money in the fund and principal and~~

~~interest payments from loans or agreements made from the fund.~~

~~(b) All proceeds of assets received by the authority as a~~

~~result of the default of loans or agreements made under this~~

~~chapter.~~

~~(c) All appropriations, grants, or gifts of money or property~~

~~made to the fund.~~

~~(d) All fees or charges collected by the authority pursuant to~~

~~activities authorized under this chapter.~~

~~(e) Other revenue as provided by law.~~

~~(3) All balances in the fund at the end of a fiscal year shall~~

~~be carried over as a part of the fund and shall not revert to the~~

~~general fund of the state.~~

(1) The Michigan housing and community development fund is

created as a separate fund in the authority.

(2) The fund shall be administered by the authority, and money

in the fund shall be expended only as provided in this act.

(3) The authority shall credit to the fund all amounts

appropriated to the fund or to the authority for the fund and any

other money made available to the authority for the fund from any

other source for the purposes under this act. The authority, on

behalf of the fund, may solicit and accept gifts, grants, labor,

loans, and other aid from any person, government, or entity. The

authority may receive money or other assets from any source for

deposit into the fund, including, but not limited to, federal

funds, gifts, bequests, and donations.

(4) The authority shall invest the money and credit the

earnings from the investments to the fund in accordance with

section 22.

(5) Money appropriated to the fund or to the authority for the

fund shall be available for disbursement by the authority upon

appropriation.

(6) Money in the fund at the close of a fiscal year shall

remain in the fund and shall not lapse to the general fund.

Sec. 58c. (1) The authority shall expend money in the fund to

make grants, mortgage loans, or other loans to eligible applicants

as provided in this section to enable eligible applicants to

finance any of the following with respect to housing or home

ownership for low income, very low income, and extremely low income

households and with respect to projects located in a downtown area

or adjacent neighborhood:

(a) Acquisition of land and buildings.

(b) Rehabilitation.

(d) Development and predevelopment costs.

(e) Preservation of existing housing.

(f) ~~Infrastructure~~ Community development projects, including,

but not limited to, infrastructure improvements, economic

development projects, blight elimination, or community facilities.

~~that support housing development.~~

(g) Insurance.

(h) Operating and replacement reserves.

(i) Down payment assistance.

(j) Security deposit assistance.

(k) ~~Supportive services~~ Foreclosure prevention and assistance.

(l) Individual development accounts established under the

individual or family development account program act, 2006 PA 513,

MCL 206.701 to 206.711.

(m) Activities related to ending homelessness.

(n) Assistance to nonprofit organizations, municipalities, and

land bank fast track authorities organized under the land bank fast

track act, 2003 PA 258, MCL 124.751 to 124.774.

(o) Predatory lending prevention or relief.

(2) The authority shall expend a portion of the fund for

housing for ~~special needs populations including, but not limited~~

~~to, the homeless,~~ persons with physical or mental handicaps , and

persons living in ~~rural or~~ eligible distressed areas.

(3) The authority may make a loan to an eligible applicant

from the fund at no interest or at below market interest rates,

with or without security, and may make a loan for predevelopment

financing.

(4) The authority may provide assistance to eligible

applicants for housing units for very low income or extremely low

income households within multifamily housing that is occupied

partly by very low income or extremely low income households and

partly by households that do not qualify as very low income or

extremely low income households, subject to the rules promulgated

by the authority.

(5) The authority may ~~provide funding for projects with 50~~

~~units or less and provide incentives to encourage project~~

~~feasibility and mixed income housing projects that respond to~~

~~community priorities~~ expend money in the fund for all other things

necessary to achieve the objectives and purposes of the fund or

this chapter.

(6) When performing functions under this chapter, the

authority shall consider advice provided by the committee created

under section 58e.