HMFA has three types of loan programs. They are permanent take-out financing, construction loans that convert to permanent financing and construction loans for local housing authority turnkey projects. Most loans are funded through the sale of bonds. These bonds may be either tax-exempt or taxable. The interest income on tax-exempt bonds is exempt from federal income tax. Tax-exempt bonds generally have a lower interest rate and, as a result, HMFA is able to provide loan financing at below market interest rates.
Projects financed through the sale of tax-exempt bonds must comply with Section 142(d) of the Internal Revenue Code and the applicable U.S. Department of Treasury regulations. These regulations control such things as the low- or moderate-income occupancy requirements as well as the use of the buildings. Furthermore, these bonds are subject to a statewide volume cap and the availability of the same for the funding of housing projects.
Taxable bonds are generally less restrictive; however, they usually have an interest rate of approximately 200 basis points higher than that of tax-exempt bonds. Under special circumstances, HMFA will fund loans from the Multifamily Rental Housing Production Fund Program. This program's funds are generally accessed to provide short-term loans for local housing authority turnkey projects or to provide immediate loans in anticipation of refunding the loan with bond proceeds at the next occurring bond issuance of HMFA.
