HMFA has three types of loan programs. They are refinancing permanent loans, construction loans that convert to permanent financing and permanent loans with a construction escrow. 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.
