PRINTER'S NO. 1751
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
REFERRED TO STATE GOVERNMENT, MAY 9, 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 32 the powers and duties of the agency; and providing penalties. 33 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows: 2 Section 1. The title and sections 101, 102, 103, 201 and 3 202, act of December 3, 1959 (P.L.1688), known as the "Housing 4 Agency Law," clause (7) of section 102 amended July 31, 1968 5 (P.L.914), are amended to read: 6 AN ACT 7 To promote the health, safety and welfare of the people of the 8 Commonwealth by broadening the market for [low-priced private 9 homes] housing for persons and families of low and moderate 10 income and alleviating shortages thereof, and by assisting in 11 the provision of housing for elderly persons through the 12 creation of the Pennsylvania Housing Finance Agency as a 13 public corporation and government instrumentality; providing 14 for the organization, membership and administration of the 15 agency, prescribing its general powers and duties and the 16 manner in which its funds are kept and audited, empowering 17 the agency to make housing loans to [eligible] qualified 18 mortgagors upon the security of insured and uninsured 19 mortgages, defining [eligible] qualified mortgagors and 20 providing for priorities among [them] tenants in certain 21 instances, prescribing interest rates and other terms of 22 housing loans, permitting the agency to acquire real or 23 personal property, permitting the agency to make agreements 24 with financial institutions and Federal agencies, providing 25 for the purchase by persons of low and moderate income of 26 housing units, and approving the sale of housing units, 27 permitting the agency to sell housing loans, providing for 28 the promulgation of regulations and forms by the agency, 29 prescribing penalties for furnishing false information, 30 empowering the agency to borrow money upon its own credit by 19720S1407B1751 - 2 -
1 the issuance and sale of bonds and notes and by giving 2 security therefor, permitting the refunding, redemption and 3 purchase of such obligations by the agency, prescribing 4 remedies of holders of such bonds and notes, exempting bonds 5 and notes of the agency, the income therefrom, and the income 6 and revenues of the agency from taxation, except transfer, 7 death and gift taxes; making such bonds and notes legal 8 investments for certain purposes; and indicating how the act 9 shall become effective. 10 Section 101. Short Title.--This act shall be known and may 11 be cited as the "Housing Finance Agency Law." 12 Section 102. Findings and Declaration of Policy.--It is 13 hereby determined and declared as a matter of legislative 14 finding that-- 15 (1) The welfare of the Commonwealth is threatened by the 16 fact that throughout Pennsylvania the supply of [low-priced] 17 private homes and rental units for persons and families of low 18 and moderate income is inadequate to meet the need for such 19 housing created by an expanding population, the wearing out of 20 older dwellings and the elimination of substandard dwellings by 21 governmental action, and by a shortage of suitable dwellings for 22 elderly persons. 23 (2) Because of higher construction costs, a scarcity of 24 financing available for housing and the resulting increase in 25 interest rates, the housing need which exists in fact has not 26 been able to find economic expression in a market demand 27 sufficient to encourage greater production of [low-priced] homes 28 and rental housing [for elderly persons] by private industry for 29 persons and families of low and moderate income, including the 30 elderly. 19720S1407B1751 - 3 -
1 (3) Persons and families whose residences are condemned by 2 governmental action in the prosecution of necessary public works 3 in urban slum clearance programs and under regulatory laws 4 protecting health and safety, face insuperable difficulties in 5 finding new [homes which are] housing which is adequate, safe 6 and sanitary. Many such persons and families are not eligible to 7 occupy public housing administered by governmental agencies and 8 are also unable to rent or purchase adequate, safe and sanitary 9 [private] housing because of the economic conditions described. 10 Unless it becomes economically feasible for these persons and 11 families to acquire [private] housing in place of the dwellings 12 now being eliminated by urban renewal programs in blighted areas 13 and other dwellings removed by reason of other public works, 14 such necessary governmental activities face serious curtailment 15 or interruption. 16 (4) The Commonwealth has a strong moral responsibility to 17 assist in providing opportunity for the rental or purchase of 18 relocation housing by persons and families who are displaced by 19 necessary governmental action, as well as a general and 20 continuing responsibility to eliminate conditions which prevent 21 private industry from supplying [homes] housing to relieve the 22 general shortage of [dwellings] housing. 23 (5) [Private industry, if provided with market and financial 24 conditions warranting greater expenditure of private capital for 25 housing and for the development of technological advances in 26 housing construction, can supply the low-priced private homes 27 needed in this Commonwealth.] Private industry alone has been 28 and now is unable to provide the financing necessary, at a cost 29 which persons and families of low and moderate income can 30 afford, for housing for such persons and families and therefore, 19720S1407B1751 - 4 -
1 the specialized financing provided for in this act will 2 encourage greater expenditure of private capital for housing. 3 (6) The relationship of a sufficient provision of adequate, 4 safe and sanitary housing to the advancement of the public 5 health and morals and to the prevention of fire, accident and 6 crime is clear. 7 (7) Therefore, it is hereby declared to be the policy of the 8 Commonwealth of Pennsylvania to promote the health, safety and 9 welfare of its inhabitants by the creation of a body corporate 10 and politic, to be known as the "Pennsylvania Housing Finance 11 Agency," which shall exist and operate for the purposes of 12 alleviating the hardship which results from insufficient 13 production of [low-priced] private homes and of rental housing 14 for [elderly] persons and families of low and moderate income, 15 including the elderly, the hardship resulting from the 16 relocation of persons displaced by governmental action, the 17 deleterious effect of inadequate housing upon the general 18 welfare of the Commonwealth, and the disadvantages, resulting 19 from economic conditions, which bar private industry from 20 satisfying a vital need, by broadening the market for [low- 21 priced] private homes and for housing for [elderly] persons and 22 families of low and moderate income, including the elderly, 23 through the provision of specialized financing secured by 24 [insured] mortgages to [persons or to agencies who] 25 corporations, individuals, joint ventures, partnerships, limited 26 partnerships, trusts, cooperatives and condominiums, which are 27 unable to obtain such financing in the general market or who are 28 unable to participate in specialized Federal housing programs 29 because of lack of available Federal funds, and through 30 cooperation with and assistance to the Pennsylvania Department 19720S1407B1751 - 5 -
1 of Community Affairs as such department carries into effect the 2 powers and duties vested in it, thus improving and stimulating 3 the distribution of investment capital for housing. Such 4 purposes are public purposes for which public money may be 5 spent. 6 Section 103. Definitions.--As used in this act unless 7 otherwise indicated-- 8 (1) "Agency" means the "Pennsylvania Housing Finance 9 Agency," the public body, corporate and politic, created by this 10 act. 11 (2) "Board" means the governing body of the agency. 12 (3) "Bonds" and "notes" mean the bonds and notes which the 13 agency is authorized to issue pursuant to article V. of this 14 act. 15 (4) "Federal agency" means the United States of America, the 16 President or any department of the United States or any 17 corporation, agency or instrumentality, heretofore or hereafter 18 created, designated or established by the United States. 19 (5) "Mortgage" means a first mortgage on a fee simple estate 20 in real estate located in Pennsylvania, given to secure advances 21 on or the unpaid purchase price of the real estate under the 22 laws of Pennsylvania, together with the credit instruments, if 23 any, secured thereby; the term "mortgage," unmodified by the 24 word "insured," includes both insured mortgages and those which 25 are not insured. 26 (6) "Insured mortgage" means a mortgage insured or approved 27 to be insured [by the Federal Housing Administration, pursuant 28 to the National Housing Act of June 27, 1934, and its amendments 29 and supplements, heretofore and hereinafter enacted] or 30 guaranteed by a Federal agency and shall include instruments or 19720S1407B1751 - 6 -
1 certificates which are guaranteed by a Federal agency and 2 secured by insured or guaranteed mortgages 3 (7) "Act" means this act and the rules and regulations 4 adopted by the agency hereunder. 5 (8) "Annual income" shall mean the total annual income of 6 all members of a family, from whatever source derived, including 7 but not limited to, pension, annuity, retirement and social 8 security benefits; provided, however, that there may be excluded 9 from income (i) such reasonable allowances for dependents, (ii) 10 such reasonable allowances for medical expenses, (iii) all or 11 any proportionate part of the earnings of gainfully employed 12 minors or family members other than the chief wage earner, or 13 (iv) such income as is not received regularly, as the agency by 14 rule or regulation may determine. 15 (9) "Earned surplus" shall have the same meaning as in 16 generally accepted accounting standards. 17 (10) "Elderly or elderly person or persons" shall mean any 18 individual who is qualified, by reason of age, to draw benefits 19 from Federal Old Age and Survivors Insurance or from any other 20 pension or annuity in which the age of the recipient is the 21 criterion for entitlement, or in the absence of entitlement to 22 insurance of the above types, one who has attained the age at 23 which Federal Old Age and Survivors Insurance benefits would be 24 payable if the individual had been covered by that insurance 25 system. 26 (11) "Mortgagor" shall mean individuals, joint ventures, 27 partnerships, limited partnerships, trusts, corporations, 28 cooperatives and condominiums, whether nonprofit or organized 29 for profit. 30 (12) "F.H.A." shall mean the Federal Housing Administration, 19720S1407B1751 - 7 -
1 United States Department of Housing and Urban Development and 2 any successor to its functions. 3 (13) "Low income persons or families" and "moderate income 4 persons or families" shall mean families and persons who cannot 5 afford to pay the amounts at which private enterprise, without 6 the assistance of this act is providing a substantial supply of 7 decent, safe and sanitary housing. The income limits for the 8 admission of such families and persons to projects shall be 9 those established pursuant to the rules and regulations 10 established by the agency. 11 (14) "Moderate rentals" shall mean rent charges less than 12 those rents generally charged for new dwelling units of 13 comparable size and location built by the unassisted efforts of 14 private enterprise and financed at then current market interest 15 rates. 16 (15) "Low rentals" shall mean rent charges at least ten per 17 cent lower than moderate rentals. 18 (16) "Rent" or "rentals" shall mean the charges paid by 19 moderate and low-income persons for occupancy in a project under 20 this act, whether the project is operated on a landlord-tenant 21 basis or as a condominium or cooperative. 22 (17) "Project" shall mean a number of dwelling units 23 constructed, rehabilitated or converted to a cooperative or 24 condominium with the assistance of a mortgage loan from the 25 agency, including the acquisition, construction or 26 rehabilitation of lands, buildings, equipment, improvements and 27 other ancillary facilities such as, but not limited to streets, 28 sewers, utilities, parks, site preparation, landscaping, and 29 such ancillary facilities, offices and other nonhousing 30 facilities such as administrative, community, health, 19720S1407B1751 - 8 -
1 recreational, educational and welfare facilities as the agency 2 determines to be necessary, convenient or desirable 3 appurtenances. 4 (18) "Total project cost" means the sum total of all costs 5 incurred in the development of a project, which are approved by 6 the agency as reasonable and necessary, which costs shall 7 include, but are not necessarily limited to, (i) cost of land 8 acquisition and any buildings thereon, (ii) cost of site 9 preparation, demolition and development, (iii) architect, 10 engineer, legal, agency and other fees paid or payable in 11 connection with the planning, execution and financing of the 12 project, (iv) cost of necessary studies, surveys, plans and 13 permits, (v) insurance, interest, financing, tax and assessment 14 costs and other operating and carrying costs during 15 construction, (vi) cost of construction, reconstruction, 16 fixtures, and equipment related to the real property, (vii) cost 17 of land improvements, (viii) necessary expenses in connection 18 with initial occupancy of the project, (ix) a reasonable profit 19 or fee to the builder and developer, (x) an allowance 20 established by the agency for working capital and contingency 21 reserves, and reserves for any anticipated operating deficits 22 during the first two years of occupany, (xi) the cost of such 23 other items, including tenant relocation, as the agency shall 24 determine to be reasonable and necessary for the development of 25 the project, less any and all net rents and other net revenues 26 received from the operation of the real and personal property on 27 the project site during construction. 28 All costs shall be subject to approval and audit by the 29 agency. The agency may adopt rules and regulations specifying in 30 detail the types and categories of cost which shall be allowable 19720S1407B1751 - 9 -
1 if actually incurred in the construction or reconstruction of a 2 project. 3 Section 201. Agency Creation.--A body corporate and politic, 4 named the "Pennsylvania Housing Finance Agency," is hereby 5 created as a public corporation and government instrumentality 6 to have continuing succession until its existence shall be 7 terminated by law. 8 Section 202. Agency Membership.--The members of the agency 9 shall be the Secretary of [Commerce] Community Affairs, his 10 successors in office, and six additional members whom the 11 Governor shall appoint. The members initially appointed shall 12 serve for terms of one, two, three, four, five and six years, 13 respectively, the particular term of each to be designated by 14 the Governor at the time of appointment. The terms of all their 15 successors shall be six years each, except that any person 16 appointed to fill a vacancy shall serve only for the unexpired 17 term. Every member's term shall extend until his successor is 18 appointed and qualified. Any appointed member of the agency 19 shall be eligible for reappointment. The members of the agency 20 shall not receive compensation for their services as members, 21 but shall receive reimbursement for all necessary expenses 22 incurred in connection with the performance of their duties as 23 members. 24 Section 2. Section 204 of the act is repealed. 25 Section 3. Section 205 of the act, clauses (5), (7.1) and 26 (13), amended or added July 31, 1968 (P.L.914), is amended to 27 read: 28 Section 205. Agency Powers.--The agency shall have the 29 following powers: 30 (1) To adopt, use and alter at will a corporate seal. 19720S1407B1751 - 10 -
1 (2) To make and alter bylaws for the management and 2 regulation of its affairs and to make and from time to time 3 amend and repeal rules and regulations governing the conduct of 4 the business of the agency. 5 (3) To enter into contracts of all kinds and to execute all 6 instruments necessary or convenient for carrying on its 7 operations. 8 (4) To accept grants and subsidies from and to enter into 9 agreements or other transactions with any Federal agency or 10 agency of the Commonwealth or other entity. 11 (5) To accept grants-in-aid, gifts, donations, legacies or 12 usages of money made or extended by individuals, organizations, 13 public or private corporations, department or instrumentalities 14 of the Commonwealth, or the Federal government, and to return 15 money advanced for its usage not otherwise required for its 16 purposes or for the Capital Reserve Fund created in accordance 17 with section [508] 504-A of this act. 18 (6) To be a party litigant in any court having jurisdiction 19 according to law in any form of action whatsoever. 20 (7) In accordance with the provisions of [article III. and 21 article IV. of] this act to make commitments to purchase and to 22 purchase, service and sell [insured] mortgages, and to make 23 loans directly upon the security of [insured] mortgages. 24 (7.1) To cooperate with and assist the Pennsylvania 25 Department of Community Affairs as such department carries into 26 effect the powers and duties vested in it. 27 (8) To acquire, hold and dispose of personal property, 28 tangible and intangible. 29 (9) To acquire, hold and dispose of real property, or any 30 interest therein to be used by the agency for the purpose of its 19720S1407B1751 - 11 -
1 offices and operations. 2 (10) [To acquire real property, or any interest therein, by 3 purchase or foreclosure, where such acquisition is necessary or 4 appropriate to protect any loan in which the agency has an 5 interest; to sell, transfer and convey any such property to a 6 buyer and in the event such sale, transfer or conveyance cannot 7 be effected with reasonable promptness or at a reasonable price, 8 to lease such property to a tenant.] Acquire by purchase, gift 9 or foreclosure any real or personal property, or any interest 10 therein, to enter into any lease of property and to hold, sell, 11 assign, lease, encumber, mortgage or otherwise dispose of any 12 real or personal property, or any interest therein, or mortgage 13 lien interest owned by it or under its control, custody or in 14 its possession and release or relinquish any right, title, 15 claim, lien, interest, easement or demand however acquired, 16 including any equity or right of redemption, in property 17 foreclosed by it and to do any of the foregoing by public or 18 private sale, with or without public bidding, notwithstanding 19 the provisions of any other law. 20 (11) To borrow money for the operation and work of the 21 agency by the making of notes and by the issuance of bonds in 22 accordance with the provisions of article V. of this act. 23 (12) To invest any funds held in reserves or sinking funds, 24 or any funds not required for immediate disbursement, in such 25 investments as may be lawful for fiduciaries under any law of 26 the Commonwealth, including insured mortgages, which for such 27 temporary purposes alone, need not be made by a mortgagor or 28 involve real estate located in Pennsylvania. 29 (13) To conduct housing studies and to enter into contracts 30 with the Department of Community Affairs and to do all things 19720S1407B1751 - 12 -
1 necessary or convenient to carry out the powers granted by this 2 act or other acts. 3 (14) Employ an executive director and such other officers, 4 agents, employes, professional and business advisers as may from 5 time to time be necessary in its judgment and to fix their 6 compensation; and to promote and discharge such officers, 7 employes and agents. 8 (15) Appear in its own behalf before boards, commissions, 9 departments or other agencies of government, municipal, State or 10 Federal. 11 (16) Procure insurance against any loss in connection with 12 its property in such amounts, and from such insurers, as may be 13 necessary or desirable. 14 (17) To do all things necessary or convenient to carry out 15 the powers granted by this act or other acts. 16 Section 4. Articles III., IV., V. and VI. of the act are 17 repealed and four articles are added to read: 18 ARTICLE III.-A 19 Housing Purchase Program 20 Section 301-A. Housing Purchase Program.--(a) The agency may 21 make loans to any mortgagor for the construction, reconstruction 22 or rehabilitation of housing units for sale to individual 23 purchasers of low or moderate income as provided by the agency 24 in its rules and regulations and to any such individual 25 purchaser for the long-term financing of a housing unit. A loan 26 under this section may be in an amount not to exceed one hundred 27 per cent of the total project cost as approved by the agency. 28 (b) While such loan is outstanding, any sale by the 29 mortgagor or any subsequent resale shall be subject to approval 30 by the agency and the agency shall provide in its rules and 19720S1407B1751 - 13 -
1 regulations concerning such sales and resales that the price of 2 the housing unit sold, the method of making payments thereafter, 3 the security afforded and the interest rates, fees and charges 4 to be paid shall at all times be sufficient to permit the agency 5 to make the payments on its bonds and notes plus any 6 administrative or other costs of the agency in connection with 7 the transactions. Housing units shall be sold under terms that 8 provide for monthly payments including principal, interest, 9 taxes and insurance. 10 (c) While such loan is outstanding, the agency shall, prior 11 to the approval of sale by the mortgagor or any subsequent 12 resale, satisfy itself that such sale or resale is to persons of 13 low or moderate income. 14 (d) Upon the sale by the mortgagor of any housing unit to an 15 individual purchaser of low or moderate income under this 16 subsection to whom a loan is being made by the agency, such 17 housing unit shall be released from the mortgage running from 18 the mortgagor to the agency and such mortgage shall be replaced 19 as to the housing unit by a mortgage running from the individual 20 purchaser to the agency. 21 ARTICLE IV.-A 22 Rental Housing Program 23 Section 401-A. Rental Housing Program.--To accomplish the 24 declared purpose of this act of providing rental housing to 25 persons and families of low and moderate income the agency is 26 hereby authorized to: 27 (1) Make first mortgage loans secured by real property or a 28 leasehold estate, including mortgages insured by a Federal 29 agency, to finance projects designed and planned to be available 30 for low and moderate income persons and families or elderly 19720S1407B1751 - 14 -
1 persons and others. 2 (2) Sell, at public or private sale, with or without 3 bidding, any mortgage or other obligation securing a mortgage 4 loan, including sales of mortgages to the United States of 5 America or the Commonwealth or any agencies, instrumentalities 6 or departments thereof. 7 (3) Consent, subject to the provisions of any contract with 8 noteholders or bondholders, whenever it deems it necessary or 9 desirable in the fulfillment of the purposes of this act, to the 10 modification, with respect to rate of interest, time of payment 11 of any installment of principal or interest, or any other terms 12 of any mortgage, mortgage loan, mortgage loan commitment, 13 contract or agreement of any kind to which the agency is a 14 party. 15 (4) In the event of a violation by the mortgagor of the 16 terms of any agreement between the agency and the eligible 17 mortgagor or in the event of a violation by the mortgagor of 18 this act or of the terms of the mortgage loan agreement or of 19 any rules and regulations of the agency duly promulgated 20 pursuant to this act, or in the event the agency shall determine 21 that any loan, or part thereof, made pursuant to this act is in 22 jeopardy of not being repaid, the agency may remove any or all 23 of the existing owners, partners, officers or directors of such 24 mortgagor and appoint such person or persons who the agency in 25 its sole discretion deems advisable, including officers or 26 employes of the agency, as new officers or directors to serve in 27 place of those removed. Officers or directors so appointed need 28 not be stockholders or meet other qualifications which may be 29 prescribed by the certificate of incorporation or bylaws of such 30 mortgagor. In the absence of fraud or bad faith, officers or 19720S1407B1751 - 15 -
1 directors so appointed shall not be personally liable for debts, 2 obligations or liabilities of such mortgagor. Officers or 3 directors so appointed shall serve only for a period coexistent 4 with the duration of such violation or until the agency is 5 assured in a manner satisfactory to it that such violation, or 6 violations of a similar nature, have not and will not reoccur. 7 Officers or employes of the agency who are so appointed as 8 officers or directors shall serve in such capacity without 9 compensation, but shall be entitled to be reimbursed, if and as 10 the certificate of incorporation or bylaws of such mortgagor may 11 provide, for all necessary expenses incurred in the discharge of 12 their duties as officers or directors so appointed of such 13 mortgagor and such other necessary expenses incurred in the 14 discharge of their duties as officers or directors of such 15 eligible mortgagor as determined by the agency. 16 Section 402-A. Mortgage Loans.--(a) Purpose. The agency may 17 make mortgage loans to mortgagors for such projects as in the 18 judgment of the agency have promise of supplying well planned, 19 well designed apartment units which will provide housing for low 20 and moderate income persons or families or the elderly and 21 others in locations where there is a need for such housing. Such 22 loans may include construction loans as well as permanent loans. 23 The agency shall require the mortgagor receiving a loan or its 24 contractor to post labor and materials, and construction 25 performance, surety bonds in amounts related to the project cost 26 as established by regulation or to execute other assurances and 27 guarantees as the agency may deem necessary and may require its 28 principals or stockholders to also execute such other assurances 29 and guarantees as the agency may deem necessary. 30 (b) Interest and Charges. The agency shall have authority 19720S1407B1751 - 16 -
1 to set from time to time the interest rates at which it shall 2 make loans, consistent with the agency's cost of borrowing 3 money, cost of operation and its responsibilities to the holders 4 of its bonds. In connection with the making of mortgage loans 5 and commitments therefor, and in addition to such interest 6 charges, the agency may make and collect such fees and charges, 7 including but not limited to reimbursement of the agency's 8 financing costs, service charges, insurance premiums and 9 mortgage insurance premiums, as the agency determines to be 10 reasonable. 11 (c) Limited Profit. A mortgagor may not make distributions 12 in any one year, with respect to a project financed by the 13 agency, in excess of six per cent of the mortgagor's equity in 14 such project, except that the right to such distribution shall 15 be cumulative. The mortgagor's equity in a project shall consist 16 of the difference between the mortgage loan and the total 17 project cost. With respect to every project, the agency shall, 18 pursuant to regulations adopted by it, establish the mortgagor's 19 equity at the time of the making of the final mortgage advance 20 and for purposes of this paragraph, that figure shall remain 21 constant during the life of the agency's mortgage on such 22 project. In the case of a nonprofit mortgagor receiving a 23 mortgage loan in the amount of one hundred per cent of the total 24 project cost, no distributions shall be permitted. 25 (d) Use of Nondistributed Profits. Whenever a mortgagor 26 accumulates earned surplus in addition to such reserves for 27 replacement as the agency may require, in excess of ten per cent 28 of the current annual rent roll for the project, rents in the 29 project shall be reduced to the extent necessary to lower the 30 earned surplus accumulation to such ten per cent figure in the 19720S1407B1751 - 17 -
1 following fiscal year. 2 (e) Regulatory Agreement. The loan shall be subject to an 3 agreement between the agency and the mortgagor which will 4 subject said mortgagor and its principals or stockholders to 5 limitations established by the agency as to rentals and other 6 charges, builders' and developers' profits, dividends and fees, 7 and the disposition of its property and franchises to the extent 8 more restrictive limitations are not provided by the law under 9 which the borrower is incorporated or organized. 10 (f) Nondiscrimination. The agency shall require that 11 occupancy of all housing financed or otherwise assisted under 12 this act be open to all persons regardless of race, national 13 origin, religion, or creed, and that mortgagors, contractors and 14 subcontractors engaged in the construction, rehabilitation, sale 15 or rental of such housing, shall provide equal opportunity for 16 employment without discrimination as to race, national origin, 17 religion or creed. 18 (g) Amortization and Refinancing. The ratio of loan to 19 project value and the amortization period of loans made under 20 this act which are insured by F.H.A. shall be governed by the 21 F.H.A. mortgage insurance commitment for each project concerned, 22 but shall not exceed fifty years. In the case of a mortgage loan 23 not insured by F.H.A., the ratio of loan to project value and 24 the amortization period of loans shall be determined in 25 accordance with regulations formulated and published by the 26 agency. 27 (h) Project Cost Certification. No loan shall be made 28 unless the mortgagor agrees (i) to certify upon completion of 29 project construction or rehabilitation, subject to audit and 30 determination by the agency, the actual total project cost as 19720S1407B1751 - 18 -
1 defined herein, and (ii) to pay forthwith to the agency, for 2 application to reduction of the principal of the loan, the 3 amount, if any, subject to audit and determination by the 4 agency, of loan proceeds received in excess of the allowable 5 loan based upon the percentage of loan to total project cost 6 authorized by the agency. Notwithstanding the provisions of this 7 subsection, the agency may accept, in lieu of any certification 8 of total project cost as provided herein, such other assurances 9 of the said total project cost, in any form or manner 10 whatsoever, as will enable the agency to determine with 11 reasonable accuracy the amount of said total project cost. 12 Section 403-A. Rental Charges.--In order to encourage 13 developments which are not economically homogeneous and to 14 achieve rent charges which will make units available to persons 15 and families of low income at low rentals and moderate income at 16 moderate rentals the agency and a mortgagor may use measures 17 including, but not limited to: direct rental assistance in the 18 form of partial rent subsidy from any county, municipal, 19 Commonwealth or Federal source, allocation of lower rents, and 20 the raising of rents in the majority of apartments in the 21 project in order to lower the rents of those in the lower rent 22 charge category. With respect to each project the agency shall, 23 prior to initial occupancy, allocate and prescribe the number of 24 lower rental units and the rents to be charged therefor. The 25 allocation may be reviewed and adjusted from time to time. The 26 method of achieving lower rental charges shall, in each 27 instance, be prescribed by the agency. 28 Section 404-A. Tenants.--(a) Prior to making a loan 29 commitment under this article, the agency shall approve a tenant 30 selection plan submitted by the applicant for such a loan. The 19720S1407B1751 - 19 -
1 agency shall make regulations from time to time governing the 2 terms of such tenant selection plans. Such plans shall include 3 criteria for tenant selection based upon the established income 4 limits for eligible tenants which may vary with the size and 5 circumstances of the person or family. Such income limits shall 6 be sufficiently flexible to avoid undue economic homogeneity 7 among the tenants of a project. Tenant selection plans shall 8 provide that as between applicants equally in need and eligible 9 for occupancy of the unit, preference may be given to the 10 elderly and to persons displaced by public action or natural 11 disaster. 12 (b) The agency shall by rules and regulations provide for 13 the periodic examination of the annual income of any person or 14 family residing in any project constructed or rehabilitated with 15 a loan from the agency. In the event that the annual income of a 16 person or family residing in any such project increases and 17 exceeds the income limits prescribed by applicable rules and 18 regulations of the agency but is not more than twenty-five per 19 cent above the annual income so prescribed for admission to the 20 project, the owner or managing agent of such project shall 21 permit the person or family to continue to occupy the unit. The 22 agency or (with the approval of the agency) the mortgagor of any 23 project constructed or rehabilitated with a loan from the 24 agency, may terminate the tenancy or interest of any person or 25 family residing in such project whose annual income exceeds one 26 hundred twenty-five per cent of that prescribed by applicable 27 rules and regulations of the agency and which continues to 28 exceed the same for a period of six months or more: Provided, 29 That no tenancy or interest of any such person or family in any 30 such project shall be terminated except upon reasonable notice 19720S1407B1751 - 20 -
1 and opportunity to obtain suitable alternate housing, in 2 accordance with rules and regulations of the agency: Provided 3 further, That any such person or family, with the approval of 4 the agency, may be permitted to continue to occupy the unit, 5 subject to payment of a rent or carrying charge surcharge to the 6 mortgagor in accordance with a schedule of surcharges fixed by 7 the agency. The agency may require the mortgagor to make payable 8 such surcharge to the agency's general fund. 9 ARTICLE V.-A 10 Bonds and Notes 11 Section 501-A. Issuance of Bonds and Notes.--(a) The agency 12 shall have the power and is hereby authorized from time to time 13 to issue its negotiable bonds, either as serial bonds maturing 14 in annual installments or as term bonds, or any combination 15 thereof, and notes in such principal amount as, in the opinion 16 of the agency, shall be necessary to provide sufficient funds 17 for achieving its corporate purposes, including the housing 18 programs established in Articles III-A and IV-A, the payment of 19 interest on bonds and notes of the agency, establishment of 20 reserves to secure such bonds and notes, and all other 21 expenditures of the agency incident to and necessary or 22 convenient to carry out its corporate purposes and powers. The 23 agency shall have power, from time to time, to issue renewal 24 notes, to issue bonds to pay notes and whenever it deems 25 refunding expedient to refund any bonds by the issuance of new 26 bonds, whether the bonds to be refunded have or have not 27 matured, and to issue bonds partly to refund bonds then 28 outstanding and partly for any other purpose. The refunding 29 bonds shall be sold and the proceeds applied to the purchase, 30 redemption or payment of the bonds to be refunded. 19720S1407B1751 - 21 -
1 (b) The notes and bonds shall be authorized by resolution of 2 the members, shall bear such date or dates, and shall mature at 3 such time or times, in the case of any such note, or any 4 renewals thereof, not exceeding five years from the date of 5 issue of such original note, and in the case of any such bond 6 not exceeding fifty years from the date of issue, as such 7 resolution or resolutions may provide. The notes and bonds shall 8 bear interest at such rate or rates, be in such denominations, 9 be in such form, either coupon or registered, carry such 10 registration privileges, contain such terms and provisions 11 relating to, but not limited to, pledges of the agency's assets, 12 setting aside of reserves, limitations on additional notes and 13 bonds, and such other matters as may affect the security or 14 protection of the notes and bonds, be executed in such manner, 15 be payable in such medium of payment, at such place or places 16 and be subject to such terms of redemption as such resolution or 17 resolutions may provide. The notes and bonds of the agency may 18 be sold at public or private sale, at such price or prices as 19 the agency shall determine. 20 (c) Neither the members of the agency nor any person 21 executing the notes or bonds shall be liable personally on the 22 notes or bonds or be subject to any personal liability or 23 accountability by reason of the issuance thereof. 24 (d) The agency, subject to such agreement with noteholders 25 or bondholders as may then exist, shall have power out of any 26 funds available therefor to purchase its notes or bonds, which 27 shall thereupon be cancelled, at a price not exceeding (i) if 28 the notes or bonds are then redeemable, the redemption price 29 then applicable plus accrued interest to the next interest 30 payment date thereupon, or (ii) if the notes or bonds are not 19720S1407B1751 - 22 -
1 then redeemable, the redemption price applicable on the first 2 date after such purchase upon which the notes or bonds become 3 subject to redemption plus accrued interest to such date. 4 Section 502-A. Credit of Commonwealth or Any Subdivision 5 Thereof Not Pledged.--Except as may otherwise be expressly 6 provided by the agency, its bonds and notes shall be general 7 obligations of the agency payable out of any moneys or revenues 8 of the agency, including the proceeds of mortgage loans made 9 under this act, reserve funds created therefor by the agency, 10 any mortgage insurance contracts pertaining thereto and other 11 lawfully available money, subject only to any agreements with 12 holders of the bonds or notes pledging any receipts or revenues. 13 Bonds and notes issued under the provisions of this act shall 14 not be deemed to constitute a debt of the Commonwealth or of any 15 political subdivision thereof or a pledge of the faith and 16 credit of the Commonwealth or of any such political subdivision. 17 All such bonds and notes shall contain on the face thereof a 18 statement to the effect that neither the agency nor the 19 Commonwealth nor any political subdivision thereof shall be 20 obligated to pay the same or the interest thereon except from 21 such proceeds, reserve fund or mortgage insurance contracts and 22 that neither the faith and credit nor the taxing power of the 23 Commonwealth or any political subdivision thereof is pledged to 24 the payment of the principal of or the interest on such bonds. 25 Section 503-A. General Fund.--(a) The agency shall create 26 and establish a general fund, herein referred to as the "General 27 Fund," and shall pay into such General Fund any moneys 28 appropriated and made available by the Commonwealth for the 29 purposes of such General Fund, and any other moneys which may be 30 available to the agency for its general purposes from any source 19720S1407B1751 - 23 -
1 or sources other than proceeds from the issuance and sale of 2 notes or bonds by the agency. 3 Section 504-A. Capital Reserve Fund.--(a) The agency shall 4 create and establish a separate special fund, herein referred to 5 as the "Capital Reserve Fund," and shall pay into such Capital 6 Reserve Fund any moneys appropriated and made available by the 7 Commonwealth for the purposes of such fund, any proceeds of sale 8 of notes or bonds to the extent provided in the resolution of 9 the agency authorizing issuance thereof, and any other moneys 10 which may be available to the agency for the purpose of such 11 fund from any other source or sources. All moneys held in the 12 Capital Reserve Fund, except as hereinafter provided, shall be 13 used solely for the payment of the principal of bonds of the 14 agency as the same mature, required payments to any sinking fund 15 established for the amortization of term bonds (hereinafter 16 referred to as "sinking fund payments"), the purchase of bonds 17 of the agency, the payment of interest on such bonds of the 18 agency or the payment of any redemption premium required to be 19 paid when such bonds are redeemed prior to maturity: Provided, 20 however, That moneys in such fund shall not be withdrawn 21 therefrom at any time in such amount as would reduce the amount 22 of such fund to less than the maximum amount of principal and 23 interest maturing and becoming due and sinking fund payments 24 required to be made in any succeeding calendar year on all bonds 25 of the agency then outstanding, except for the purpose of paying 26 the principal, interest and sinking fund payments becoming due 27 on such bonds of the agency maturing and becoming due and for 28 the payment of which other moneys of the agency are not 29 available. For the purpose of this subdivision, in computing the 30 maximum amount of principal maturing in any succeeding calendar 19720S1407B1751 - 24 -
1 year, the principal amount of any term bonds which are to be 2 authorized by sinking fund payments shall not be included in the 3 computation. Any income or interest earned by, or increment to, 4 the Capital Reserve Fund due to the investment thereof may be 5 transferred to the General Fund or any other fund of the agency 6 to the extent it does not reduce the amount in such Capital 7 Reserve Fund below the maximum amount of principal and interest 8 maturing and becoming due and sinking fund payments required to 9 be made in any succeeding calendar year on all bonds of the 10 agency then outstanding and secured by such Capital Reserve 11 Fund. 12 (b) The agency shall not issue bonds at any time if the 13 maximum amount of principal and interest maturing and becoming 14 due and sinking fund payments required to be made in a 15 succeeding calendar year on such bonds then to be issued and on 16 all other bonds of the agency then outstanding will exceed the 17 amount of the Capital Reserve Fund at the time of issuance 18 unless the agency, at the time of issuance of such bonds, shall 19 deposit in such fund from the proceeds of the bonds so to be 20 issued, or otherwise, an amount which together with the amount 21 then in such fund, will be not less than the maximum amount of 22 principal and interest maturing and becoming due and sinking 23 fund payments required to be made in any succeeding calendar 24 year on such bonds then to be issued and on all bonds of the 25 agency then outstanding. 26 (c) To assure the continued operation and solvency of the 27 agency for the carrying out of the public purposes of this act, 28 provision is made in subsection (a) for the accumulation in the 29 Capital Reserve Fund of an amount equal to the maximum amount of 30 principal and interest maturing and becoming due and sinking 19720S1407B1751 - 25 -
1 fund payments required to be made in any succeeding calendar 2 year on all bonds of the agency then outstanding. In order 3 further to assure such maintenance of the Capital Reserve Fund 4 the agency, at least thirty days before the beginning of each 5 legislative session, shall submit to the Governor and General 6 Assembly an estimate of any funds expected to be necessary 7 during the following year to make up any deficiencies in the 8 Capital Reserve Fund or otherwise to avoid default in the 9 payment of interest or principal upon bonds or notes issued by 10 the agency, or in sinking fund payments required to be made, and 11 the Governor shall cause the amount of such deficiency, if any, 12 to be placed in the budget of the Commonwealth for the next 13 succeeding fiscal year, so that the General Assembly shall be 14 enabled to provide appropriation sufficient to make up any such 15 deficiency or otherwise to avoid any default. Such amount 16 appropriated, if any, shall be repaid to the Commonwealth as 17 soon as possible by the agency from moneys in the General Fund 18 in excess of the amount required to make and keep the agency 19 self-supporting. 20 (d) In computing the amount of the Capital Reserve Fund for 21 the purposes of this section, securities in which all or a 22 portion of such fund are invested shall be valued at par, or if 23 purchased at less than par, at their cost to the agency. 24 Section 505-A. Trust Agreement.--In the discretion of the 25 agency, bonds and notes issued by it shall be secured by a trust 26 agreement by and between the agency and a trustee, which may be 27 any trust company or bank within the Commonwealth having the 28 powers of a trust company. Either the resolution providing for 29 the issuance of bonds and notes or such trust agreement may 30 contain such provisions for protecting and enforcing the rights 19720S1407B1751 - 26 -
1 and remedies of the bondholders as may be reasonable and proper 2 and not in violation of law, including covenants setting forth 3 the duties of the agency in relation to the custody, 4 safeguarding and application of all moneys. 5 It shall be lawful for any bank or trust company incorporated 6 under the laws of the Commonwealth to act as depository of the 7 proceeds of bonds and notes or of revenues and to furnish such 8 indemnifying bonds or to pledge such securities as may be 9 required by the agency. Such trust agreement may set forth the 10 rights and remedies of the bondholders and noteholders and of 11 the trustee, and may restrict the individual right of action by 12 bondholders and noteholders. In addition to the foregoing, such 13 trust agreement may contain such other provision as the agency 14 may deem reasonable and proper for the security of the 15 bondholders and noteholders. All expenses incurred in carrying 16 out the provisions of such trust agreement may be treated as a 17 part of the cost of the operation of the agency. 18 Section 506-A. Bonds and Notes Tax Exempt.--The creation of 19 the agency is in all respects for the benefit of the people of 20 the Commonwealth and for the improvement of their health, 21 safety, welfare, comfort and security, and its purposes are 22 public purposes and the agency will be performing an essential 23 governmental function. The Commonwealth covenants with the 24 purchasers and all subsequent holders and transferees of the 25 notes and bonds issued by the agency, in consideration of the 26 acceptance of any payment for the notes and bonds, that the 27 notes and bonds of the agency, issued pursuant to this act and 28 the income therefrom, the income and revenues of the agency, and 29 the agency and its property shall at all times be free from 30 taxation or assessment of every kind and nature except for 19720S1407B1751 - 27 -
1 inheritance, estate, gift and transfer taxes. 2 Section 507-A. Notes and Bonds as Legal Investments.--The 3 notes and bonds of the agency are securities in which all public 4 officers and bodies of the Commonwealth and all municipalities 5 and municipal subdivisions, all insurance companies and 6 associations, and other persons carrying on an insurance 7 business, all banks, trust companies, savings banks and savings 8 associations, saving and loan associations, investment 9 companies, all administrators, guardians, executors, trustees 10 and other fiduciaries, and all other persons whatsoever who are 11 now or may hereafter be authorized to invest in bonds or other 12 obligations of the Commonwealth, may properly and legally invest 13 funds, including capital, in their control or belonging to them. 14 Section 508-A. Covenant by Commonwealth Not to Limit or 15 Alter Powers Vested in Agency.--The Commonwealth of Pennsylvania 16 does hereby pledge to and covenant and agree with the holders of 17 any bonds, bond anticipation notes or other obligations issued 18 pursuant to the authority of this act that the Commonwealth will 19 not limit or alter the rights or powers hereby vested in the 20 agency to perform and fulfill the terms of any agreement made 21 with the holders of such bonds, bond anticipation notes or other 22 obligations, or in any way impair the rights or remedies of such 23 holders, until such bond, bond anticipation notes and other 24 obligations, together with interest thereon, with interest on 25 any unpaid installments of interest, and all costs and expenses 26 in connection with any action or proceedings by or in behalf of 27 such holders, are fully met and discharged or provided for. The 28 agency may include this pledge and agreement of the Commonwealth 29 in any agreement with the holders of bonds, bond anticipation 30 notes and other obligations issued by the agency. 19720S1407B1751 - 28 -
1 ARTICLE VI.-A 2 Liberal Construction, Fraud Penalty and Effective Date 3 Section 601-A. Liberal Construction.--This act, being 4 necessary for the welfare of the Commonwealth and its 5 inhabitants, shall be liberally construed to effect the purposes 6 thereof. 7 Section 602-A. Fraud Penalty.--Any person who attempts to or 8 obtains financial aid for a project hereunder or occupancy or 9 continual occupancy of a dwelling unit therein by false or 10 misleading information or who shall violate this act or who 11 shall by fraud attempt to obtain moneys from the agency or its 12 approval for the payment of moneys or shall fraudulently attempt 13 to or does prevent the collection of any moneys due to the 14 agency shall, for each offense, be guilty of a misdemeanor, and, 15 upon conviction thereof, shall be sentenced to pay a fine not 16 exceeding three hundred dollars ($300) or undergo imprisonment 17 not exceeding one year, or both. 18 Section 603-A. Effective Date; Proclamation.--This act shall 19 become effective when the Governor by proclamation declares that 20 sufficient funds are available to administer this act. For the 21 purposes of this determination and then thereafter, in addition 22 to any appropriations as are made to the agency, the 23 Commonwealth is authorized to accept for the account of the 24 agency grants-in-aid, donations and gifts of every manner and 25 type from the Federal Government or from any other private or 26 public corporation or person. Upon such declaration, such funds 27 as have been collected shall immediately be paid to the 28 treasurer of the agency, or if a treasurer has not been 29 appointed, to such other person as the Governor may designate as 30 acting treasurer. D26L32CM/19720S1407B1751 - 29 -