PRINTER'S NO. 1751

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

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 -