PRIOR PRINTER'S NO. 1751 PRINTER'S NO. 1961
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
AS AMENDED ON THIRD CONSIDERATION, JUNE 28, 1971
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 19720S1407B1961 - 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. 19720S1407B1961 - 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, 19720S1407B1961 - 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 19720S1407B1961 - 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 19720S1407B1961 - 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, 19720S1407B1961 - 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, 19720S1407B1961 - 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 19720S1407B1961 - 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 APPOINTMENT OF A MEMBER OF THE <-- 19 AGENCY MADE HEREAFTER SHALL BE SUBJECT TO THE ADVICE AND CONSENT 20 OF TWO-THIRDS OF ALL THE MEMBERS OF THE SENATE. Any appointed 21 member of the agency shall be eligible for reappointment. The 22 members of the agency shall not receive compensation for their 23 services as members, but shall receive reimbursement for all 24 necessary expenses incurred in connection with the performance 25 of their duties as members. 26 Section 2. Section 204 of the act is repealed. 27 Section 3. Section 205 of the act, clauses (5), (7.1) and 28 (13), amended or added July 31, 1968 (P.L.914), is amended to 29 read: 30 Section 205. Agency Powers.--The agency shall have the 19720S1407B1961 - 10 -
1 following powers: 2 (1) To adopt, use and alter at will a corporate seal. 3 (2) To make and alter bylaws for the management and 4 regulation of its affairs and to make and from time to time 5 amend and repeal rules and regulations governing the conduct of 6 the business of the agency. 7 (3) To enter into contracts of all kinds and to execute all 8 instruments necessary or convenient for carrying on its 9 operations. 10 (4) To accept grants and subsidies from and to enter into 11 agreements or other transactions with any Federal agency or 12 agency of the Commonwealth or other entity. 13 (5) To accept grants-in-aid, gifts, donations, legacies or 14 usages of money made or extended by individuals, organizations, 15 public or private corporations, department or instrumentalities 16 of the Commonwealth, or the Federal government, and to return 17 money advanced for its usage not otherwise required for its 18 purposes or for the Capital Reserve Fund created in accordance 19 with section [508] 504-A of this act. 20 (6) To be a party litigant in any court having jurisdiction 21 according to law in any form of action whatsoever. 22 (7) In accordance with the provisions of [article III. and 23 article IV. of] this act to make commitments to purchase and to 24 purchase, service and sell [insured] mortgages, and to make 25 loans directly upon the security of [insured] mortgages. 26 (7.1) To cooperate with and assist the Pennsylvania 27 Department of Community Affairs as such department carries into 28 effect the powers and duties vested in it. 29 (8) To acquire, hold and dispose of personal property, 30 tangible and intangible. 19720S1407B1961 - 11 -
1 (9) To acquire, hold and dispose of real property, or any 2 interest therein to be used by the agency for the purpose of its 3 offices and operations. 4 (10) [To acquire real property, or any interest therein, by 5 purchase or foreclosure, where such acquisition is necessary or 6 appropriate to protect any loan in which the agency has an 7 interest; to sell, transfer and convey any such property to a 8 buyer and in the event such sale, transfer or conveyance cannot 9 be effected with reasonable promptness or at a reasonable price, 10 to lease such property to a tenant.] Acquire by purchase, gift 11 or foreclosure any real or personal property, or any interest 12 therein, to enter into any lease of property and to hold, sell, 13 assign, lease, encumber, mortgage or otherwise dispose of any 14 real or personal property, or any interest therein, or mortgage 15 lien interest owned by it or under its control, custody or in 16 its possession and release or relinquish any right, title, 17 claim, lien, interest, easement or demand however acquired, 18 including any equity or right of redemption, in property 19 foreclosed by it and to do any of the foregoing by public or 20 private sale, with or without public bidding, notwithstanding 21 the provisions of any other law. 22 (11) To borrow money for the operation and work of the 23 agency by the making of notes and by the issuance of bonds in 24 accordance with the provisions of article V. of this act. 25 (12) To invest any funds held in reserves or sinking funds, 26 or any funds not required for immediate disbursement, in such 27 investments as may be lawful for fiduciaries under any law of 28 the Commonwealth, including insured mortgages, which for such 29 temporary purposes alone, need not be made by a mortgagor or 30 involve real estate located in Pennsylvania. 19720S1407B1961 - 12 -
1 (13) To conduct housing studies and to enter into contracts 2 with the Department of Community Affairs and to do all things 3 necessary or convenient to carry out the powers granted by this 4 act or other acts. 5 (14) Employ an executive director and such other officers, 6 agents, employes, professional and business advisers as may from 7 time to time be necessary in its judgment and to fix their 8 compensation; and to promote and discharge such officers, 9 employes and agents. 10 (15) Appear in its own behalf before boards, commissions, 11 departments or other agencies of government, municipal, State or 12 Federal. 13 (16) Procure insurance against any loss in connection with 14 its property in such amounts, and from such insurers, as may be 15 necessary or desirable. 16 (17) To do all things necessary or convenient to carry out 17 the powers granted by this act or other acts. 18 Section 4. Articles III., IV., V. and VI. of the act are 19 repealed and four articles are added to read: 20 ARTICLE III.-A 21 Housing Purchase Program 22 Section 301-A. Housing Purchase Program.--(a) The agency may 23 make loans to any mortgagor for the construction, reconstruction 24 or rehabilitation of housing units for sale to individual 25 purchasers of low or moderate income as provided by the agency 26 in its rules and regulations and to any such individual 27 purchaser for the long-term financing of a housing unit. A loan 28 under this section may be in an amount not to exceed one hundred 29 per cent of the total project cost as approved by the agency. 30 (b) While such loan is outstanding, any sale by the 19720S1407B1961 - 13 -
1 mortgagor or any subsequent resale shall be subject to approval 2 by the agency and the agency shall provide in its rules and 3 regulations concerning such sales and resales that the price of 4 the housing unit sold, the method of making payments thereafter, 5 the security afforded and the interest rates, fees and charges 6 to be paid shall at all times be sufficient to permit the agency 7 to make the payments on its bonds and notes plus any 8 administrative or other costs of the agency in connection with 9 the transactions. Housing units shall be sold under terms that 10 provide for monthly payments including principal, interest, 11 taxes and insurance. 12 (c) While such loan is outstanding, the agency shall, prior 13 to the approval of sale by the mortgagor or any subsequent 14 resale, satisfy itself that such sale or resale is to persons of 15 low or moderate income. 16 (d) Upon the sale by the mortgagor of any housing unit to an 17 individual purchaser of low or moderate income under this 18 subsection to whom a loan is being made by the agency, such 19 housing unit shall be released from the mortgage running from 20 the mortgagor to the agency and such mortgage shall be replaced 21 as to the housing unit by a mortgage running from the individual 22 purchaser to the agency. 23 ARTICLE IV.-A 24 Rental Housing Program 25 Section 401-A. Rental Housing Program.--To accomplish the 26 declared purpose of this act of providing rental housing to 27 persons and families of low and moderate income the agency is 28 hereby authorized to: 29 (1) Make first mortgage loans secured by real property or a 30 leasehold estate, including mortgages insured by a Federal 19720S1407B1961 - 14 -
1 agency, to finance projects designed and planned to be available 2 for low and moderate income persons and families or elderly 3 persons and others. 4 (2) Sell, at public or private sale, with or without 5 bidding, any mortgage or other obligation securing a mortgage 6 loan, including sales of mortgages to the United States of 7 America or the Commonwealth or any agencies, instrumentalities 8 or departments thereof. 9 (3) Consent, subject to the provisions of any contract with 10 noteholders or bondholders, whenever it deems it necessary or 11 desirable in the fulfillment of the purposes of this act, to the 12 modification, with respect to rate of interest, time of payment 13 of any installment of principal or interest, or any other terms 14 of any mortgage, mortgage loan, mortgage loan commitment, 15 contract or agreement of any kind to which the agency is a 16 party. 17 (4) In the event of a violation by the mortgagor of the 18 terms of any agreement between the agency and the eligible 19 mortgagor or in the event of a violation by the mortgagor of 20 this act or of the terms of the mortgage loan agreement or of 21 any rules and regulations of the agency duly promulgated 22 pursuant to this act, or in the event the agency shall determine 23 that any loan, or part thereof, made pursuant to this act is in 24 jeopardy of not being repaid, the agency may remove any or all 25 of the existing owners, partners, officers or directors of such 26 mortgagor and appoint such person or persons who the agency in 27 its sole discretion deems advisable, including officers or 28 employes of the agency, as new officers or directors to serve in 29 place of those removed. Officers or directors so appointed need 30 not be stockholders or meet other qualifications which may be 19720S1407B1961 - 15 -
1 prescribed by the certificate of incorporation or bylaws of such 2 mortgagor. In the absence of fraud or bad faith, officers or 3 directors so appointed shall not be personally liable for debts, 4 obligations or liabilities of such mortgagor. Officers or 5 directors so appointed shall serve only for a period coexistent 6 with the duration of such violation or until the agency is 7 assured in a manner satisfactory to it that such violation, or 8 violations of a similar nature, have not and will not reoccur. 9 Officers or employes of the agency who are so appointed as 10 officers or directors shall serve in such capacity without 11 compensation, but shall be entitled to be reimbursed, if and as 12 the certificate of incorporation or bylaws of such mortgagor may 13 provide, for all necessary expenses incurred in the discharge of 14 their duties as officers or directors so appointed of such 15 mortgagor and such other necessary expenses incurred in the 16 discharge of their duties as officers or directors of such 17 eligible mortgagor as determined by the agency. 18 Section 402-A. Mortgage Loans.--(a) Purpose. The agency may 19 make mortgage loans to mortgagors for such projects as in the 20 judgment of the agency have promise of supplying well planned, 21 well designed apartment units which will provide housing for low 22 and moderate income persons or families or the elderly and 23 others in locations where there is a need for such housing. Such 24 loans may include construction loans as well as permanent loans. 25 The agency shall require the mortgagor receiving a loan or its 26 contractor to post labor and materials, and construction 27 performance, surety bonds in amounts related to the project cost 28 as established by regulation or to execute other assurances and 29 guarantees as the agency may deem necessary and may require its 30 principals or stockholders to also execute such other assurances 19720S1407B1961 - 16 -
1 and guarantees as the agency may deem necessary. 2 (b) Interest and Charges. The agency shall have authority 3 to set from time to time the interest rates at which it shall 4 make loans, consistent with the agency's cost of borrowing 5 money, cost of operation and its responsibilities to the holders 6 of its bonds. In connection with the making of mortgage loans 7 and commitments therefor, and in addition to such interest 8 charges, the agency may make and collect such fees and charges, 9 including but not limited to reimbursement of the agency's 10 financing costs, service charges, insurance premiums and 11 mortgage insurance premiums, as the agency determines to be 12 reasonable. 13 (c) Limited Profit. A mortgagor may not make distributions 14 in any one year, with respect to a project financed by the 15 agency, in excess of six per cent of the mortgagor's equity in 16 such project, except that the right to such distribution shall 17 be cumulative. The mortgagor's equity in a project shall consist 18 of the difference between the mortgage loan and the total 19 project cost. A LOAN MAY BE IN AN AMOUNT NOT TO EXCEED ONE <-- 20 HUNDRED PER CENT OF THE PROJECT COST AS APPROVED BY THE AGENCY 21 IN THE CASE OF A NON-PROFIT HOUSING CORPORATION OR INDIVIDUAL 22 PURCHASER AND IN AN AMOUNT NOT TO EXCEED NINETY PER CENT OF THE 23 PROJECT COST AS APPROVED BY THE AGENCY IN THE CASE OF A LIMITED 24 DIVIDEND HOUSING CORPORATION. With respect to every project, the 25 agency shall, pursuant to regulations adopted by it, establish 26 the mortgagor's equity at the time of the making of the final 27 mortgage advance and for purposes of this paragraph, that figure 28 shall remain constant during the life of the agency's mortgage 29 on such project. In the case of a nonprofit mortgagor receiving 30 a mortgage loan in the amount of one hundred per cent of the 19720S1407B1961 - 17 -
1 total project cost, no distributions shall be permitted. 2 (d) Use of Nondistributed Profits. Whenever a mortgagor 3 accumulates earned surplus in addition to such reserves for 4 replacement as the agency may require, in excess of ten per cent 5 of the current annual rent roll for the project, rents in the 6 project shall be reduced to the extent necessary to lower the 7 earned surplus accumulation to such ten per cent figure in the 8 following fiscal year. 9 (e) Regulatory Agreement. The loan shall be subject to an 10 agreement between the agency and the mortgagor which will 11 subject said mortgagor and its principals or stockholders to 12 limitations established by the agency as to rentals and other 13 charges, builders' and developers' profits, dividends and fees, 14 and the disposition of its property and franchises to the extent 15 more restrictive limitations are not provided by the law under 16 which the borrower is incorporated or organized. 17 (f) Nondiscrimination. The agency shall require that 18 occupancy of all housing financed or otherwise assisted under 19 this act be open to all persons regardless of race, national 20 origin, religion, or creed, and that mortgagors, contractors and 21 subcontractors engaged in the construction, rehabilitation, sale 22 or rental of such housing, shall provide equal opportunity for 23 employment without discrimination as to race, national origin, 24 religion or creed. 25 (g) Amortization and Refinancing. The ratio of loan to 26 project value and the amortization period of loans made under 27 this act which are insured by F.H.A. shall be governed by the 28 F.H.A. mortgage insurance commitment for each project concerned, 29 but shall not exceed fifty years. In the case of a mortgage loan 30 not insured by F.H.A., the ratio of loan to project value and 19720S1407B1961 - 18 -
1 the amortization period of loans shall be determined in 2 accordance with regulations formulated and published by the 3 agency. 4 (h) Project Cost Certification. No loan shall be made 5 unless the mortgagor agrees (i) to certify upon completion of 6 project construction or rehabilitation, subject to audit and 7 determination by the agency, the actual total project cost as 8 defined herein, and (ii) to pay forthwith to the agency, for 9 application to reduction of the principal of the loan, the 10 amount, if any, subject to audit and determination by the 11 agency, of loan proceeds received in excess of the allowable 12 loan based upon the percentage of loan to total project cost 13 authorized by the agency. Notwithstanding the provisions of this 14 subsection, the agency may accept, in lieu of any certification 15 of total project cost as provided herein, such other assurances 16 of the said total project cost, in any form or manner 17 whatsoever, as will enable the agency to determine with 18 reasonable accuracy the amount of said total project cost. 19 Section 403-A. Rental Charges.--In order to encourage 20 developments which are not economically homogeneous and to 21 achieve rent charges which will make units available to persons 22 and families of low income at low rentals and moderate income at 23 moderate rentals the agency and a mortgagor may use measures 24 including, but not limited to: direct rental assistance in the 25 form of partial rent subsidy from any county, municipal, 26 Commonwealth or Federal source, allocation of lower rents, and 27 the raising of rents in the majority of apartments in the 28 project in order to lower the rents of those in the lower rent 29 charge category. With respect to each project the agency shall, 30 prior to initial occupancy, allocate and prescribe the number of 19720S1407B1961 - 19 -
1 lower rental units and the rents to be charged therefor. The 2 allocation may be reviewed and adjusted from time to time. The 3 method of achieving lower rental charges shall, in each 4 instance, be prescribed by the agency. 5 Section 404-A. Tenants.--(a) Prior to making a loan 6 commitment under this article, the agency shall approve a tenant 7 selection plan submitted by the applicant for such a loan. The 8 agency shall make regulations from time to time governing the 9 terms of such tenant selection plans. Such plans shall include 10 criteria for tenant selection based upon the established income 11 limits for eligible tenants which may vary with the size and 12 circumstances of the person or family. Such income limits shall 13 be sufficiently flexible to avoid undue economic homogeneity 14 among the tenants of a project. Tenant selection plans shall 15 provide that as between applicants equally in need and eligible 16 for occupancy of the unit, preference may be given to the 17 elderly and to persons displaced by public action or natural 18 disaster. 19 (b) The agency shall by rules and regulations provide for 20 the periodic examination of the annual income of any person or 21 family residing in any project constructed or rehabilitated with 22 a loan from the agency. In the event that the annual income of a 23 person or family residing in any such project increases and 24 exceeds the income limits prescribed by applicable rules and 25 regulations of the agency but is not more than twenty-five per 26 cent above the annual income so prescribed for admission to the 27 project, the owner or managing agent of such project shall 28 permit the person or family to continue to occupy the unit. The 29 agency or (with the approval of the agency) the mortgagor of any 30 project constructed or rehabilitated with a loan from the 19720S1407B1961 - 20 -
1 agency, may terminate the tenancy or interest of any person or 2 family residing in such project whose annual income exceeds one 3 hundred twenty-five per cent of that prescribed by applicable 4 rules and regulations of the agency and which continues to 5 exceed the same for a period of six months or more: Provided, 6 That no tenancy or interest of any such person or family in any 7 such project shall be terminated except upon reasonable notice 8 and opportunity to obtain suitable alternate housing, in 9 accordance with rules and regulations of the agency: Provided 10 further, That any such person or family, with the approval of 11 the agency, may be permitted to continue to occupy the unit, 12 subject to payment of a rent or carrying charge surcharge to the 13 mortgagor in accordance with a schedule of surcharges fixed by 14 the agency. The agency may require the mortgagor to make payable 15 such surcharge to the agency's general fund. 16 ARTICLE V.-A 17 Bonds and Notes 18 Section 501-A. Issuance of Bonds and Notes.--(a) The agency 19 shall have the power and is hereby authorized from time to time 20 to issue its negotiable bonds, either as serial bonds maturing 21 in annual installments or as term bonds, or any combination 22 thereof, and notes in such principal amount as, in the opinion 23 of the agency, shall be necessary to provide sufficient funds 24 for achieving its corporate purposes, including the housing 25 programs established in Articles III-A and IV-A, the payment of 26 interest on bonds and notes of the agency, establishment of 27 reserves to secure such bonds and notes, and all other 28 expenditures of the agency incident to and necessary or 29 convenient to carry out its corporate purposes and powers. The 30 agency shall have power, from time to time, to issue renewal 19720S1407B1961 - 21 -
1 notes, to issue bonds to pay notes and whenever it deems 2 refunding expedient to refund any bonds by the issuance of new 3 bonds, whether the bonds to be refunded have or have not 4 matured, and to issue bonds partly to refund bonds then 5 outstanding and partly for any other purpose. The refunding 6 bonds shall be sold and the proceeds applied to the purchase, 7 redemption or payment of the bonds to be refunded. 8 (b) The notes and bonds shall be authorized by resolution of 9 the members, shall bear such date or dates, and shall mature at 10 such time or times, in the case of any such note, or any 11 renewals thereof, not exceeding five years from the date of 12 issue of such original note, and in the case of any such bond 13 not exceeding fifty years from the date of issue, as such 14 resolution or resolutions may provide. The notes and bonds shall 15 bear interest at such rate or rates, be in such denominations, 16 be in such form, either coupon or registered, carry such 17 registration privileges, contain such terms and provisions 18 relating to, but not limited to, pledges of the agency's assets, 19 setting aside of reserves, limitations on additional notes and 20 bonds, and such other matters as may affect the security or 21 protection of the notes and bonds, be executed in such manner, 22 be payable in such medium of payment, at such place or places 23 and be subject to such terms of redemption as such resolution or 24 resolutions may provide. The notes and bonds of the agency may 25 be sold at public or private sale, at such price or prices as 26 the agency shall determine. 27 (c) Neither the members of the agency nor any person 28 executing the notes or bonds shall be liable personally on the 29 notes or bonds or be subject to any personal liability or 30 accountability by reason of the issuance thereof. 19720S1407B1961 - 22 -
1 (d) The agency, subject to such agreement with noteholders 2 or bondholders as may then exist, shall have power out of any 3 funds available therefor to purchase its notes or bonds, which 4 shall thereupon be cancelled, at a price not exceeding (i) if 5 the notes or bonds are then redeemable, the redemption price 6 then applicable plus accrued interest to the next interest 7 payment date thereupon, or (ii) if the notes or bonds are not 8 then redeemable, the redemption price applicable on the first 9 date after such purchase upon which the notes or bonds become 10 subject to redemption plus accrued interest to such date. 11 Section 502-A. Credit of Commonwealth or Any Subdivision 12 Thereof Not Pledged.--Except as may otherwise be expressly 13 provided by the agency, its bonds and notes shall be general 14 obligations of the agency payable out of any moneys or revenues 15 of the agency, including the proceeds of mortgage loans made 16 under this act, reserve funds created therefor by the agency, 17 any mortgage insurance contracts pertaining thereto and other 18 lawfully available money, subject only to any agreements with 19 holders of the bonds or notes pledging any receipts or revenues. 20 Bonds and notes issued under the provisions of this act shall 21 not be deemed to constitute a debt of the Commonwealth or of any 22 political subdivision thereof or a pledge of the faith and 23 credit of the Commonwealth or of any such political subdivision. 24 All such bonds and notes shall contain on the face thereof a 25 statement to the effect that neither the agency nor the 26 Commonwealth nor any political subdivision thereof shall be 27 obligated to pay the same or the interest thereon except from 28 such proceeds, reserve fund or mortgage insurance contracts and 29 that neither the faith and credit nor the taxing power of the 30 Commonwealth or any political subdivision thereof is pledged to 19720S1407B1961 - 23 -
1 the payment of the principal of or the interest on such bonds. 2 Section 503-A. General Fund.--(a) The agency shall create 3 and establish a general fund, herein referred to as the "General 4 Fund," and shall pay into such General Fund any moneys 5 appropriated and made available by the Commonwealth for the 6 purposes of such General Fund, and any other moneys which may be 7 available to the agency for its general purposes from any source 8 or sources other than proceeds from the issuance and sale of 9 notes or bonds by the agency. 10 Section 504-A. Capital Reserve Fund.--(a) The agency shall 11 create and establish a separate special fund, herein referred to 12 as the "Capital Reserve Fund," and shall pay into such Capital 13 Reserve Fund any moneys appropriated and made available by the 14 Commonwealth for the purposes of such fund, any proceeds of sale 15 of notes or bonds to the extent provided in the resolution of 16 the agency authorizing issuance thereof, and any other moneys 17 which may be available to the agency for the purpose of such 18 fund from any other source or sources. All moneys held in the 19 Capital Reserve Fund, except as hereinafter provided, shall be 20 used solely for the payment of the principal of bonds of the 21 agency as the same mature, required payments to any sinking fund 22 established for the amortization of term bonds (hereinafter 23 referred to as "sinking fund payments"), the purchase of bonds 24 of the agency, the payment of interest on such bonds of the 25 agency or the payment of any redemption premium required to be 26 paid when such bonds are redeemed prior to maturity: Provided, 27 however, That moneys in such fund shall not be withdrawn 28 therefrom at any time in such amount as would reduce the amount 29 of such fund to less than the maximum amount of principal and 30 interest maturing and becoming due and sinking fund payments 19720S1407B1961 - 24 -
1 required to be made in any succeeding calendar year on all bonds 2 of the agency then outstanding, except for the purpose of paying 3 the principal, interest and sinking fund payments becoming due 4 on such bonds of the agency maturing and becoming due and for 5 the payment of which other moneys of the agency are not 6 available. For the purpose of this subdivision, in computing the 7 maximum amount of principal maturing in any succeeding calendar 8 year, the principal amount of any term bonds which are to be 9 authorized by sinking fund payments shall not be included in the 10 computation. Any income or interest earned by, or increment to, 11 the Capital Reserve Fund due to the investment thereof may be 12 transferred to the General Fund or any other fund of the agency 13 to the extent it does not reduce the amount in such Capital 14 Reserve Fund below the maximum amount of principal and interest 15 maturing and becoming due and sinking fund payments required to 16 be made in any succeeding calendar year on all bonds of the 17 agency then outstanding and secured by such Capital Reserve 18 Fund. 19 (b) The agency shall not issue bonds at any time if the 20 maximum amount of principal and interest maturing and becoming 21 due and sinking fund payments required to be made in a 22 succeeding calendar year on such bonds then to be issued and on 23 all other bonds of the agency then outstanding will exceed the 24 amount of the Capital Reserve Fund at the time of issuance 25 unless the agency, at the time of issuance of such bonds, shall 26 deposit in such fund from the proceeds of the bonds so to be 27 issued, or otherwise, an amount which together with the amount 28 then in such fund, will be not less than the maximum amount of 29 principal and interest maturing and becoming due and sinking 30 fund payments required to be made in any succeeding calendar 19720S1407B1961 - 25 -
1 year on such bonds then to be issued and on all bonds of the 2 agency then outstanding. 3 (c) To assure the continued operation and solvency of the 4 agency for the carrying out of the public purposes of this act, 5 provision is made in subsection (a) for the accumulation in the 6 Capital Reserve Fund of an amount equal to the maximum amount of 7 principal and interest maturing and becoming due and sinking 8 fund payments required to be made in any succeeding calendar 9 year on all bonds of the agency then outstanding. In order 10 further to assure such maintenance of the Capital Reserve Fund 11 the agency, at least thirty days before the beginning of each 12 legislative session, shall submit to the Governor and General 13 Assembly an estimate of any funds expected to be necessary 14 during the following year to make up any deficiencies in the 15 Capital Reserve Fund or otherwise to avoid default in the 16 payment of interest or principal upon bonds or notes issued by 17 the agency, or in sinking fund payments required to be made, and 18 the Governor shall cause the amount of such deficiency, if any, 19 to be placed in the budget of the Commonwealth for the next 20 succeeding fiscal year, so that the General Assembly shall be 21 enabled to provide appropriation sufficient to make up any such 22 deficiency or otherwise to avoid any default. Such amount 23 appropriated, if any, shall be repaid to the Commonwealth as 24 soon as possible by the agency from moneys in the General Fund 25 in excess of the amount required to make and keep the agency 26 self-supporting. 27 (d) In computing the amount of the Capital Reserve Fund for 28 the purposes of this section, securities in which all or a 29 portion of such fund are invested shall be valued at par, or if 30 purchased at less than par, at their cost to the agency. 19720S1407B1961 - 26 -
1 Section 505-A. Trust Agreement.--In the discretion of the 2 agency, bonds and notes issued by it shall be secured by a trust 3 agreement by and between the agency and a trustee, which may be 4 any trust company or bank within the Commonwealth having the 5 powers of a trust company. Either the resolution providing for 6 the issuance of bonds and notes or such trust agreement may 7 contain such provisions for protecting and enforcing the rights 8 and remedies of the bondholders as may be reasonable and proper 9 and not in violation of law, including covenants setting forth 10 the duties of the agency in relation to the custody, 11 safeguarding and application of all moneys. 12 It shall be lawful for any bank or trust company incorporated 13 under the laws of the Commonwealth to act as depository of the 14 proceeds of bonds and notes or of revenues and to furnish such 15 indemnifying bonds or to pledge such securities as may be 16 required by the agency. Such trust agreement may set forth the 17 rights and remedies of the bondholders and noteholders and of 18 the trustee, and may restrict the individual right of action by 19 bondholders and noteholders. In addition to the foregoing, such 20 trust agreement may contain such other provision as the agency 21 may deem reasonable and proper for the security of the 22 bondholders and noteholders. All expenses incurred in carrying 23 out the provisions of such trust agreement may be treated as a 24 part of the cost of the operation of the agency. 25 Section 506-A. Bonds and Notes Tax Exempt.--The creation of 26 the agency is in all respects for the benefit of the people of 27 the Commonwealth and for the improvement of their health, 28 safety, welfare, comfort and security, and its purposes are 29 public purposes and the agency will be performing an essential 30 governmental function. The Commonwealth covenants with the 19720S1407B1961 - 27 -
1 purchasers and all subsequent holders and transferees of the 2 notes and bonds issued by the agency, in consideration of the 3 acceptance of any payment for the notes and bonds, that the 4 notes and bonds of the agency, issued pursuant to this act and 5 the income therefrom, the income and revenues of the agency, and 6 the agency and its property shall at all times be free from 7 taxation or assessment of every kind and nature except for 8 inheritance, estate, gift and transfer taxes. 9 Section 507-A. Notes and Bonds as Legal Investments.--The 10 notes and bonds of the agency are securities in which all public 11 officers and bodies of the Commonwealth and all municipalities 12 and municipal subdivisions, all insurance companies and 13 associations, and other persons carrying on an insurance 14 business, all banks, trust companies, savings banks and savings 15 associations, saving and loan associations, investment 16 companies, all administrators, guardians, executors, trustees 17 and other fiduciaries, and all other persons whatsoever who are 18 now or may hereafter be authorized to invest in bonds or other 19 obligations of the Commonwealth, may properly and legally invest 20 funds, including capital, in their control or belonging to them. 21 Section 508-A. Covenant by Commonwealth Not to Limit or 22 Alter Powers Vested in Agency.--The Commonwealth of Pennsylvania 23 does hereby pledge to and covenant and agree with the holders of 24 any bonds, bond anticipation notes or other obligations issued 25 pursuant to the authority of this act that the Commonwealth will 26 not limit or alter the rights or powers hereby vested in the 27 agency to perform and fulfill the terms of any agreement made 28 with the holders of such bonds, bond anticipation notes or other 29 obligations, or in any way impair the rights or remedies of such 30 holders, until such bond, bond anticipation notes and other 19720S1407B1961 - 28 -
1 obligations, together with interest thereon, with interest on 2 any unpaid installments of interest, and all costs and expenses 3 in connection with any action or proceedings by or in behalf of 4 such holders, are fully met and discharged or provided for. The 5 agency may include this pledge and agreement of the Commonwealth 6 in any agreement with the holders of bonds, bond anticipation 7 notes and other obligations issued by the agency. 8 ARTICLE VI.-A 9 Liberal Construction, Fraud Penalty and Effective Date 10 Section 601-A. Liberal Construction.--This act, being 11 necessary for the welfare of the Commonwealth and its 12 inhabitants, shall be liberally construed to effect the purposes 13 thereof. 14 Section 602-A. Fraud Penalty.--Any person who attempts to or 15 obtains financial aid for a project hereunder or occupancy or 16 continual occupancy of a dwelling unit therein by false or 17 misleading information or who shall violate this act or who 18 shall by fraud attempt to obtain moneys from the agency or its 19 approval for the payment of moneys or shall fraudulently attempt 20 to or does prevent the collection of any moneys due to the 21 agency shall, for each offense, be guilty of a misdemeanor, and, 22 upon conviction thereof, shall be sentenced to pay a fine not 23 exceeding three hundred dollars ($300) or undergo imprisonment 24 not exceeding one year, or both. 25 Section 603-A. Effective Date; Proclamation.--This act shall 26 become effective when the Governor by proclamation declares that 27 sufficient funds are available to administer this act. For the 28 purposes of this determination and then thereafter, in addition 29 to any appropriations as are made to the agency, the 30 Commonwealth is authorized to accept for the account of the 19720S1407B1961 - 29 -
1 agency grants-in-aid, donations and gifts of every manner and 2 type from the Federal Government or from any other private or 3 public corporation or person. Upon such declaration, such funds 4 as have been collected shall immediately be paid to the 5 treasurer of the agency, or if a treasurer has not been 6 appointed, to such other person as the Governor may designate as 7 acting treasurer. D26L32CM/19720S1407B1961 - 30 -