The Virginia Housing Development Authority (VHDA) continues to accept Rental Housing applications and underwrite loans, although they stopped posting a daily rate sheet on their website. This is due to the uncertainty that remains in the capital markets, including both the ability to access the markets and to adequately predict the resulting cost of funds. In April, VHDA was able to issue both Rental Housing and Homeownership bonds. VHDA was the first state HFA to access the capital markets in April. Proceeds from both issues will be used to fund existing mortgage loan obligations in each program. VHDA has plans to access the capital markets again in May to further support our existing permanent and construction loan portfolios.
Upon completion of its May capital markets activity, VHDA expects to reassess its access to the capital markets and to establish a schedule for future taxable and tax-exempt Rental Housing bond issuance that could provide funding for new production. It should also be noted that VHDA expects to lock rates for any such future taxable loans pursuant to a bond issuance schedule in a manner consistent with its longstanding process for tax-exempt loans. In that process, a loan commitment is issued and accepted by the borrower along with the payment of fees and submission of required documentation in order to be included in a prospective bond offering; however, the interest rates on the loans are not locked until the bonds are actually priced roughly two weeks later. Therefore, VHDA does not expect to be able to lock rates on taxable loans between bond pricing dates until further notice.
The earliest such schedule is expected to require signed commitments and payment of points is by June 30, to accommodate a mid-July bond pricing. Regardless of the actual timing of these anticipated bond issues, we expect to include only those developments that are ready to proceed immediately, meaning, among other things, all local approvals are in hand and permits are ready to be issued, plans are approved, and the construction contract has been signed. There may be other requirements imposed as a condition for funding to be determined by VH as we continue to monitor market changes. As usual, commitments for such deals will be contingent upon the Authority’s ability to access the capital markets at rates that allow for the development to be feasible and underwrite to the required Debt Service Coverage Ratio.
