CHAPTER 2. FINANCING OF HOUSING
IC 5-20-2
Chapter 2. Financing of Housing
IC 5-20-2-1
Legislative findings; declaration of purpose
Sec. 1. Legislative Findings and Declaration of Purpose. It is
hereby found and declared that in this state there is a shortage of
decent, safe and sanitary housing that most people can afford; that
the shortage of such housing is a threat to the health, safety, morals
and welfare of Indiana residents and is not transitory and self-curing;
that the cost of financing such housing is a major and substantial
factor affecting the supply and cost of decent, safe and sanitary
housing built by private enterprise; that the purpose of this chapter
is to provide a means of lowering the cost of financing ownership by
Indiana residents of decent, safe and sanitary housing; that such
financing of residential ownership will (a) provide for and promote
the public health, safety, morals, and welfare, (b) stimulate
construction of new housing and remodeling and improvement of
existing housing, thereby relieving conditions of unemployment and
encouraging the increase of industry and commercial activity and
economic development so as to reduce the evils attendant upon
unemployment, (c) assist low and moderate income people in
acquiring and owning decent, safe and sanitary housing which they
can afford, (d) promote the integration of families of varying
economic means, and (e) preserve and increase the ad valorem
property tax base in this state; that the foregoing are public purposes;
and that the necessity for the provisions of this chapter is a matter of
legislative determination.
As added by Acts 1979, P.L.47, SEC.1.
IC 5-20-2-2
Definitions
Sec. 2. As used in this chapter, each of the following shall have
the meaning indicated unless a different meaning clearly appears
from the context:
(1) "Bonds" means the revenue bonds authorized to be issued
under this chapter and includes notes and any and all other
limited obligations of a county or municipality payable as
provided in this chapter.
(2) "Executive officer" of a county, city, or town has the
meaning set forth in IC 36-1-2-5.
(3) "Governing body" of a county, city, or town has the
meaning set forth in IC 36-1-2-9.
(4) "Home" means real property and improvements thereon
constructed for human habitation, located within the county or
municipality, consisting of not more than four (4) units, and
owned by one (1) mortgagor who occupies or intends to occupy
one (1) of such units.
(5) "Home mortgage" means an interest bearing loan for not to
exceed thirty (30) years to a mortgagor for the purpose of
purchasing or improving a home, evidenced by a promissory
note and secured by a mortgage on this home, but shall not
include a loan primarily for the purpose of refinancing an
existing loan.
(6) "Lending institution" means any bank, trust company,
savings bank, national banking association, savings association,
mortgage banker, or other financing institution or governmental
agency which customarily provides service or otherwise aids in
the financing of mortgages on single family residential housing
or multifamily residential housing, which institution, for a
county, is located in that county, and for a municipality is
located in the county in which the municipality is located, or
any holding company for any of the foregoing.
(7) "Mortgagor" means an individual, or two (2) or more
individuals acting together, who have received a home
mortgage under this chapter.
(8) "Recording officer" means the clerk or clerk-treasurer of a
county or municipality.
(9) "Municipality" means a city or town.
(10) "Authority" refers to the Indiana housing and community
development authority created by IC 5-20-1-3.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.1; P.L.8-1989, SEC.23; P.L.79-1998, SEC.11;
P.L.181-2006, SEC.21.
IC 5-20-2-3
Application
Sec. 3. Application. This chapter applies to counties, cities, towns,
and consolidated cities.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.2.
IC 5-20-2-4
Income limits
Sec. 4. Income Limits. (a) The governing body shall establish by
ordinance an aggregate acceptable income amount for the year
immediately preceding the calendar year in which a mortgage is
requested, for the mortgagor and all individuals, except minor
children of the mortgagor, who intend to reside with the mortgagor
in one (1) dwelling unit. The purpose of this aggregate acceptable
income amount is to limit the assistance provided by this chapter to
individuals of low and moderate income.
(b) The governing body may consider the following factors before
it adopts the ordinance provided in subsection (a) of this section:
(1) the portion of total income of a person that is available to
meet housing needs;
(2) the number of persons that may share a residential dwelling
unit;
(3) the cost and condition of available housing; and
(4) the amount of income required to obtain and pay for decent,
safe, and sanitary housing in the regular private housing market.
(c) Mortgage loans under this chapter are limited to persons
having adjusted gross income for Indiana individual income tax
purposes of law and moderate income. However, at least ninety
percent (90%) of the value of home mortgages made from any issue
of bonds will be made with respect to mortgagors whose adjusted
family income does not exceed one hundred percent (100%) of the
median income of all families residing within the metropolitan area
of the county or municipality as determined by the governing body.
For the purpose of determining the income of a person who was not
a resident of the state of Indiana for the prior taxable year, the
person's adjusted gross income shall be computed as if he were a
resident of the state of Indiana for the prior taxable year.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.3.
IC 5-20-2-5
Other limitations
Sec. 5. (a) Bonds shall not be issued by a county, city, town, or
consolidated city for home mortgages under this chapter if at the time
of issuance and delivery there remains unexpended or uncommitted
more than five percent (5%) of the net proceeds of a prior bond
issued by that county, city, town, or consolidated city under this
chapter.
(b) Bonds shall not be issued under this chapter for home
mortgages in an amount in excess of twenty-five percent (25%) of
the average annual amount of mortgage lending in the county or
municipality in the most recent three (3) year period for which the
governing body shall by ordinance determine from the Home
Mortgage Disclosure Act, Public Law 94-200.
(c) No issue shall be approved by the authority if the amount of
the issue exceeds the total amount of bond issues permissible under
this chapter in the calendar year during which the proposed bonds
will be issued. The total amount of bonds permissible under this
chapter in any calendar year shall be fifty dollars ($50) multiplied by
the population of the state of Indiana as determined by the most
recent federal decennial census.
(d) There is a five percent (5%) down payment requirement. An
issue meets this requirement only if seventy-five percent (75%) or
more of the owner-occupied financing provided by the issue is
ninety-five percent (95%) financing. For purposes of this subsection,
financing of a residence is ninety-five percent (95%) financing if
such financing is ninety-five percent (95%) or more of the
acquisition cost of such residence. A larger down payment is
permitted in the case of alternative mortgage instruments as provided
by law.
(e) No mortgage shall be made under this chapter the amount of
which exceeds two and one-half (2 1/2) times the amount of the
annual income of the prospective mortgagor. In addition, no
financing shall be provided under this chapter to a prospective
mortgagor who is already a mortgagor with respect to an existing
mortgage financed under this chapter.
(f) The effective rate of interest on mortgages provided from a
particular bond issue under this chapter may not exceed the yield on
the issue by more than one (1) percentage point. For purposes of this
subsection, the effective rate of mortgage interest and the bond yield
shall be determined in accordance with reasonable procedures
adopted by the authority. However, the authority may waive the
restriction in this subsection if it determines that:
(1) waiver of the restriction with respect to a proposed issue is
in the best interests of the citizens of the issuing jurisdiction and
the state of Indiana; and
(2) the proposed issue is not marketable without waiver of the
restriction.
(g) An issue meets the requirements of this section only if a
preliminary official statement of such issue has been submitted to the
authority, and:
(1) such authority has, within thirty (30) days after the date of
such submission, issued an opinion that such issue meets the
requirements of this section and section 4 of this chapter; or
(2) thirty (30) days have elapsed since such submission and
during this thirty (30) day period the authority has not issued an
opinion that the issue does not meet the requirements of this
section and section 4 of this chapter.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.4; P.L.1-2006, SEC.107; P.L.181-2006, SEC.22;
P.L.1-2007, SEC.30.
IC 5-20-2-6
Administration
Sec. 6. Administration. In cities, the mayor shall designate a
trustee institution to administer the proceeds of bond issues under
this chapter; in counties and towns, the designation shall be made by
the governing body. All lending institutions may participate under
this chapter. The proceeds of each bond issue shall be apportioned as
provided in this section by the trustee institution among all lending
institutions that choose to participate. Those institutions that choose
to participate shall furnish the trustee with copies of their submission
under the Home Mortgage Disclosure Act during the preceding three
(3) years.
(1) For the most recent calendar year for which this information
is available, the trustee institution shall compute the percentage
that each participating lending institution's total amount of
mortgages for homes located in the county bears to that same
total amount for all participating lending institutions; this
percentage figure is the participating lending institution's
percentage share of the proceeds of bonds to be apportioned to
it by the trustees institution.
(2) The participating institutions must certify to the trustee that
the proceeds will be used as required by the chapter, and that
the institution will attempt to maintain the same proportion of
dollar volume of all mortgage loans within the county or
municipality during the calendar year in which the proceeds are
distributed as in the preceding year. The trustee institution may,
in its discretion, reapportion any unused bond proceeds among
the participating lending institutions either:
(A) six (6) months after funds are first apportioned to
participating lending institutions for mortgage lending
purposes; or
(B) after seventy-five percent (75%) of the bond proceeds
designated for mortgage acquisition have been used.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.5.
IC 5-20-2-7
Powers
Sec. 7. Powers. A county or municipality to which this chapter
applies has all powers necessary to accomplish the purposes of this
chapter including, but not limited to, the power:
(1) to purchase, contract and enter into advance commitments
to purchase, home mortgages owned by lending institutions at
such prices and upon such other terms and conditions as shall
be determined by the county or municipality, to make and
execute contracts with one (1) or more lending institutions for
the origination and servicing of home mortgages, and to pay the
reasonable value of services rendered under those contracts;
(2) to make loans to lending institutions under terms and
conditions which, in addition to other provisions as determined
by the county or municipality, shall require the lending
institutions to use substantially all of the net proceeds thereof,
directly or indirectly, for the making of home mortgages in an
aggregate principal amount substantially equal to the amount of
such net proceeds;
(3) to establish, by rules or regulations, in any ordinance
relating to the issuance of bonds or in any financing documents
relating to such issuance, such standards and requirements
applicable to the purchase of home mortgages from or the
making of loans to lending institutions as the county or
municipality deems necessary or desirable, including but not
limited to:
(A) the time within which lending institutions must make
commitments and disbursements for home mortgages;
(B) the location and other characteristics of homes to be
financed by home mortgages;
(C) the terms and conditions of home mortgages to be acquired;
(D) the amounts and types of insurance coverage required on
homes, home mortgages and bonds;
(E) the representations and warranties of lending institutions
confirming compliance with such standards and requirements;
(F) restrictions as to interest rates and other terms of home
mortgages or the return realized therefrom by lending
institutions;
(G) the type and amount of collateral security to be provided to
assure repayment of any loans from the county or municipality
and to assure repayment of bonds; and
(H) any other matters relating to the purchase of home
mortgages or the making of loans to lending institutions as shall
be deemed relevant by the county or municipality; however, no
lending institution shall charge and retain an origination fee in
excess of three percent (3%) of the principal amount of any
such home mortgage;
(4) to require from each lending institution from which home
mortgages are purchased or to which loans are made the
submission, at the time of the purchase or loan, of evidence
satisfactory to the county or municipality of the ability and
intention of the lending institution to make home mortgages,
and the submission, within the time specified by the county or
municipality for making disbursements for home mortgages, of
evidence satisfactory to the county or municipality of the
making of home mortgages and of compliance with any
standards and requirements established by the county or
municipality;
(5) to issue bonds to defray, in whole or in part:
(A) the costs of purchasing, or funding the making of home
mortgages;
(B) the costs of studies and surveys, insurance premiums,
underwriting fees, legal, accounting, and marketing services
incurred in connection with the issuance and sale of bonds,
including bonds and interest reserve accounts and trustee,
custodian and rating agency fees; and
(C) those other costs that are reasonably related to (A) and (B);
(6) to sell or otherwise dispose of any home mortgages, in
whole or in part, or to loan sufficient funds to any person to
defray, in whole or in part, the costs of purchasing home
mortgages, so that the revenues and receipts to be derived with
respect to the home mortgages, together with any insurance
proceeds, reserve accounts and earnings thereon shall be
designed to produce revenues and receipts at least sufficient to
provide for the prompt payment at maturity of principal, interest
and redemption premiums, if any, upon all bonds issued to
finance these costs;
(7) to pledge any revenues and receipts to be received from any
home mortgages or other sources provided in this chapter to the
punctual payment of bonds authorized under this chapter, and
the interest and redemption premiums, if any, thereon;
(8) to mortgage, pledge or grant security interests in any home
mortgages, notes or other property in favor of the holder or
holders of bonds issued therefor;
(9) to sell and convey any home mortgages for those prices and
at those times that the governing body determines;
(10) to issue its bonds to refund in whole or in part at any time
bonds previously issued under this chapter, including, without
limitation, interest to maturity or earlier redemption date,
redemption premiums and costs of the type enumerated in
clause (5) of this section; and
(11) to make and execute contracts and other instruments
necessary or convenient to the exercise of any of the powers
granted in this chapter.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.6.
IC 5-20-2-8
Bonds
Sec. 8. (a) Bonds shall not be issued under this chapter unless
these bonds are rated "A" or better by one (1) of the nationally
recognized rating agencies or unless these bonds are sold in a
transaction not involving any public offering within the meaning of
Section 4(2) of the Securities Act of 1933, as amended, and rules and
regulations thereunder.
(b) The exercise of any or all powers or the issue of bonds under
this chapter shall be authorized by ordinance of the governing body.
Notwithstanding any law to the contrary, this ordinance may be
adopted at the same meeting at which it is introduced and it shall take
effect immediately upon adoption. Any ordinance authorizing bonds
shall be adopted only after the governing body has held a public
hearing on the proposed financing after giving not less than five (5)
days notice by publication in at least one (1) newspaper of general
circulation in the county or municipality. This ordinance shall also
set forth a legislative finding and declaration of the public purpose
of the bond issue and that the ordinance is being enacted pursuant to
the powers granted by this chapter. No action to contest the validity
of any bonds may commence more than thirty (30) days following
the adoption of the ordinance approving the bonds. However, if
authorized by ordinance, any officer of the county or municipality
may bring an action under IC 34-13-5 or file a petition under
IC 36-4-4-5 within this thirty (30) day period to determine the
validity of any bonds or any agreements in connection with them. In
this proceeding, no bond need be filed by the petitioner or plaintiff
unless requested by the county or municipality, and any judgment
shall be final unless appealed within thirty (30) days after entry of
the judgment.
(c) The bonds shall bear interest at the rate or rates, may be
payable at the times, may be in one (1) or more series, may bear the
date or dates, may mature at the time or times not exceeding forty
(40) years from their respective dates, may be payable in the medium
of payment at the place or places, may carry the registration
privileges, may be subject to the terms of redemption at the
premiums, may be executed in the manner, may contain the terms,
covenants, and conditions, may be in the form either coupon or
registered, and may bear the name that the ordinance or trust
indenture securing the bonds provides. The bonds may be sold at
public or private sale in a manner and upon the terms provided in the
ordinance. Pending the preparation of definitive bonds, interim
receipts, or certificates in the form and with the provisions as
provided in the ordinance may be issued to the purchaser of bonds
sold pursuant to this chapter.
(d) The bonds and interim receipts or certificates are negotiable
instruments under the laws of this state. Bonds and receipts and the
authorization, issuance, sale, and delivery thereof are not subject to
any general law concerning bonds of municipalities.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.7; P.L.3-1990, SEC.22; P.L.1-1998, SEC.76.
IC 5-20-2-9
Covenants in bonds
Sec. 9. Covenants in Bonds. (a) Any ordinance authorizing the
issuance of bonds or related trust indenture may contain covenants
as to:
(1) the use and disposition of the revenues and receipts from
any home mortgages for which the bonds are to be issued,
including the creation and maintenance of reserves;
(2) the insurance to be carried on any home, home mortgage, or
bonds and the use and disposition of insurance moneys;
(3) the appointment of one (1) or more banks or trust companies
within or outside the state of Indiana, having the necessary trust
powers, as trustee or custodian for the benefit of the
bondholders, paying agent or bond registrar;
(4) the investment of any funds held by this trustee or
custodian;
(5) the maximum interest rate payable on any home mortgage;
and
(6) the terms and conditions upon which the holders of the
bonds or any portion thereof, or any trustees therefor, are
entitled to the appointment of a receiver by a court of competent
jurisdiction, and these terms and conditions may provide that
the receiver may enter and take possession of the home
mortgages, or any part thereof, and maintain, sell or otherwise
dispose of such mortgages, prescribe other payments and
collect, receive and apply all income and revenues thereafter
arising therefrom.
(b) Any ordinance authorizing the issuance of bonds or related
trust indenture may provide that the principal of, premium, if any,
and interest on any such bonds shall be secured by a mortgage,
pledge, security interest, insurance agreement or indenture of trust
covering such home mortgages for which the bonds are issued. Such
mortgage, pledge, security interest, insurance agreement or indenture
of trust may contain such covenants and agreements to safeguard the
bonds as is provided for in the ordinance authorizing the bonds and
shall be executed in the manner as may be provided for in the
ordinance.
(c) The provisions of this chapter and any ordinance and any
mortgage, pledge, security interest or indenture of trust shall
constitute a contract with the holder of the bonds and continues in
effect until the principal of, the interest on, and the redemption
premiums, if any, on the bonds so issued have been fully paid or
provision made therefor. The duties of this county or municipality
and its governing body and officers under this chapter, any
ordinance, and any mortgage, pledge, security interest or indenture
of trust shall be enforceable as provided in it by any bondholder by
mandamus, foreclosure, or other appropriate suit, action or
proceeding in any court of competent jurisdiction. However, the
ordinance or any mortgage, pledge, security interest or indenture of
trust under which the bonds are issued may provide that all remedies
and rights to enforcement may be vested in a trustee (with full power
of appointment) for the benefit of all the bondholders which trustee
shall be subject to the control of a specified number of holders or
owners of any outstanding bonds.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.8.
IC 5-20-2-10
Signatures of officers on bonds; validity of bonds
Sec. 10. Signatures of Officers on Bonds.Validity of Bonds. The
bonds and any coupons shall bear the manual or facsimile signatures
of the executive officer and the recording officer of the county or
municipality and any coupons shall bear the facsimile signature of
one (1) or more of these officers. These signatures shall be the valid
and binding signatures of these officers, notwithstanding that before
delivery and payment, any or all of the individuals whose signatures
appear have ceased to be officers of the county or municipality
issuing the bonds. The validity of the bonds is not dependent on nor
affected by the validity or regularity of any proceedings relating to
the home mortgages for which the bonds are issued. The ordinance
authorizing the bonds may provide that the bonds shall contain a
recital that they are issued pursuant to this chapter, which recital
shall be conclusive evidence of their validity and of the regularity of
their issuance.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.9.
IC 5-20-2-11
Lien of bonds
Sec. 11. Lien of Bonds. Bonds issued under this chapter and the
interest on them may be secured by a pledge of or lien upon the
revenues and receipts derived from or in connection with the home
mortgages or from any notes or other obligations of lending
institutions with respect to which the bonds have been issued. The
governing body may provide in the ordinance authorizing the bonds
for the issuance of additional bonds to be equally and ratably secured
by a lien upon these revenues and receipts.
As added by Acts 1979, P.L.47, SEC.1.
IC 5-20-2-12
Liability for bonds
Sec. 12. Liability for Bonds. All bonds issued under this chapter
and the interest on them are limited obligations of the county or
municipality payable solely from the revenues and receipts derived
from or in connection with the home mortgages, from any notes or
other obligations of lending institutions with respect to which these
bonds are issued, or from the proceeds of these bonds or refunding
bonds and the investment income from them. No holder of any bonds
issued under this chapter has the right to compel any exercise of the
taxing power of the county or municipality to pay the bonds or the
interest or redemption premium, if any, thereon. The bonds are not
an indebtedness of the county or municipality or a loan of its credit
within the meaning of any constitutional or statutory limitation. Nor
shall the bonds be construed to create any moral obligation on the
part of the county or municipality with respect to their payment. It
shall be plainly stated on the face of each bond that it has been issued
under the provisions of this chapter and that it does not constitute an
indebtedness of the county or municipality or a loan of its credit
within the meaning of any constitutional or statutory limitation.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.10.
IC 5-20-2-13
Exemption from contract and bidding requirements; real property
bid submitted by trust
Sec. 13. (a) A requirement of competitive bidding or restriction
imposed on the procedure for award of contracts for the sale or other
disposition of property of the county or municipality is not applicable
to any action taken under this chapter.
(b) This subsection applies if a county or municipality sells or
disposes of real property under this chapter by acceptance of bids. A
bid submitted by a trust (as defined in IC 30-4-1-1(a)) must identify
each:
(1) beneficiary of the trust; and
(2) settlor empowered to revoke or modify the trust.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.11; P.L.336-1989(ss), SEC.17.
IC 5-20-2-14
Tax exemption for bonds
Sec. 14. All bonds and interim receipts or certificates, proceeds
received by a holder from the sale of them to the extent of the
holder's cost of acquisition, proceeds received upon redemption prior
to maturity, proceeds received at maturity, and interest thereon, are
exempt from taxation in the state of Indiana for all purposes except
the financial institutions tax imposed under IC 6-5.5 or a state
inheritance tax imposed under IC 6-4.1.
As added by Acts 1979, P.L.47, SEC.1. Amended by P.L.21-1990,
SEC.8; P.L.254-1997(ss), SEC.7.
IC 5-20-2-15
Tax exemption
Sec. 15. Tax Exemption. All home mortgages and notes or other
obligations of lending institutions executed pursuant to this chapter
and the revenues and receipts derived by a county or municipality
therefrom are exempt from all taxation in the state of Indiana.
As added by Acts 1979, P.L.47, SEC.1. Amended by Acts 1981,
P.L.62, SEC.12.
IC 5-20-2-16
Securities exemption
Sec. 16. All bonds and interim receipts or certificates authorized
pursuant to this chapter are exempt from the provisions of IC 23-19
or other securities registration laws.
As added by Acts 1979, P.L.47, SEC.1. Amended by P.L.27-2007,
SEC.5.
IC 5-20-2-17
Antitrust exemption
Sec. 17. Antitrust Exemption. Transactions under this chapter are
exempt from the provisions of IC 24-1 or any other antitrust law,
present or future, of the state.
As added by Acts 1979, P.L.47, SEC.1.
IC 5-20-2-18
Powers conferred as additional and supplemental; limitations
imposed; effect
Sec. 18. Powers Conferred as Additional and Supplemental;
Limitations Imposed-Effect. The powers conferred by this chapter
are in addition and supplemental to, and the limitations imposed by
this chapter shall not affect, the powers conferred by any other law
of this state. Mortgages may be acquired, purchased and financed,
and bonds may be issued under this chapter, notwithstanding that any
other law may provide for the acquisition, purchase and financing of
like home mortgages, or the issuance of bonds for like purposes, and
without regard to the requirements, restrictions, limitations or other
provisions contained in any other law.
As added by Acts 1979, P.L.47, SEC.1.