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 ishereby found and declared that in this state there is a shortage ofdecent, safe and sanitary housing that most people can afford; thatthe shortage of such housing is a threat to the health, safety, moralsand welfare of Indiana residents and is not transitory and self-curing;that the cost of financing such housing is a major and substantialfactor affecting the supply and cost of decent, safe and sanitaryhousing built by private enterprise; that the purpose of this chapteris to provide a means of lowering the cost of financing ownership byIndiana residents of decent, safe and sanitary housing; that suchfinancing of residential ownership will (a) provide for and promotethe public health, safety, morals, and welfare, (b) stimulateconstruction of new housing and remodeling and improvement ofexisting housing, thereby relieving conditions of unemployment andencouraging the increase of industry and commercial activity andeconomic development so as to reduce the evils attendant uponunemployment, (c) assist low and moderate income people inacquiring and owning decent, safe and sanitary housing which theycan afford, (d) promote the integration of families of varyingeconomic means, and (e) preserve and increase the ad valoremproperty tax base in this state; that the foregoing are public purposes;and that the necessity for the provisions of this chapter is a matter oflegislative 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 havethe meaning indicated unless a different meaning clearly appearsfrom the context:
(1) "Bonds" means the revenue bonds authorized to be issuedunder this chapter and includes notes and any and all otherlimited obligations of a county or municipality payable asprovided in this chapter.
(2) "Executive officer" of a county, city, or town has themeaning set forth in IC 36-1-2-5.
(3) "Governing body" of a county, city, or town has themeaning set forth in IC 36-1-2-9.
(4) "Home" means real property and improvements thereonconstructed for human habitation, located within the county ormunicipality, consisting of not more than four (4) units, andowned by one (1) mortgagor who occupies or intends to occupyone (1) of such units.
(5) "Home mortgage" means an interest bearing loan for not toexceed thirty (30) years to a mortgagor for the purpose of
purchasing or improving a home, evidenced by a promissorynote and secured by a mortgage on this home, but shall notinclude a loan primarily for the purpose of refinancing anexisting loan.
(6) "Lending institution" means any bank, trust company,savings bank, national banking association, savings association,mortgage banker, or other financing institution or governmentalagency which customarily provides service or otherwise aids inthe financing of mortgages on single family residential housingor multifamily residential housing, which institution, for acounty, is located in that county, and for a municipality islocated in the county in which the municipality is located, orany holding company for any of the foregoing.
(7) "Mortgagor" means an individual, or two (2) or moreindividuals acting together, who have received a homemortgage under this chapter.
(8) "Recording officer" means the clerk or clerk-treasurer of acounty or municipality.
(9) "Municipality" means a city or town.
(10) "Authority" refers to the Indiana housing and communitydevelopment 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 byordinance an aggregate acceptable income amount for the yearimmediately preceding the calendar year in which a mortgage isrequested, for the mortgagor and all individuals, except minorchildren of the mortgagor, who intend to reside with the mortgagorin one (1) dwelling unit. The purpose of this aggregate acceptableincome amount is to limit the assistance provided by this chapter toindividuals of low and moderate income.
(b) The governing body may consider the following factors beforeit adopts the ordinance provided in subsection (a) of this section:
(1) the portion of total income of a person that is available tomeet housing needs;
(2) the number of persons that may share a residential dwellingunit;
(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 personshaving adjusted gross income for Indiana individual income taxpurposes of law and moderate income. However, at least ninetypercent (90%) of the value of home mortgages made from any issueof bonds will be made with respect to mortgagors whose adjustedfamily income does not exceed one hundred percent (100%) of themedian income of all families residing within the metropolitan areaof the county or municipality as determined by the governing body.For the purpose of determining the income of a person who was nota resident of the state of Indiana for the prior taxable year, theperson's adjusted gross income shall be computed as if he were aresident 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, orconsolidated city for home mortgages under this chapter if at the timeof issuance and delivery there remains unexpended or uncommittedmore than five percent (5%) of the net proceeds of a prior bondissued by that county, city, town, or consolidated city under thischapter.
(b) Bonds shall not be issued under this chapter for homemortgages in an amount in excess of twenty-five percent (25%) ofthe average annual amount of mortgage lending in the county ormunicipality in the most recent three (3) year period for which thegoverning body shall by ordinance determine from the HomeMortgage Disclosure Act, Public Law 94-200.
(c) No issue shall be approved by the authority if the amount ofthe issue exceeds the total amount of bond issues permissible underthis chapter in the calendar year during which the proposed bondswill be issued. The total amount of bonds permissible under thischapter in any calendar year shall be fifty dollars ($50) multiplied bythe population of the state of Indiana as determined by the mostrecent federal decennial census.
(d) There is a five percent (5%) down payment requirement. Anissue meets this requirement only if seventy-five percent (75%) ormore of the owner-occupied financing provided by the issue isninety-five percent (95%) financing. For purposes of this subsection,financing of a residence is ninety-five percent (95%) financing ifsuch financing is ninety-five percent (95%) or more of theacquisition cost of such residence. A larger down payment ispermitted in the case of alternative mortgage instruments as providedby law.
(e) No mortgage shall be made under this chapter the amount ofwhich exceeds two and one-half (2 1/2) times the amount of theannual income of the prospective mortgagor. In addition, nofinancing shall be provided under this chapter to a prospective
mortgagor who is already a mortgagor with respect to an existingmortgage financed under this chapter.
(f) The effective rate of interest on mortgages provided from aparticular bond issue under this chapter may not exceed the yield onthe issue by more than one (1) percentage point. For purposes of thissubsection, the effective rate of mortgage interest and the bond yieldshall be determined in accordance with reasonable proceduresadopted by the authority. However, the authority may waive therestriction in this subsection if it determines that:
(1) waiver of the restriction with respect to a proposed issue isin the best interests of the citizens of the issuing jurisdiction andthe state of Indiana; and
(2) the proposed issue is not marketable without waiver of therestriction.
(g) An issue meets the requirements of this section only if apreliminary official statement of such issue has been submitted to theauthority, and:
(1) such authority has, within thirty (30) days after the date ofsuch submission, issued an opinion that such issue meets therequirements of this section and section 4 of this chapter; or
(2) thirty (30) days have elapsed since such submission andduring this thirty (30) day period the authority has not issued anopinion that the issue does not meet the requirements of thissection 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 atrustee institution to administer the proceeds of bond issues underthis chapter; in counties and towns, the designation shall be made bythe governing body. All lending institutions may participate underthis chapter. The proceeds of each bond issue shall be apportioned asprovided in this section by the trustee institution among all lendinginstitutions that choose to participate. Those institutions that chooseto participate shall furnish the trustee with copies of their submissionunder the Home Mortgage Disclosure Act during the preceding three(3) years.
(1) For the most recent calendar year for which this informationis available, the trustee institution shall compute the percentagethat each participating lending institution's total amount ofmortgages for homes located in the county bears to that sametotal amount for all participating lending institutions; thispercentage figure is the participating lending institution'spercentage share of the proceeds of bonds to be apportioned toit by the trustees institution.
(2) The participating institutions must certify to the trustee thatthe proceeds will be used as required by the chapter, and that
the institution will attempt to maintain the same proportion ofdollar volume of all mortgage loans within the county ormunicipality during the calendar year in which the proceeds aredistributed as in the preceding year. The trustee institution may,in its discretion, reapportion any unused bond proceeds amongthe participating lending institutions either:
(A) six (6) months after funds are first apportioned toparticipating lending institutions for mortgage lendingpurposes; or
(B) after seventy-five percent (75%) of the bond proceedsdesignated 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 chapterapplies has all powers necessary to accomplish the purposes of thischapter including, but not limited to, the power:
(1) to purchase, contract and enter into advance commitmentsto purchase, home mortgages owned by lending institutions atsuch prices and upon such other terms and conditions as shallbe determined by the county or municipality, to make andexecute contracts with one (1) or more lending institutions forthe origination and servicing of home mortgages, and to pay thereasonable value of services rendered under those contracts;
(2) to make loans to lending institutions under terms andconditions which, in addition to other provisions as determinedby the county or municipality, shall require the lendinginstitutions to use substantially all of the net proceeds thereof,directly or indirectly, for the making of home mortgages in anaggregate principal amount substantially equal to the amount ofsuch net proceeds;
(3) to establish, by rules or regulations, in any ordinancerelating to the issuance of bonds or in any financing documentsrelating to such issuance, such standards and requirementsapplicable to the purchase of home mortgages from or themaking of loans to lending institutions as the county ormunicipality deems necessary or desirable, including but notlimited to:
(A) the time within which lending institutions must makecommitments and disbursements for home mortgages;
(B) the location and other characteristics of homes to befinanced by home mortgages;
(C) the terms and conditions of home mortgages to be acquired;
(D) the amounts and types of insurance coverage required onhomes, home mortgages and bonds;
(E) the representations and warranties of lending institutionsconfirming compliance with such standards and requirements;
(F) restrictions as to interest rates and other terms of home
mortgages or the return realized therefrom by lendinginstitutions;
(G) the type and amount of collateral security to be provided toassure repayment of any loans from the county or municipalityand to assure repayment of bonds; and
(H) any other matters relating to the purchase of homemortgages or the making of loans to lending institutions as shallbe deemed relevant by the county or municipality; however, nolending institution shall charge and retain an origination fee inexcess of three percent (3%) of the principal amount of anysuch home mortgage;
(4) to require from each lending institution from which homemortgages are purchased or to which loans are made thesubmission, at the time of the purchase or loan, of evidencesatisfactory to the county or municipality of the ability andintention of the lending institution to make home mortgages,and the submission, within the time specified by the county ormunicipality for making disbursements for home mortgages, ofevidence satisfactory to the county or municipality of themaking of home mortgages and of compliance with anystandards and requirements established by the county ormunicipality;
(5) to issue bonds to defray, in whole or in part:
(A) the costs of purchasing, or funding the making of homemortgages;
(B) the costs of studies and surveys, insurance premiums,underwriting fees, legal, accounting, and marketing servicesincurred 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, inwhole or in part, or to loan sufficient funds to any person todefray, in whole or in part, the costs of purchasing homemortgages, so that the revenues and receipts to be derived withrespect to the home mortgages, together with any insuranceproceeds, reserve accounts and earnings thereon shall bedesigned to produce revenues and receipts at least sufficient toprovide for the prompt payment at maturity of principal, interestand redemption premiums, if any, upon all bonds issued tofinance these costs;
(7) to pledge any revenues and receipts to be received from anyhome mortgages or other sources provided in this chapter to thepunctual payment of bonds authorized under this chapter, andthe interest and redemption premiums, if any, thereon;
(8) to mortgage, pledge or grant security interests in any homemortgages, notes or other property in favor of the holder orholders of bonds issued therefor;
(9) to sell and convey any home mortgages for those prices andat those times that the governing body determines; (10) to issue its bonds to refund in whole or in part at any timebonds previously issued under this chapter, including, withoutlimitation, interest to maturity or earlier redemption date,redemption premiums and costs of the type enumerated inclause (5) of this section; and
(11) to make and execute contracts and other instrumentsnecessary or convenient to the exercise of any of the powersgranted 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 unlessthese bonds are rated "A" or better by one (1) of the nationallyrecognized rating agencies or unless these bonds are sold in atransaction not involving any public offering within the meaning ofSection 4(2) of the Securities Act of 1933, as amended, and rules andregulations thereunder.
(b) The exercise of any or all powers or the issue of bonds underthis chapter shall be authorized by ordinance of the governing body.Notwithstanding any law to the contrary, this ordinance may beadopted at the same meeting at which it is introduced and it shall takeeffect immediately upon adoption. Any ordinance authorizing bondsshall be adopted only after the governing body has held a publichearing on the proposed financing after giving not less than five (5)days notice by publication in at least one (1) newspaper of generalcirculation in the county or municipality. This ordinance shall alsoset forth a legislative finding and declaration of the public purposeof the bond issue and that the ordinance is being enacted pursuant tothe powers granted by this chapter. No action to contest the validityof any bonds may commence more than thirty (30) days followingthe adoption of the ordinance approving the bonds. However, ifauthorized by ordinance, any officer of the county or municipalitymay bring an action under IC 34-13-5 or file a petition underIC 36-4-4-5 within this thirty (30) day period to determine thevalidity of any bonds or any agreements in connection with them. Inthis proceeding, no bond need be filed by the petitioner or plaintiffunless requested by the county or municipality, and any judgmentshall be final unless appealed within thirty (30) days after entry ofthe judgment.
(c) The bonds shall bear interest at the rate or rates, may bepayable at the times, may be in one (1) or more series, may bear thedate or dates, may mature at the time or times not exceeding forty(40) years from their respective dates, may be payable in the mediumof payment at the place or places, may carry the registrationprivileges, may be subject to the terms of redemption at thepremiums, may be executed in the manner, may contain the terms,covenants, and conditions, may be in the form either coupon orregistered, and may bear the name that the ordinance or trust
indenture securing the bonds provides. The bonds may be sold atpublic or private sale in a manner and upon the terms provided in theordinance. Pending the preparation of definitive bonds, interimreceipts, or certificates in the form and with the provisions asprovided in the ordinance may be issued to the purchaser of bondssold pursuant to this chapter.
(d) The bonds and interim receipts or certificates are negotiableinstruments under the laws of this state. Bonds and receipts and theauthorization, issuance, sale, and delivery thereof are not subject toany 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 theissuance of bonds or related trust indenture may contain covenantsas to:
(1) the use and disposition of the revenues and receipts fromany 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, orbonds and the use and disposition of insurance moneys;
(3) the appointment of one (1) or more banks or trust companieswithin or outside the state of Indiana, having the necessary trustpowers, as trustee or custodian for the benefit of thebondholders, paying agent or bond registrar;
(4) the investment of any funds held by this trustee orcustodian;
(5) the maximum interest rate payable on any home mortgage;and
(6) the terms and conditions upon which the holders of thebonds or any portion thereof, or any trustees therefor, areentitled to the appointment of a receiver by a court of competentjurisdiction, and these terms and conditions may provide thatthe receiver may enter and take possession of the homemortgages, or any part thereof, and maintain, sell or otherwisedispose of such mortgages, prescribe other payments andcollect, receive and apply all income and revenues thereafterarising therefrom.
(b) Any ordinance authorizing the issuance of bonds or relatedtrust 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 trustcovering such home mortgages for which the bonds are issued. Suchmortgage, pledge, security interest, insurance agreement or indentureof trust may contain such covenants and agreements to safeguard thebonds as is provided for in the ordinance authorizing the bonds andshall be executed in the manner as may be provided for in theordinance. (c) The provisions of this chapter and any ordinance and anymortgage, pledge, security interest or indenture of trust shallconstitute a contract with the holder of the bonds and continues ineffect until the principal of, the interest on, and the redemptionpremiums, if any, on the bonds so issued have been fully paid orprovision made therefor. The duties of this county or municipalityand its governing body and officers under this chapter, anyordinance, and any mortgage, pledge, security interest or indentureof trust shall be enforceable as provided in it by any bondholder bymandamus, foreclosure, or other appropriate suit, action orproceeding in any court of competent jurisdiction. However, theordinance or any mortgage, pledge, security interest or indenture oftrust under which the bonds are issued may provide that all remediesand rights to enforcement may be vested in a trustee (with full powerof appointment) for the benefit of all the bondholders which trusteeshall be subject to the control of a specified number of holders orowners 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. Thebonds and any coupons shall bear the manual or facsimile signaturesof the executive officer and the recording officer of the county ormunicipality and any coupons shall bear the facsimile signature ofone (1) or more of these officers. These signatures shall be the validand binding signatures of these officers, notwithstanding that beforedelivery and payment, any or all of the individuals whose signaturesappear have ceased to be officers of the county or municipalityissuing the bonds. The validity of the bonds is not dependent on noraffected by the validity or regularity of any proceedings relating tothe home mortgages for which the bonds are issued. The ordinanceauthorizing the bonds may provide that the bonds shall contain arecital that they are issued pursuant to this chapter, which recitalshall be conclusive evidence of their validity and of the regularity oftheir 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 theinterest on them may be secured by a pledge of or lien upon therevenues and receipts derived from or in connection with the homemortgages or from any notes or other obligations of lendinginstitutions with respect to which the bonds have been issued. Thegoverning body may provide in the ordinance authorizing the bondsfor the issuance of additional bonds to be equally and ratably securedby 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 chapterand the interest on them are limited obligations of the county ormunicipality payable solely from the revenues and receipts derivedfrom or in connection with the home mortgages, from any notes orother obligations of lending institutions with respect to which thesebonds are issued, or from the proceeds of these bonds or refundingbonds and the investment income from them. No holder of any bondsissued under this chapter has the right to compel any exercise of thetaxing power of the county or municipality to pay the bonds or theinterest or redemption premium, if any, thereon. The bonds are notan indebtedness of the county or municipality or a loan of its creditwithin the meaning of any constitutional or statutory limitation. Norshall the bonds be construed to create any moral obligation on thepart of the county or municipality with respect to their payment. Itshall be plainly stated on the face of each bond that it has been issuedunder the provisions of this chapter and that it does not constitute anindebtedness of the county or municipality or a loan of its creditwithin 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 propertybid submitted by trust
Sec. 13. (a) A requirement of competitive bidding or restrictionimposed on the procedure for award of contracts for the sale or otherdisposition of property of the county or municipality is not applicableto any action taken under this chapter.
(b) This subsection applies if a county or municipality sells ordisposes of real property under this chapter by acceptance of bids. Abid submitted by a trust (as defined in IC 30-4-1-1(a)) must identifyeach:
(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, proceedsreceived by a holder from the sale of them to the extent of theholder's cost of acquisition, proceeds received upon redemption priorto maturity, proceeds received at maturity, and interest thereon, areexempt from taxation in the state of Indiana for all purposes exceptthe financial institutions tax imposed under IC 6-5.5 or a stateinheritance 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 otherobligations of lending institutions executed pursuant to this chapterand the revenues and receipts derived by a county or municipalitytherefrom 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 authorizedpursuant to this chapter are exempt from the provisions of IC 23-19or 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 areexempt 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; limitationsimposed; effect
Sec. 18. Powers Conferred as Additional and Supplemental;Limitations Imposed-Effect. The powers conferred by this chapterare in addition and supplemental to, and the limitations imposed bythis chapter shall not affect, the powers conferred by any other lawof this state. Mortgages may be acquired, purchased and financed,and bonds may be issued under this chapter, notwithstanding that anyother law may provide for the acquisition, purchase and financing oflike home mortgages, or the issuance of bonds for like purposes, andwithout regard to the requirements, restrictions, limitations or otherprovisions contained in any other law.
As added by Acts 1979, P.L.47, SEC.1.