University of California Annual Report on University Employee Housing Assistance Programs Fiscal Year Ended June 30, 2013

Transcription

1 University of California Annual Report on University Employee Housing Assistance Programs Fiscal Year Ended June 30, 2013 University of California Office of the President Executive Vice President - Chief Financial Officer Office of Loan Programs 1111 Franklin Street, 6th Floor Oakland, CA

2 Table of Contents Introduction Housing Assistance Programs Status Report...2 Cumulative Program Data...6 Appendix A: Program Descriptions...7 Appendix B: Loans Requiring Additional Approval...8

3 Introduction This Annual Report on University Employee Housing Assistance Programs provides an overview of the activities of the Office of Loan Programs (OLP) for the fiscal year ended June 30, The President is required to report annually on the program performance and to include information regarding origination volume, portfolio balance, and rate of return calculations for the program. In addition, the President is required to report the number, total dollar amount, and average loan amount of loans made to members of the Senior Management Group. In January 2013, the Consumer Financial Protection Bureau (CFPB) issued new lending regulations that implement certain provisions of the Dodd-Frank Act. The new CFPB regulations become effective on January 10, The University is modifying MOP policies in order to comply with these new requirements. This report also includes data related to portfolio loan sales completed during the fiscal year pursuant to the Mortgage Origination Program Portfolio Sale Program. OLP plans, develops, and administers the University of California (University) loan programs for members of the Academic Senate, members of the Senior Management Group, and other designated classes of employees, as approved by the Regents in June 1984 and amended from time to time. The housing and loan-related operations of OLP are self-supporting, utilizing service fee revenues and Faculty Housing Programs Reserve Fund earnings. The main components of the University s loan programs are the Mortgage Origination Program (MOP), and the Supplemental Home Loan Program (SHLP). MOP provides first deed of trust mortgage loans, using funds allocated from the University s Short-Term Investment Pool (STIP). SHLP primarily provides secondary financing, using authorized campus fund sources. In limited cases, SHLP provides primary mortgage loan financing. The body of this report provides the following information: Loan activity levels, including the number and dollar amount of mortgages initiated in fiscal year , and a comparison to loan activity levels for the prior fiscal year, Loan portfolio statistics, including the total number and dollar amount of mortgage loans outstanding as of June 30, MOP earnings analysis, including the average rate of return of the MOP portfolio as of June 30, 2013, and the dollar amount of the earnings differential between the MOP portfolio and STIP. Summary report of the loan activity for members of the Senior Management Group. Status of MOP Portfolio Loan Sales. Appendix A contains a description of the active housing assistance programs, and Appendix B contains a summary of loan types requiring additional approval. Page 1 of 8

4 Housing Assistance Programs Status Report Loan Activity Levels As shown in Table 1, The Office of Loan Programs funded 187 MOP loans in fiscal year , with an aggregate dollar amount of $105.9 million. The overall loan volume represents an 8.8% year-toyear decrease (18 fewer loans than the previous fiscal year) in the number of loans funded, and a 10.7% decrease in the total dollar volume funded. The reduction in the usage of MOP is due primarily to the availability of competitive interest rates through commercial lenders. The no lender fee structure and the favorable underwriting terms continue to make the MOP loan product a valuable recruitment and retention tool. Table 2 displays the annual loan volume statistics for the SHLP program. In fiscal year, , OLP funded 47 SHLP loans, with an aggregate dollar amount of $3.4 million. Of the SHLP loans funded, 20 loans totaling $337,650 were used for a one-time project to fund renovation loans in the forsale housing development at the Santa Barbara campus. Excluding these loans, there was a 2.90% yearto-year increase in the number of loans funded and a 155.8% increase in the dollar volume of loans funded. The increase in loan volume is primarily due to large loans which were funded by the Los Angeles campus. Table 3 presents a comparison of the number and dollar amount of MOP loans made in fiscal year to the activity levels for fiscal year Table 4 presents the same data for SHLP loans. Table 1: Mortgage Origination Program (MOP) Statistics by Location Fiscal Year Location Of Loans Of Loans Berkeley 31 $19,603,250 $632, Davis 19 8,551, , Irvine 38 15,219, , Los Angeles 29 24,670, , Merced 7 1,767, , Riverside 10 4,446, , San Diego 20 11,394, , San Francisco 12 8,161, , Santa Barbara 11 7,003, , Santa Cruz 10 5,114, , Totals/ 187 $105,931,400 $566, Page 2 of 8

5 Table 2: Supplemental Home Loan Program (SHLP) Statistics by Location Fiscal Year Location Berkeley 1 $ 61,550 $61, Davis 1 22,400 22, Irvine ,250 21, Los Angeles 5 2,270, , San Diego 1 29,500 29, San Francisco 6 367,750 61, Santa Barbara (Renovation) ,650 16, Santa Cruz 3 101,850 33, Totals/ 47 $3,406,400 $72, Table 3: Mortgage Origination Program Activity Levels by Location Comparison of and Totals Location Loan Amount Loan Amount Berkeley 29 $18,966,600 $654, $19,603,250 $632,363 Davis 17 8,495, , ,551, ,066 Irvine 39 17,826, , ,219, ,517 Los Angeles 24 20,185, , ,670, ,695 Merced 2 241, , ,767, ,479 Riverside 9 2,467, , ,446, ,615 San Diego 24 15,507, , ,394, ,740 San Francisco 19 14,377, , ,161, ,125 Santa Barbara 27 13,444, , ,003, ,645 Santa Cruz 15 7,168, , ,114, ,420 Totals 205 $118,682,900 $578, $105,931,400 $566,478 Page 3 of 8

6 Table 4: Supplemental Home Loan Program (SHLP) Activity Levels by Location Comparison of and Totals Location Loan Amount Loan Amount Berkeley 1 $43,050 $43,050 1 $61,550 $61,550 Davis ,400 22,400 Irvine ,800 25, ,250 21,525 Los Angeles ,270, ,090 San Diego 1 25,000 25, ,500 29,500 San Francisco 4 756, , ,750 61,292 Santa Barbara 1 22,200 22, Santa Barbara (Renovation Loans) n/a n/a n/a ,650 16,883 Santa Cruz 4 102,100 25, ,850 33,950 Totals 21 $1,199,650 $57, $3,406,400 $72,477 Page 4 of 8

7 Senior Management Group Statistics Tables 5 and 6 display the number, dollar amount, and average loan amount of MOP and SHLP loans made to members of the Senior Management Group (SMG) for fiscal year Table 5: Mortgage Origination Program Loans made to SMG Employees Fiscal Year Location Riverside 1 $ 660,000 $ 660, Santa Cruz 1 627, , Totals/ 2 $1,287,500 $643, Table 6: Supplemental Home Loan Program Loans made to SMG Employees Fiscal Year Location Santa Cruz 1 $34,850 $34, Totals/ 1 $34,850 $34, Page 5 of 8

8 Cumulative Program Data Loan Portfolio Statistics From program inception in July 1984 through June 30, 2013, OLP has funded 5,607 MOP loans with an aggregate dollar amount of $2.41 billion. The servicing portfolio as of June 30, 2013 consists of 2,695 loans with an outstanding portfolio balance of $1.22 billion. Of the outstanding servicing portfolio, 284 loans are UC-owned with an aggregate principal balance of $161.1 million as of June 30, Of the 284 UC-owned loans, 200 of the loans with an aggregate principal balance of $108 million do not have an interest rate floor. The remainder of the loan portfolio consists of 2,411 investor-owned loans with an aggregate principal balance of $1.1 billion, and is also serviced by OLP. The average rate of return of UC-owned MOP loans outstanding as of June 30, 2013 is 2.43%. Loans funded after August 1, 2010 have a minimum MOP rate of 3.0%, but loans made prior to this date do not have a floor interest rate. As of June 30, 2013 there are 226 UC-owned SHLP loans outstanding with an aggregate principal balance of $27.8 million. The remainder of the portfolio consists of 96 investor-owned loans with an aggregate principal balance of $4.6 million. MOP Portfolio Loan Sales In order to increase the liquidity of STIP and to make additional funds available for the Mortgage Origination Program, the University periodically sells loans to outside investors. In fiscal year , the University successfully completed 3 loan sales for a total of 927 MOP loans and an aggregate outstanding balance of $482.6 million. The sale of these loans resulted in a net to the University of % of par value. MOP Earnings Analysis When MOP was established, it was determined that any cumulative shortfalls in earnings and any principal losses to the MOP portfolio would be repaid to STIP from the Faculty Housing Programs Reserve. A comparison of MOP earnings vs. STIP earnings is completed each month, accompanied by transfers of the overage/shortfall in earnings between STIP and the Faculty Housing Programs Reserve. For the period July 1, 2012 through June 30, 2013, the annual MOP portfolio rate of return outperformed the STIP rate of return by $652,894. The dollar amount of the overage was transferred to the Faculty Housing Programs Reserve from STIP. In , the MOP program experienced losses associated with seven approved short sale transactions, one deed-in-lieu transaction, and one REO sale for a loss. A transfer of $1.02 million was completed from the Faculty Housing Programs Reserve to reimburse STIP for the principal losses associated with these transactions. There was also one short sale transaction and one deed-in-lieu transaction for the SHLP program resulting in a loss of $20, Losses associated with SHLP loans are realized by the campus funding source that was used to originate the loan. Program Update as of December 2013 The CFBP lending regulations include strict underwriting criteria and a definition of a Qualified Mortgage that must meet certain requirements in order to provide a conclusive presumption that a borrower has the ability to repay a loan. For loan applications received after January 10, 2014, OLP will, as a general matter, no longer offer Interest-Only loans or loans with terms greater than 30 years. OLP is reviewing exceptions to the loan tenor to see if in certain cases it could make sense to authorize the campuses to accept the risk for making loans with features of a non-qualified Mortgage. Additionally, in order to qualify for a small creditor exemption to the debt-to-income ratio requirements for a Qualified Mortgage, the University is forming a nonprofit corporation and transferring the residential lending functions of OLP to the corporation. Page 6 of 8

9 Appendix A: Program Descriptions A.1 Mortgage Origination Program (MOP) The Mortgage Origination Program was authorized by The Regents in July 1984 and utilizes funds from the University s Short-Term Investment Pool (STIP) to make first deed-of-trust loans to eligible employees. The eligible population for participation in MOP is limited to full-time University appointees who are members of the Academic Senate or who hold equivalent academic titles, Acting Assistant Professors, and members of the Senior Management Group. MOP loans are structured as adjustable interest rate loans with loan-to-value ratios of up to 90% and repayment periods of up to 40 years. The standard MOP interest rate is indexed to the most recently available four-quarter average rate-of-return of STIP, plus an administrative fee of one-quarter of one percent. The program has had cumulative allocations of $2.830 billion through June As of June 30, 2013, $416,936,720 in allocation funding is available for new loans. Effective August 1, 2010, a minimum interest rate of 3.0% was implemented for newly funded loans. A.2 Graduated Payment Mortgage Origination Program (GP-MOP) In November 2001, The Regents approved a variation on the standard MOP loan product. The Graduated Payment MOP (GP-MOP) is a loan that provides a lower interest rate to the borrower during the initial years of the loan. The initial rate paid by the borrower is a pre-determined amount less than the standard MOP Rate, with a minimum interest rate of 3.00%. The amount of the borrower s rate reduction (Interest Rate Differential) becomes smaller each year for a set number of years (Rate Differential Period). During the Rate Differential Period, the campus reimburses STIP for any shortfall in earnings that result from the lower Borrower Rate. Of the MOP loans funded in fiscal year , 5 represented GP-MOP loans, with a total dollar amount of $5.14 million. A.3 Interest-Only Mortgage Origination Program (IO-MOP) In May 2007, The Regents approved the Interest-Only MOP product. This loan product features an interest-only repayment period of up to ten years, followed by a fully-amortizing period of not less than 30 years. During the interest-only period, the interest-only rate (IO-MOP rate) is calculated as the standard MOP rate, plus an additional fee component of.25%. There is no negative amortization with an IO-MOP loan. Of the MOP loans funded in fiscal year , 11 represented IO-MOP loans, with a total dollar amount of $6.1 million. Effective with the MOP allocation, the total amount of IO-MOP loans is limited to 15% of the cumulative allocation. To be in compliance with the CFPB regulations, OLP will no longer offer Interest-Only loans for loan applications received after January 10, A.4 Supplemental Home Loan Program (SHLP) The Supplemental Home Loan Program primarily provides second deeds of trust for mortgage financing (a limited number of these loans is used to secure a first deed of trust on a property being purchased). SHLP loans are funded from campus resources (for example, Chancellor s discretionary funds). State funds cannot be used as a funding source. Page 7 of 8

10 Appendix B: Loans Requiring Additional Approval Current Program parameters provide for an additional approval process to address unusual recruitment or retention needs. Any position specifically designated by The Regents as requiring Regents approval for compensation-related matters must also receive Regents approval for loan-related matters. All other requests must be supported by a recommendation by the Chancellor or the LBNL Director. Below is a summary of the categories of loans requiring additional approval from either the President and/or The Regents. Maximum Loan Amount: The President, with concurrence of the Chairman of the Board of Regents and the Chairs of the Committees on Finance and Compensation, may approve MOP and SHLP loan amounts for greater than the maximum loan amount as approved by The Regents. The current maximum loan amount for MOP or SHLP loans is $1.33 million. GP-MOP Terms: The President is authorized to approve an initial rate reduction amount greater than 3 percent and/or an annual adjustment to the rate reduction amount outside the standard rate reduction range of 0.25% to 0.50%. Non-Standard Title: The President is authorized to approve individuals not in the eligible population for MOP or SHLP participation. Maximum Loan-to-Value (LTV) Ratio: The President, with concurrence of the Chairman of the Board of Regents and the Chairs of the Committees on Finance and Compensation, may approve an increase to the maximum LTV, to no more than 90%, for loans in excess of the current Indexed Program Loan Threshold. Table B.1: Loans Requiring Additional Approval (Cumulative Statistics: June June 2013) MOP Loans Category Maximum Loan Amount 8 $12,446,500 $1,555, Non-Standard GP-MOP 14 $14,023,900 $1,001, Non-Standard Title 59 $40, $681, Position Requiring Regents Approval 39 $30,992,300 $794, SHLP Loans Category Maximum Loan-to-Value Ratio 3 $390,750 $130, Non-Standard Title 43 $14, $327, Position Requiring Regents Approval 7 $5,081,200 $25, Page 8 of 8