Legislative Analysis
Phone: (517) 373-8080
EXPAND MSHDA PASS-THROUGH BOND PROGRAM
http://www.house.mi.gov/hfa
Senate Bill 417 as reported from House committee Analysis available at
Sponsor: Sen. Sam Singh http://www.legislature.mi.gov
House Committee: Economic Development and Small Business
Senate Committee: Housing and Human Services
Complete to 3-12-24
(Enacted as Public Act 71 of 2024)
SUMMARY:
Senate Bill 417 would amend the State Housing and Development Authority Act to make
several modifications to the Michigan State Housing Development Authority (MSHDA) Pass-
Through Bond Program, including authorizing MSHDA to use the proceeds of the bonds to
finance certain senior housing projects, accept private placements as a form of credit
enhancement, and allow eligible borrowers to have up to $100.0 million in outstanding loan
commitments.
The Pass-Through Bond Program allows MSHDA to issue bonds to finance a project
undertaken by an eligible housing developer. The bonds are a limited obligation of MSHDA,
not secured by MSHDA’s capital reserve account, and not backed by the moral obligation of
the state. To protect MSHDA from risk, the bonds are secured by the revenues of the borrower,
the real and personal property being financed, and an acceptable form of credit enhancement.1
Eligible projects
Under the State Housing and Development Authority Act, MSHDA can use the proceeds of
the bonds to make loans to eligible entities (such as a nonprofit housing corporation, limited
dividend housing association, mobile home park corporation, or public body or agency) for the
construction, rehabilitation, or long-term financing of multi-family housing projects for
students or for which at least 20% of the units are allocated for low- and moderate-income
persons. The loans can also be used for social, recreational, commercial, or communal facilities
to serve and improve the residential area in which a project is or will be located. 2
Under SB 417, multi-family housing projects that include independent living, congregate care,
and assisted living units for individuals who are at least 55 years old would be eligible for the
program. The bill would also no longer require the pass-through program to provide long-term
financing for eligible projects.
Eligible expenditures
The bill would remove a provision that prohibits MSHDA from providing long-term financing
for a project unless the project is constructed or rehabilitated in anticipation of the financing,
any requirements that some or all of the units are occupied by low- or moderate-income
1
For more information on the program, see: https://www.michigan.gov/mshda/developers/pass-through and
https://www.michigan.gov/mshda/-
/media/Project/Websites/mshda/developers/lihtc/assets/liptbruslr/mshda_li_ptb_01_pass_through__bond_prog_stmt
_app_req.pdf?rev=7bfd2bb1761d4ade8da2f139c3475c61&hash=1BCFAF0484D1E715F9104165FF35AD05.
2
Under Senate Bill 417, supporting facilities would also qualify as an eligible use.
House Fiscal Agency Page 1 of 4
 individuals will expire within two years, or the project is to be owned and operated by a
qualified 501(c)(3) nonprofit housing corporation.
To be eligible for financing through the Pass-Through Bond Program, rehabilitation
expenditures with respect to a project currently must equal at least 30% of the portion of the
cost of acquiring the building and equipment that is financed with the proceeds of the bonds
issued for the project, unless the project is located in an eligible distressed area 3 and receives
approval from MSHDA. Under SB 417, the required proportion of rehabilitation expenditures
would be reduced to at least 15% of the proceeds of the related notes or bonds, regardless of
whether the project is in an eligible distressed area.
MSHDA would no longer be required, but would still be able, to issue higher income limits for
a project financed by the Pass-Through Bond Program if it determines that the owner of the
project exercised reasonable efforts to rent the units to persons whose incomes did not exceed
the original income limitations and cannot attain and sustain at least a 95% occupancy level
for the project for any one-year period after the first tenant.
Application
A borrower seeking to qualify for a loan must file an application with MSHDA that includes
an acceptable proposed credit enhancement. Under SB 417, a standby purchase agreement4
would be an acceptable credit enhancement, and an applicant could alternatively include a
description of a private placement structure 5 that provides for the sale and resale of the notes
or bonds consistent with MSHDA’s restrictions and limitations. If MSHDA determines that
the repayment of the notes or bonds will be reasonably secure because of the proposed credit
enhancement or private placement structure, that determination would be conclusive and would
take the place of MSHDA’s normal underwriting and feasibility review.
The bill would also reduce the application fee from the greater of $4,000 or 0.05% of the
principal amount of notes or bonds requested to 0.01% of the principal amount of requested
notes or bonds.
Commitments
MSHDA must issue a six-month commitment to loan funds for a project in an amount that
cannot be greater than the total development cost of the project or $25.0 million (or $50.0
million for a project in an eligible distressed area), whichever is less, after determining that the
following conditions are met:
• The project is eligible for financing and the borrower is an eligible borrower.
• A completed application has been submitted and the borrower has provided acceptable
evidence of a commitment to issue the proposed credit enhancement to assure MSHDA
that the repayment of the notes or bonds is reasonably secure. 6
3
For a description and list of eligible distressed areas, see: https://www.michigan.gov/mshda/-
/media/Project/Websites/mshda/about/reports/MSHDA-EDA-List.pdf. Generally, the term means local governments
experiencing levels of economic hardship above the state average.
4
A standby purchase agreement is used to guarantee repurchase of the bonds. See: https://www.nabl.org/bond-
basics/standby-bond-purchase-agreement/.
5
Under a private placement structure, an institutional investor purchases the bonds privately.
6
Under Senate Bill 417, the borrower could fulfill this requirement by providing acceptable evidence of a commitment
to privately purchase the notes or bonds.
House Fiscal Agency SB 417 as reported Page 2 of 4
 • If the loan is made indirectly through a mortgage lender, all applicable requirements
have been met.
Under SB 417, MSHDA would no longer be required, but would still be able, to issue a six-
month commitment to loan funds under those conditions, and the cap on the commitment
amount would be removed. The bill also would no longer require MSHDA to extend a six-
month loan commitment for an additional six months if the borrower pays a nonrefundable
$5,000 fee.
Currently, a borrower and any related person 7 generally cannot have outstanding loan
commitments totaling more than the amount of financing approved for a single project or $25.0
million, whichever is greater, at any one time. 8 Senate Bill 417 would increase this maximum
to the greater of $100.0 million or the amount of financing approved for a project.
Fees
A borrower generally must pay a fee of up to 1.9% of the principal amount of the notes or
bonds for a loan made for a project, or up 0.9% of the principal amount if the project is located
in an eligible distressed area. This fee is in addition to any commitment or extension fee, and
MSHDA can establish an annual fee or other administrative fees to be paid by the borrower
during the term of the loan. Senate Bill 417 would cap the fee at 1.9%, regardless of where the
project is located, and an additional annual or administrative fee would be due during the term
of the loan or the applicable compliance monitoring period.
Subject to any rights of the holders of any notes or bonds issued to finance a multi-family
housing project, if the owner of a project provides MSHDA with satisfactory evidence that a
prospective new owner is an eligible borrower and interest on the notes or bonds will remain
exempt from federal income taxes, the borrower can sell, refinance from an alternate source,
or resyndicate the project without being required to pay a prepayment penalty or fee, other than
a penalty or fee owed to the holders of the notes or bonds issued to finance the project. Senate
Bill 417 would specify that a penalty or fee could also be owed to a mortgage lender or credit
enhancer.
MCL 125.1444c
BRIEF DISCUSSION:
According to committee testimony, the bill would allow more housing development projects
to be completed and would better align Michigan with current practices, particularly because
most states currently allow certain investors to use a private placement structure. Reducing the
proportion of expenditures that must be spent on rehabilitation to qualify for the Pass-Through
Bond Program to 15% would also align state law more closely with federal requirements. 9
7
See: https://www.law.cornell.edu/uscode/text/26/144.
8
This provision does not apply to 501(c)(3) housing corporations and limited dividend housing associations owned
and controlled by those corporations.
9
See: https://www.irs.gov/tax-exempt-bonds/rehabilitation-requirement-under-irc-section-147d-for-financing-
acquisitions-of-existing-property.
House Fiscal Agency SB 417 as reported Page 3 of 4
FISCAL IMPACT:
The bill would have no direct fiscal impact on state or local government. However, the bill
would expand the scope of MSHDA’s use of certain bond and note proceeds, as noted above.
MSHDA is a component unit of the state of Michigan authorized to issue notes and bonds to
finance housing for rental or sale to low- and moderate-income families and individuals. As
such, MSHDA’s notes and bonds are a direct obligation of the authority and are not a debt of
the state of Michigan. MSHDA is authorized by statute to have $5.0 billion of notes and bonds
outstanding.
The change in the application fee from the greater of $4,000 or 0.0005 multiplied by the
principal amount of notes or bonds issued to 0.0001 multiplied by the principal amount would
reduce application fee revenues on a per dollar basis. Changes to other fees would have an
indeterminate impact and would depend on the project being financed with notes or bonds.
POSITIONS:
Representatives of the following entities testified in support of the bill (2-13-24):
• Michigan State Housing Development Authority
• Ginosko Development
The following entities indicated support for the bill (3-5-24):
• Michigan Housing Council
• Michigan Realtors
• Olympia Development
Legislative Analyst: Holly Kuhn
Fiscal Analyst: Ben Gielczyk
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency SB 417 as reported Page 4 of 4


Statutes affected:
Senate Introduced Bill: 125.1444
As Passed by the Senate: 125.1444
As Passed by the House: 125.1444
Public Act: 125.1444
Senate Enrolled Bill: 125.1444