Request By:
Mr. F. Lynn Luallen
Executive Director
Kentucky Housing Corporation
1231 Louisville Road
Frankfort, Kentucky 40601
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Elizabeth E. Blackford, Assistant Attorney General
You have written to request the opinion of this office as to whether the Kentucky Housing Corporation, hereinafter the Corporation, has the power to establish a proposed program entitled "Loans to Mortgage Lenders, " and whether such a program was contemplated by the Legislature.
The proposed program, as submitted, is as follows:
(1) The Kentucky Housing Corporation will make loans to qualified mortgage lenders throughout the State for the purpose of furnishing funds to such qualified mortgage lenders to be used by them for the making of residential mortgage loans.
(2) The Kentucky Housing Corporation proposes to adopt certain guidelines governing the making of loans to the mortgage lenders and as to their use of the proceeds as follows:
(a) Detailed procedures for the application or submission of request for loans to the mortgage lenders.
(b) Standards and requirements as to allocations of loans among all of the mortgage lenders requesting loans. In this regard, the Kentucky Housing Corporation intends to use the guidelines heretofore used in its single-family mortgage purchase aprogram. The interest rate to be charged the mortgage lender would be 1/2 of 1% above the net interest cost of the Kentucky Housing Corporation on its bond issue.
(c) Loans by the mortgage lenders to the ultimate borrower will be limited to individuals meeting the Kentucky Housing Corporation's income guidelines heretofore adopted by the Board of Directors as applicable to its single-family mortgage purchase program.
(d) The interest rate charged by the mortgage lenders on the residential mortgage loans made by them as a result of this program may not be more than 1-1/2% above the Kentucky Housing Corporation lending rate to the mortgage lenders.
(e) The loan proceeds to the mortgage lenders by contract will be disbursed in the form of residential mortgage loans made within six (6) months of the date of the loan to the mortgage lenders.
(f) The mortgage lenders will be allowed to charge all normal closing costs including the cost of any insurance required as well as a onetime 1& origination fee.
All of the above guidelines and the program itself are designed (i) to expand the supply of funds in the State available to mortgage lenders making residential loans to persons meeting the Kentucky Housing Corporation income guidelines; (ii) to alleviate the shortage of substandard and inadequate housing in the State; and (iii) to obtain more effective participation by mortgage lenders in the programs of the Kentucky Housing Corporation. As regards the first of these objectives, it should be noted that despite the success of the Kentucky Housing Corporation's single-family mortgage purchase program, there remains a shortage of adequate housing throughout the State. Initial data indicates that as many as thirty financial institutions that have not heretofore participated in any Kentucky Housing Corporation program desire to participate in this program.
(3) The obligations to repay the loans made by Kentucky Housing Corporation to the mortgage lenders will be general in nature and shall be evidenced by a note of the mortgage lender bearing interest and a definitive maturity date. The note will have a prepayment provision.
(4) The interest rate and the other terms of the loans to the mortgage lenders by the Corporation made with the proceeds of the bond issue of the Corporation will be sufficient to ensure the principal and interest payments on the bonds.
(5) The staff proposes that the Corporation elect to require additional security for the general debt so as to secure the payment of both principal and interest by the mortgage lender. Such collateral security shall consist of (i) direct obligations of the United States of America; (ii) bonds, debentures, notes or other evidences of indebtedness, satisfactory to the Corporation, issued by any of the following federal agencies-banks for cooperatives, federal intermediate credit banks, federal home loan banks, export-import bank of the United States, federal land banks, the federal national mortgage association or the government national mortgage association; (iii) direct obligations of or obligations guaranteed by the state; or (iv) mortgages insured or guaranteed by the United States of America or an instrumentality thereof as to payments of principal and interest. In addition, the Corporation will require additional types of collateral such as conventional mortgages and mortgages insured by private mortgage insurance companies and approved by the Department of Insurance. The mortgage lender will be required by agreement to adequately identify and separately maintain such collateral and the mortgage lender shall hold such collateral as an agent for the Corporation and shall be held accountable as a trustee of an express trust for the application, disposition and income therefrom solely to the uses and purposes in accordance with the provisions of the agreement. The agreement will be filed with the Secretary of State under Article 9 of the Kentucky Revised Statutes, Chapter 355.
(6) Each mortgage lender shall be required to submit to the Corporation satisfactory evidence that the proceeds of the loan have been used in accordance with the guidelines and the Corporation shall periodically inspect the books and records of such mortgage lender to ensure compliance.
(7) All residential mortgage loans made under this program shall comply with the applicable provisions of the laws of the Commonwealth of Kentucky and the United States of America.
(8) The loan agreement between the Kentucky Housing Corporation and the mortgage lender will provide for the payment of penalties to the Kentucky Housing Corporation for violation by the mortgage lender of any provision of the program and agreements.
(9) The staff has proposed that this program remain in existence only during periods of disintermediation.
(10) All mortgage loans made by the mortgage lenders shall consist of a first-lien o the premises on which the loan is made.
In answer to your question concerning whether the Legislature contemplated giving the Corporation the power to institute the "Loan to Mortgage Lenders" program, this office must say that it did. Just as legislative amendments to extant acts are presumed to be intentional and not fortuitous, so too original and complete acts are to be presumed intentional. Blackburn v. Maxwell Co., Ky., 305 S.W.2d 112 (1957). Furthermore, it is to be presumed that the Legislature intends the act to be effective as an entirety, and significance and effect shall be accorded to every part of the act. George v. Scent, Ky., 346 S.W.2d 784 (1961). Accordingly, it is the opinion of this office that the Legislature intended to give the Corporation the power to effectuate a "Loans to Mortgage Lenders" program by enacting KRS 198A.250.
In answer to your second question, it is axiomatic that governmental agencies may act only where and in the manner prescribed by express statutory authorization. As propsed, the "Loans to Mortgage Lenders" program is in full proposed, the "Loans to Mortgate Lenders" program is in full compliance with KRS 198A.250. Therefore, this office is of the opinion that the Corporation has the power to institute this program.