After slamming the door recently on tax-exempt bonds to finance single-family housing, the House Ways and Means committee reopened it enough last week to possibly let through those offerings substantially negotiated before the April 24 cut-off date. Score of bond issues worth hundreds of millions of dollars are riding on this action.
Since committee Chairman Al Ullman (D-Ore.) announced April 25 that only bonds on which binding written agreements had been signed before that date could be sold, the committee has granted three exemptions to issuers in Kentucky, New Hampshire and Chicago.
In a statement released last week responding to complaints over the deadline, Ullman and ranking minority member Barber Cornable (R-N.Y.) recognized the possibility of other exemptions.
They indicated that committee staffers would review how far along negotiations were for scores of tax-exempt bond issues before the cutoff April 24.
Written agreements often are formalities that follow the completion of negotations, a staff member explained. If the review indicates better criteria than a written agreement for determining when an offering virtually is set, the bill will be amended to allow more offerings to proceed. Individual exemptions no longer will be granted on a case-by-case basis.
For example, the committee found that three Kentucky counties had announced by April 24 that they would received bids from underwriters. Although the New Hampshire state housing agencies signed on April 25, one day late, the committee found a number of commitments had been made by banks in that state before April 24. In no case will actions taken after April 24 be considered, the congressmen said.
Hearings on the bill are scheduled for May 14 and 15.
Tax-exempt mortgage bonds provide home buyers with funds at 2 percent or 3 percent below current market rates. They were one of the fastest growing instruments until last week. In 10 months, more than $1.6 billion worth were sold, with $5 billion in sales projected for this year. In that short time, the issues grew from zero to 15 percent of the total tax-exempt bond market.
Criticizing the bonds as an "expensive subsidy" and fearing their adverse effect upon Treasury revenues and the tax-exempt bond market, the committee urged a halt to all single-family mortgage bonds by eliminating their tax exemption. Others on the Hill and in the adminstration have urged instead that the bonds be restricted to financing housing for low-income and middle-income families. The net result has been a halt in bond activity because counselors no longer are able to assure investors the new issues will be tax exempt.