The Internal Revenue Service is auditing $40.5 million of single-family housing bonds issued in 2003 by the Montana Board of Housing.

The board disclosed the audit and an IRS letter stating the audit is part of a broader initiative on housing bonds in a material event notice filed on Nov. 24 with the Municipal Securities Rulemaking Board’s EMMA system. The IRS letter was dated Nov. 23.

“Your debt issuance was selected for examination as part of a project initiative involving single-family mortgage bonds,” IRS agent ­David L. Bustos Jr. wrote to Bruce Brensdal, the issuer’s executive director. “At this time, we have no reason to believe that your debt issuance fails to comply with any of the applicable tax requirements.”

The IRS asked for bond documents and other information regarding the bonds. “During the examination, the [IRS] may need to contact various third parties including, but not limited to, underwriters, financial advisers, bond counsel and various counsel to third parties, investment banks, conduit borrowers, trustees, credit enhancers, insurers, program administrators and any other parties having a transactional relationship to the bonds,” the IRS said.

The proceeds of the Series C  bonds were used to finance the board’s purchase of about $40.1 million of fixed-rate mortgage loans, consisting of first liens on single-family, owner-occupied housing that was either insured by the Federal Housing Administration or U.S. Department of Housing and Urban Development or guaranteed by the Department of Veterans Affairs or the U.S. Department of Agriculture, Rural Development.

UBS was lead underwriter of the bonds. Kutak Rock LLP was bond counsel and Orrick, ­Herrington & Sutcliffe LLP was underwriters counsel.

Brensdal Monday said the issuer is complying with the IRS’ information requests.

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