WASHINGTON — The National Federation of Municipal Analysts is requesting comments from the municipal bond community on its newly updated draft of best disclosure practices for issuers of housing revenue bonds, which was released Thursday.
The 16-page document, slated to replace a best-practices paper from 2000, was created in response to changing economic conditions and increased concern by the financial community over housing-related investments, said Robin Ginsburg, managing director at Raymond James & Associates Inc. and co-chair of the NFMA’s housing recommended best practices subcommittee that developed the draft.
“There’s been a lot of concern about any type of security that has the word housing in it over the last few years. We feel is it important that buyers have more detailed information,” Ginsburg said.
The document says that the credit crisis highlighted the need for more detailed disclosure “so that a more in-depth analysis of programs’ ability to absorb potential losses can be performed.”
Called “Recommended Best Practices in Disclosure for Housing Revenue Bond Issues,” the document was the result of a collaboration between investors, a banker, and the National Council of State Housing Agencies’ disclosure task force and a legal representative, according to the 1,200-member group.
NFMA is accepting comments on the draft through June 30.
The draft’s recommendations are more detailed than those in the previous document.
For instance, the previous document suggested issuers disclose mortgage portfolio information such as balances and the number of loans that are outstanding and delinquent.
The new draft requests the same information by vintage — the year the loans were originated.
In addition, the draft suggests issuers provide more information about counterparty exposure, private mortgage insurance, and issuers’ financing through direct lending.
The document also recommends that issuers disclose the terms of their guaranteed investment contracts and swaps, as well as descriptions of the housing projects financed by the bonds, including details about management and occupancy and rent levels.
Many of those details are important to buyers, especially those who buy for Community Reinvestment Act credits, members of the group said.
“They need more granular information on the project, [such as] where it is and what it will be used for,” said Susan Dushock, committee co-chair and senior vice president at SunTrust Private Wealth Management.
The document includes sections on best practices for new-issue disclosure and continuing disclosure, both for issuers of single-family housing bonds and multifamily housing bonds. It also includes an example of a housing finance agency bond surveillance report, which is designed to be used by local issuers of single-family housing bonds.
“In general, housing finance agencies have good stories to tell, and we feel this piece of work encourages them, and provides them a way to tell their good stories,” Ginsburg said.
The group said it will revise the document in the next several months and expects to release the final document around the end of the comment period after June. The draft will be posted on NFMA’s website,
