Pass-Through Bond Program

The Authority’s Act permits the Authority to participate in "conduit” or "pass-through" financings in which the bonds issued to finance a development are a limited obligation of the Authority; the bonds are not secured by the Authority's capital reserve capital account; and the bonds are not backed by the moral obligation of the State of Michigan. Instead, the bonds are secured by the revenues of the borrower, the real and personal property being financed, and a form of credit enhancement acceptable to the Authority.

Projects participating in this program may use Pass-Through Bonds as long-term financing (construction and permanent financing) or as short-term financing (construction financing only).  All projects must show evidence of credit enhancement that is acceptable to the Authority. 

Projects initiated under the short-term structure have historically been credit enhanced with a Credit Enhancement and Investment Agreement and are refinanced within 36 months following the issuance of the bonds through the use of a Federal Housing Administration (FHA) insured Ginnie Mae (GNMA) mortgage or other similar financing source. The refinancing occurs after construction or substantial rehabilitation of the development has been completed – at which time the program bonds are redeemed in whole.

All proposals are subject to available volume cap, as made available by the Michigan Department of Treasury and as determined appropriate by the Authority.  The bond cap available to this program will be subject to the Authority having sufficient volume cap for its direct lending multifamily and single-family programs.  Volume cap may be allocated to qualified projects under this program provided that said projects may not have a combined bond amount greater than $100 million.  

This program will terminate at the earliest of: 1) the Authority’s regularly scheduled July 2021 meeting; or 2) the Authority’s regularly scheduled June 2021 meeting if there is no July 2021 meeting; or 3) the $100 million volume cap is fully subscribed.  For a project to be included in the $100 million ceiling, a project must have been approved by the Authority for an inducement resolution at or before the Authority’s July 2021 board meeting.  Any volume cap remaining upon termination of the program (as outlined above) will no longer be available to the program nor will it be added to any subsequent reinstatement of the program that may occur.  Once the program has terminated, the Authority will review the program and determine whether, and under what conditions, to extend the program. 

Applications may be submitted at any time after the program is authorized.  Authority staff will process applications on a first-come first-served basis in the order they are received in accordance with the date the application is received by MSHDA. The Authority will advise prospective sponsors/developers of (a) the number of proposals in process, (b) the place “in line” where the application is, based on the submission date/time of the application, and (c) the total volume cap requested by those proposals.  Project applications that are submitted but that are found to have substantial deficiencies and which cannot progress along a normal approval timeline may lose their place in line so as to not impede other projects that are more ready to move forward, but were submitted after it.  For a project to be included in the $100 million ceiling, a project must have been approved by the Authority for an inducement resolution.

Applicants will be required to commit to income and rent restrictions to target at least 10% of the total affordable units in the project for households whose income is at or below 40% of Area Median Income.  In Lieu of the 10% affordable unit restriction, the Authority may permit applicants to commit to satisfying other important mission objectives such as developing or rehabilitating projects in rural areas or projects that meet the definition of Permanent Supportive Housing and have all necessary services available, etc.  The 10% affordable unit restriction may not otherwise be waived or reduced unless the Authority determines that the restriction impedes the Authority’s ability to finance the rehabilitation or new production of projects under the program.  Applicants who believe they have otherwise eligible projects that cannot meet this requirement are encouraged to contact MSHDA staff to discuss.

Program Statement and Application Requirements