The threat posed by last year's expiring tax exemption for mortgage revenue bonds triggered a storm tide of housing bonds during the first three quarters of 1990; but this year the same threat is just over two months away, and volume is far below 1990 levels.

Through September, housing volume fell $4 billion, or 30%, to $9.5 billion from $13.5 billion during the same period last year, according to Securities Data Co./Bond Buyer.

Housing market sources, however, say those numbers are deceiving, since last year's figures were skewed by uncertainty created when Congress allowed the mortgage revenue bond program to expire on Sept. 30, 1990.

The exemption was restored in November 1990, when a new tax bill was signed. But as the end of September drew near, issuers -- worried about Congress's intentions -- brought to market hundreds of deals that otherwise would have waited until the fourth quarter, or even until 1991, housing market sources say.

"States in the August and September period had issued everything they could in the event Congress did not extend the mortgage revenue bond program," explained John McEvoy, executive director of the National Council of State Housing Agencies. Mr. McEvoy added that this year's volume so far is closer to normal.

Last Summer a Near Record

Last year's unusual summer issuance push brought volume to near-record levels for the third quarter, with $6.8 billion coming to market in the July-to-September period. That compared with just $3.1 billion during the third quarter of 1989.

This year's third quarter was mor typical, at $3.7 billion. Given 1990's weak fourth qurter, at just $2.4 billion, the gap in volume reflected by the first three quarters' statistics is expected to narrow, even though only $40 million of housing bonds were sold in the first three weeks of October.

Industry sources say another factor adding to the unusually high volume discrepancy between this year and last is the fact that, as part of the reaction to the threatened elimination of the mortgage bond program, issuers last year also decided to use up carry-over allocations from previous yars.

Not only does that add to last year's volume, but it could diminish 1991 levels, because issuers that used prior-year carry-overs do not have that extra capacity to issue bonds this year.

Still, the volume reflected in 1991's first nine months is showing strenght, compared with years when the expiring tax provision was not a factor. The January-through-September period in 1989, for example, saw about $8.6 billion, compared with this year's $9.5 billion. And volume in the sasme period in 1988 was $9.6 billion.

"We've always know we can use everything we can issue," Mr. McEvoy said. "The demand is out there, and states are moving to meet it. We could issue a lot more than we are if the $(private-activity$) cap were larger."

Last year's tax bill extended the mortgage revenue tax exemption until Dec. 31, 1991, and it remains unclear whether Congress and the Bush administration will agree to another tax bill in time to extend the program again or make it permanent, as some in the housing industry would like.

Mr. McEvoy said he expects, as the deadline approaches, issuers will again sell as many housing bonds as possible to avoid being stuck with unused capacity if the program is not extended. But because many issuers already used their carry-over capacity during last year's rush to market, the year-end volume figures probably will not be as high as in 1990, he said.

Mortgage Bond Program Key

Vincent Barberio, a vice president in the housing area at Fitch Investors Service, agreed that the fate of the mortgage bond program will be a key factor in 1991's full-year volume statistics.

"As Dec. 31 comes closer, stat housing authorities will bond out their full amounts," Mr. Barberio predicted. "Anybody who hasn't used up their allocations probably will."

Although the overall figures are lower on a year-to-year basis, refunding volume in the first nine months of 1991 is actually 24% higher than last year during the same period. Housing issuers in 1991 refunded 172 issues totaling $3.1 billion, compared with 160 issues and $2.5 billion last year.

In new-money deals, volume was off 43%, to $6.3 billion from $11 billion in 1990.

Securities Data's figures do not include remarketings of outstanding debt. Issuers frequently sell a large deal in several short-term pieces, leaving open the option of converting the various chunks to long-term bonds as proceeds are needed. That allows an issuer to avoid having the netire bond sale locked into the same interest rate. So far this year, 14 single-family housing issues, totaling $510 million, and three multifamily issues, totaling $41 million, have been remarketed with rates fixed for at least five years.

In the market as a whole, single-family issues represented a disproportionate share of the volume decline compared with multifamily deals. Bonds sold to finance single-family projects fell 35%, to $7.2 billion from $11.1 billion last year. On the multifamily side, the drop was a barely noticeable 5%, to $2.3 billion from $2.4 billion.

Goldman, Sachs & Co. was the leading underwriter of housing bonds during the first three quarters, with 67 issues totaling $1.6 billion. Merrill Lynch & Co. was second, with 38 issues totaling $1.4 billion followed by Bear, Stearns & Co., with 22 issues totaling $878 million.

Securities Data's figures are preliminary and subject to revision. They are based on long-term bonds maturing in 13 months or longer. Private placements are included, but remarketings of outstanding debt are excluded.

The Bond Buyer compiled the figures from Securities Data's data base on Oct. 18 so issues not reported by that date are excluded.

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