ALTANTA -- Citing the recent drop in interest rates, the Florida Housing Finance Agency has decided not to sell a $185 million mortgage bond issue as a publicly offered deal, opting instead last week to issue the debt as a private placement with the Federal National Mortgage Association.

The widely watched sale is the agency's first since it adopted rules curbing campaign activity by municipal market participants. In June, it used those rules to name four three-member syndicates of senior bankers to manage negotiated tax-exempt deals it anticipated selling later this year. Donaldson, Lufkin & Jenrette Securities Corp. was chosen to lead-manage the first deal, heading a syndicate to which Kidder, Peadbody & Co. and Tampa-based H.G. Nix Inc. were also named.

The bond rules, which the authority has been developing since Gov. Lawton Chiles urged it to do so in March, prohibit underwriters, bond counsel, and financial advisers involved in the authority's bond issues from contributing to political campaigns for Florida's governor or elected cabinet officials.

Mark Hendrickson, executive director of the agency, said last Friday that the authority's decision to sell the bonds to FNMA -- which will eliminate the need for the Donaldson-led team of underwriters -- was unrelated to the new rules on campaign financing.

"This is absolutely no knock on the underwriters," said Mr. Hendrickson, "but the [publicly offered] deal just didn't work any more given the current rate climate, so we made the decision to go with Fannie Mae."

He added that ever since it decided to move forward with the sale earlier this summer, the agency has weighed the pros and cons of issuing the debt through a negotiated underwriting.

Mr. Hendrickson said that until several weeks ago he had leaned in favor of the public issue, which permits the agency to offer a lower interest rate on home mortgages than that allowable through a private placement. The public offering also would have allowed more flexibility in structuring the deal -- enabling the agency to include subordinated debt to subsidize origination points charged to borrowers and permitting greater flexibility in recycling money received from loan pre-payments.

But with the drop in interest rates -- which currently permit the agency to offer home buyers 30-year fixed-rate mortgages under 8% through a Fannie Mae offering -- a privately offered bond issue is now the best choice, the housing official said.

As interest rates have dropped, he noted, the subordinate debt included in the publicly offered plan would now no longer subsidize both buyer points and negative arbitrage. Mr. Hendrickson added the negative arbitrage on the deal is now 105 basis points.

Under the private placement option, issuance costs are lower and less up-front money is required from lenders and builders, he said. According to recent calculations provided by the housing agency, the estimated cost of issuance would be $2.38 million under the negoatiated public sale and $1 million under the Fannie Mae sale. The underwriters's discount also would be less under the public sale -- 1.32%, compared with .56% under the private sale.

Mr. Hendrickson said that the housing agency reached an agreement with Fannie Mae last week under which it will sell $128 million of new-money bonds, with the remainder used to refund outstanding debt held by the agency. The bond issue, which would carry a 7.43% interest rate and allow the agency to offer 30-year mortgage loans at 7.99%, will close, he said, by the end of September. This closing date will allow the housing authority to comply with Florida's deadline for the use of the private-activity allotment granted for 1991.

The agency official said that the three-member underwriting team would still have a role in the transaction, providing cash-flow analysis. In addition, he said, the syndicate will have an opportunity to underwrite the authority's next deal after the other three teams complete their stints.

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