February 4, 1999
SUPPLEMENT TO PROSPECTUS DATED JULY 10, 1998 FOR
THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF
INDUSTRIAL ORGANIZATIONS HOUSING INVESTMENT TRUST
On January 29, 1999, at a Special Meeting of the Participants of the
American Federation of Labor and Congress of Industrial Organizations Housing
Investment Trust (the "Trust"), the Participants approved amendments to the
Trust's charter. These amendments modified certain of the underwriting
criteria for state and local government encouraged projects in which the Trust
is authorized to invest and became effective immediately. This supplement is
designed to describe the underwriting criteria now applicable to this type of
project.
The following paragraphs supersede the paragraphs within the subsection
of the Prospectus entitled "(e) State and Local Government Encouraged
Projects Meeting Specified Underwriting Criteria" on pages 19 and 20 of the
Prospectus:
(e) State and Local Government Encouraged Projects Meeting Specified
Underwriting Criteria. The Trust is permitted to invest in construction
and/or permanent loans, or securities backed by construction and/or permanent
loans or interests in such loans or securities, that have evidence of support
by a state or local government or an agency or instrumentality thereof ,
provided that the total principal amount of the investments in this category
outstanding from time to time may not exceed 4 percent of the value of all of
the Trust's assets and that all of the following criteria are satisfied: (i)
the loan-to-value ratio of the project may not exceed 60%, the "value" for
such purposes to be determined on the basis of an independent appraisal by a
licensed appraiser acceptable to the Trust, except that a loan-to-value ratio
of up to 75% is permitted if (A) mortgage insurance in an amount that will
cover all losses down to a 60% loan-to-value level has been provided by a
mortgage insurance provider rated at least "A" or better by Standard & Poor's
(or a comparable rating by another nationally recognized statistical rating
agency, as determined by the Executive Committee of the Trust) or (B) another
form of guaranty or credit support of the Trust's investment which will cover
all losses down to a 60% loan-to-value level and which is provided by a
guarantor rated A or better by Standard & Poor's (or a comparable rating by
another nationally recognized statistical rating agency, as determined by the
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Executive Committee of the Trust) at the time of acquisition by the Trust; or
(C) the project receives the benefit of low income housing tax credits
pursuant to section 42 of the IRC in accordance with the standards adopted by
the Executive Committee; (ii) the state or local government or agency or
instrumentality thereof or a foundation exempt from federal income tax under
IRC Section 501(c) must make or facilitate a financial contribution in the
project within guidelines adopted by the Executive Committee of the Trust,
such financial contribution to be in the form of subordinate financing, an
interest rate write-down, a donation of land, an award of tax credits, grants
or other financial subsidy, a form of insurance or guarantee or some other
similar contribution within guidelines adopted by the Executive Committee of
the Trust; (iii) the development and ownership team of the project must have a
demonstrably successful record of developing or managing low-income housing
projects, in accordance with guidelines developed by the Trust; (iv) the
underwriter and servicer of the mortgage loan for the project must have been
approved by the Trust; and (v) the minimum debt service coverage for the
project must be at least 1.15, based upon projections of future income and
expenses satisfactory to the Trust. There is no requirement that the
obligations acquired by the Trust under this category be rated or ratable.
The investments in this category are subject to real-estate related risks
which could have a material adverse effect on the value and performance of the
obligations. See "RISK FACTORS--Real Estate-Related Risks."
