FHFA Issues Final Rule Amending Affordable Housing Program Rules

The Federal Housing Finance Agency (FHFA) issued a final rule which amends the requirements for the Federal Home Loan Banks’ (FHL Banks’) Affordable Housing Program.  The amendments are generally designed to give the FHL Banks greater flexibility in the use of their funds and how they determine where affordable housing needs exist, and also clarifies other aspects of the rules.

The FHL Banks are a series of regional government-sponsored banks which are owned and managed by financial institutions in their regions.  The banks provide liquidity to their member financial institutions in order to promote housing finance and community investment.  The Affordable Housing Program requires the FHL Banks to provide subsidies for lending on long-term, low- and moderate-income, owner-occupied housing, well as subsidies for affordable rental housing.  Each FHL Bank allocated 10% of its annual net income to support the program, and the rules provide the criteria by which the money is allocated.

Among other things, the new rules: 1) provide the FHL Banks with greater flexibility to design project selection scoring systems to address affordable housing needs in their districts; 2) allow the FHL Banks to establish Targeted Funds which address specific affordable housing needs within their districts that are unmet, have proven difficult to address, or align with objectives in the banks’ strategic plans; 3) eliminate certain owner-occupancy requirements where program funds are used solely for rehabilitation of a property; 4) clarify requirements that fund recipients be pushed to cure breaches of their obligations before other remedies are employed (such as amending funding agreements or rescinding the funding); and 5) require that certain major decisions be made only by an FHL Bank’s full board of directors, as opposed to by board committees.

For a copy of the final rule, click here.