The Federal Home Loan Bank System (FHLBank System) has expressed strong support for efforts to streamline the Affordable Housing Program (AHP) application process, as outlined in a recent comment letter submitted in response to the Federal Housing Finance Agency’s (FHFA) Request for Input. However, the FHLBanks also argue that more comprehensive changes to the program’s regulatory framework are necessary to maximize its effectiveness.
The FHLBanks’ letter emphasizes the importance of revising the overall regulatory structure that governs the AHP. They assert that such revisions would allow this critical source of grant funding to more efficiently and consistently address affordable housing challenges across the country.
“While simplifying the application process is a step in the right direction, it is only part of the solution,” said Ryan Donovan, President and CEO of the Council of Federal Home Loan Banks. “The broader regulatory scheme surrounding AHP is overly complex and often excludes smaller financial institutions and less sophisticated affordable housing groups from participating. It’s not just about the application—it’s also the funding and monitoring regulations that need to be addressed.”
The AHP, funded by a mandated 10% of each FHLBank’s net earnings from the previous year, plays a crucial role in filling funding gaps for affordable housing projects. Last year, the 11 regional FHLBanks voluntarily increased their contribution to 15% of net earnings for affordable housing and community development programs. Despite this increased commitment, many FHLBank members—particularly smaller community financial institutions—face significant challenges in accessing these funds due to the program’s complex regulatory requirements.
Donovan highlighted the impact of AHP funding in the FHLBanks’ recently published 2023 Impact Report, noting that the system expects to contribute approximately $1 billion to affordable housing and community development initiatives this year. However, he cautioned that without further regulatory reforms, the full potential of the AHP to support families, small businesses, and communities may not be realized.
The comment letter also underscores the role of FHLBanks as “gap” funders in affordable housing projects, rather than lead lenders. This complementary position in the market, the FHLBanks argue, should be reflected in a regulatory framework that recognizes their unique role and does not impose undue burdens.
Currently, the AHP is subject to 13 FHFA regulations and five Advisory Bulletins, in addition to supervisory oversight. According to the FHLBanks, these layers of regulation significantly complicate the ability of their members to effectively use AHP funding.
The FHLBanks, which operate as 11 regional, cooperative institutions supplying lendable funds to financial institutions across all 50 states and U.S. territories, have long been a vital source of support for local housing, job creation, and economic growth. The Council of Federal Home Loan Banks, which represents all 11 FHLBanks, has reiterated its willingness to work with FHFA to address these regulatory challenges and enhance the impact of the AHP.
“We are eager to collaborate with FHFA on this initiative,” Donovan said. “By revising the broader regulatory framework, we can ensure that AHP funds reach those who need them most and that our nation’s affordable housing needs are better met.”
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