The Federal Housing Finance Agency (FHFA) has issued AB-2024-05, an Advisory Bulletin that simplifies the process for project sponsors to receive Federal Home Loan Bank (FHLBank) funds for affordable housing projects.
Each of the 11 FHLBanks operates an Affordable Housing Program (AHP) providing grants or subsidized advances to fund rental housing and homeownership opportunities for low- and moderate-income households. Nonprofits and other sponsors submit an application to the FHLBank, which includes a request for financial assistance to fill a project’s funding gap. FHFA, which oversees the FHLBanks, has heard feedback that the process is too burdensome.
“FHFA is simplifying the process of applying for AHP funding to expand the number of project sponsors and improve the FHLBanks’ ability to address affordable housing needs in their districts,” said FHFA Director Sandra L. Thompson. “Today’s Advisory Bulletin demonstrates FHFA’s focus on ensuring that the FHLBank System remains a cornerstone of support for affordable housing.”
The Advisory Bulletin responds to recommendations surfaced during roundtables and listening sessions held through the Agency’s FHLBank System at 100: Focusing on the Future initiative, a multipronged effort designed to ensure the FHLBanks’ long-term ability to provide liquidity to support housing and community development, especially through small, community-based institutions.
FHFA also received stakeholder feedback through a recent Request for Input on the AHP application process. Many respondents suggested easing regulatory burdens and constraints associated with the AHP, and consistently identified the Need for Subsidy determination as a significant challenge. They pointed specifically to uncertainty for project sponsors about the amount of their AHP awards and sponsors’ compliance burden compared to other sources of funds for affordable housing development.
The Advisory Bulletin reinforces the importance of scrutinizing funding requests, using rigorous feasibility guidelines based on sound reasoning, to ensure that AHP funds support the projects most in need. The bulletin provides for a streamlined compliance process and eliminates uncertainty for project sponsors about the amount of their AHP award. The AB also provides further clarity to the FHLBanks on determining the need for an AHP subsidy when a rental project includes capitalized reserves and supportive services.
The FHFA’s announcement is part of extensive outreach and engagement with the FHLBanks and other stakeholders since the release of the Agency’s FHLBank System at 100 Report in November 2023. The FHFA, established by Congress in 2008, serves as regulator of the FHLBank System. In August 2022, FHFA launched the FHLBank System at 100: Focusing on the Future initiative, a comprehensive review of the FHLBank System where the FHFA undertook a prospective analysis of changes that may be warranted to ensure the FHLBanks were well-positioned to fulfill their mission in the years ahead. The initiative involved significant stakeholder outreach, a historical review of the role of the FHLBanks, and detailed analysis of both the strengths and areas for improvement in the System’s current structure.
