FHFA Finalizes Amendments to Affordable Housing Program

Written By: Joel Palmer, Op-Ed Writer

The Federal Housing Finance Agency (FHFA) has published a final rule amending the Affordable Housing Program (AHP).

According to a FHFA release, the final rule provides additional flexibility at the local level for Federal Home Loan Banks (FHLBs) to allocate their AHP funds. It also provides the ability to design their project selection scoring systems to address affordable housing needs in their districts.

FHFA also said the amendments would make the program easier to use, by reducing regulatory monitoring requirements that are redundant with other federal programs.

The final rule also amends the regulation to:

•Authorize banks to establish separate competitive funds that target specific affordable housing needs in their districts.

•Remove the requirement for retention agreements for owner-occupied units where the AHP subsidy is used solely for rehabilitation.

•Provide for a calculation of household subsidy repayment amount that prioritizes return of the household’s investment in the housing to the household.

•Reduce administrative burdens related to calculating and obtaining household subsidy repayments based on net proceeds of the sale of a home.

•Further align certain project monitoring requirements with those of other federal government funding programs.

•Clarify the requirements for remediating AHP noncompliance.

•Clarify certain operational requirements.

•Streamline and reorganize the regulation.

FHLBs must implement all changes in the final rule by Jan. 1, 2021. The one exception is that they must implement changes regarding the owner-occupied retention agreement requirements by Jan. 1, 2020.  

The Federal Home Loan Bank Act requires each FHLB to establish a program to enable members to provide subsidies for long-term, low- and moderate-income, owner-occupied and affordable rental housing. 

Each FHLB is required to allocate annually 10 percent of its prior year's net income to fund its program to help subsidize the purchase, construction, and rehabilitation of affordable rental and owner-occupied housing. 

Between 1990 and 2017, banks awarded approximately $5.8 billion in AHP subsidies to assist the financing of over 865,000 affordable housing units.

“AHP subsidies have proven particularly effective in leveraging additional public and private resources for funding affordable housing projects that present underwriting challenges, such as projects for homeless households and special needs populations,” according to a statement in the final rule’s background section.

The current AHP regulation authorizes FHLBs to establish and administer two programs for awarding AHP subsidies. One is the mandatory Competitive Application Program; the other is an optional Homeownership Set-Aside Program.

Under the current rule, each FHLB must allocate annually at least 65 percent of its required annual AHP contribution to its Competitive Application Program. The new rule lowers that to 50 percent.

Both the current rule and the amended rule state that banks may allocate up to the greater of $4.5 million or 35 percent of its required annual AHP contribution to its Homeownership Set-Aside Program. FHFA proposed increasing it to 40 percent in its original proposed rule.

“We appreciate the thoughtful comments we received on the proposed rule and implemented many of those suggestions," said FHFA Director Melvin L. Watt.  “We believe that those suggestions incorporated into the final rule will help to further strengthen this important program.”

FHFA will host a webinar at 2 p.m. EST, Dec. 13, 2018, to describe the final rule and answer questions.  Questions may be submitted in advance to DHMG.HCI@fhfa.gov.  Register here for the webinar.

About the Author

As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

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