Agency proposes giving FHLBs more latitude on affordable housing funds

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WASHINGTON — The Federal Home Loan banks would have more flexibility to decide how they allocate funds for affordable housing under a new proposal issued by their regulator Tuesday.

Currently, the Federal Housing Finance Agency sets the affordable funding requirements for the 11 regional Home Loan banks. For example, each home loan bank can make annual contributions — up to the greater of $4.5 billion or 35% of the amount it allocates for affordable housing — to a "Homeownership Set-Aside" program, which conform to FHFA rules and provide down payment and closing-cost assistance as well as support for rehabilitation costs.

Each Home Loan bank also contributes towards a mandatory Competitive Application Program, which funds affordable housing development, mostly for rental properties.

Under the new proposal, which is being issued for a 60-day comment period, "each bank would be able to design and implement its own system to address specific housing needs in its district," the FHFA said.

In 2016, the 11 Home Loan banks provided $85.5 million for the Homeownership Set-Aside programs, which assisted over 13,500 low- and moderate-income homeowners. That year, the banks also awarded $238.4 million under the Competitive Application Program for participants to purchase, construct or rehabilitate 25,530 rental and owner-occupied units. In 2017, the banks' net income generated $384 million in affordable housing funding.

Under the proposal, the home loan banks would still be "required to support their reasons for choosing specific housing needs with empirical data."

David Jeffers, executive vice president for policy and public affairs at the Council of Federal Home Loan Banks, said the Home Loan banks' affordable housing programs are "one of the most important and reliable sources of support for affordable housing and community investment."

"So we’re working closely with the FHFA to help the agency hear from our member institutions and housing partners nationwide on this proposed regulation," he said.

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Federal Home Loan Banks Affordable housing FHFA