Federal Home Loan Banks Support Streamlining of Affordable Housing Program Regulations

The Federal Home Loan Bank System (FHLBank System), has filed a comment letter in response to the Federal Housing Finance Agency (FHFA) Request for Input on the Affordable Housing Program (AHP) application process.

The comment letter expresses support for FHFA’s goal of simplifying the AHP application process, while also asserting that a more meaningful and effective approach to enhancing the program’s impact would be for the agency to revise the overall regulatory framework governing AHP to allow this crucial element of grant funding to efficiently, consistently, and effectively help ease affordable housing challenges.

The comment letter also encourages FHFA to be mindful of the role the FHLBanks play – through their members – as “gap” funders rather than lead lenders in affordable housing projects. In this capacity, AHP occupies a complementary role in the affordable housing market and the FHLBanks are not positioned to influence major project changes such as funding or reserves.

AHP funding stems from the statutorily required 10 percent of the previous year’s net earnings that each FHLBank must contribute to the program and often represents the final piece of the funding stack for a given project. Last year, the 11 FHLBanks voluntarily agreed to contribute 15 percent of net earnings to affordable housing and community development programs on a go-forward basis, and in recent years the FHLBanks have encouraged FHFA to address the overly burdensome regulatory requirements that prevent the majority of FHLBank members, particularly smaller community financial institutions, from accessing AHP funds.

Ryan Donovan, president and chief executive officer of the Council of Federal Home Loan Banks, the public voice of the FHLBank System, noted that easing the AHP application burden addresses only one part of the problem.

“AHP funding has an undeniably positive impact for families, small businesses, and communities across the country, as can be seen in our recently published 2023 Impact Report, and the FHLBanks anticipate they will contribute approximately $1 billion to affordable housing and community development initiatives this year,” said Donovan. “Yet, too many smaller financial institutions and less sophisticated affordable housing and community groups are effectively excluded from participating in AHP because of overly burdensome regulations. It is not just the application process, but also the complicated regulations relating to the funding and monitoring processes that stand in the way of greater participation among FHLBank members. We strongly encourage FHFA to go beyond the application process and widen its focus to address the limitations inherent in the broad AHP regulatory scheme. We are eager to collaborate with FHFA on this initiative.”

The comment letter notes that AHP is currently subject to 13 FHFA regulations and five Advisory Bulletins, and that supervisory oversight further complicates the ability of FHLBank members to access and use AHP funding.

Click here to read the letter.