FHFA to affordable housing sponsors: We hear you on FHLBank financing

The Federal Housing Finance Agency (FHFA) on Thursday said it will aim to simplify the process of funding affordable housing projects through the Federal Home Loan Banks (FHLBanks). The advisory bulletin came in response to comments by sponsors that have called the process too cumbersome.

“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,” the agency said.

“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.”

In response to this feedback, the agency issued Advisory Bulletin 2024-05. It cites the ongoing need for affordable housing and aims to address it by easing certain regulatory burdens tied to the AHP program.

“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,” FHFA Director Sandra Thompson said in a statement. “Today’s Advisory Bulletin demonstrates FHFA’s focus on ensuring that the FHLBank System remains a cornerstone of support for affordable housing.”

Among the input considered, the bulletin highlights feedback that illustrates a need to address certain regulatory hurdles.

The FHFA aims to “reduce unnecessary obstacles to effective implementation of the AHP, such as uncertainty about the AHP subsidy amount or amount of debt financing at later project stages,” the document reads.

The agency added in its announcement that the feedback largely emerged during roundtable discussions and listening sessions stemming from an initiative to recognize the 100th anniversary of the FHLBank system.

FHFA also requested input on the AHP application process. Respondents suggesting “easing regulatory burdens and constraints associated with the AHP, and consistently identified the Need for Subsidy determination as a significant challenge,” the agency said.

“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 document also emphasizes that funding requests will need to be continually scrutinized by using “rigorous feasibility guidelines based on sound reasoning, to ensure that AHP funds support the projects most in need.”