The Federal Housing Finance Agency (FHFA) issued an advisory bulletin (AB) that simplifies the process for project sponsors to receive Federal Home Loan Bank (FHLBank) funds for affordable housing projects, the agency announced. 

“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. “[This AB] demonstrates FHFA’s focus on ensuring that the FHLBank system remains a cornerstone of support for affordable housing.” 

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. Over the years, the FHFA, which oversees the FHLBanks, has heard feedback the process is too burdensome.

In response to recommendations made during roundtables and listening sessions held through the FHFA’s FHLBank System at 100: Focusing on the Future initiative, the AB proposes 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 AB 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, FHFA stated. The AB 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.

This 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. FHFA will continue working with stakeholders to advance FHLBank System policies that support a safe and sound housing finance system, preserve access to liquidity, and promote the development of affordable housing.