CR 96-142 Application - Federal Home Loan Bank•
•
August 29, 1996
APPLICATION - FEDERAL HOME LOAN BANK AFFORDABLE HOUSING PROGRAM
Proposed Action
Staff recommends approval of the following motion : Authorize staff to prepare and submit an
application for the Federal Home Loan Banks Affordable Housing Program for the Westbrooke Patio
Homes.
With this motion, the City of Hopkins will prepare and submit an application for the Affordable
Housing Program through an approved private lender.
Overview
Council Rpt #96 -142
The Federal Home Loan Bank offers the Affordable Housing Program to assist in financing housing
projects for low to moderate income residents. Although the program is highly competitive, the
Westbrooke Patio Home roof - replacement project appears to meet all the guidelines for the funds.
The grant funds, if awarded, would be used to subsidize a portion of the cost of replacing the
deteriorated roofs at the Westbrooke Patio Homes and would be used in conjunction with the City's
residential service district financing. Homeowners receiving assistance would be required to meet the
income guidelines and executive a mortgage requiring the funds to be paid back if the property is sold.
The application must be submitted by a member lending institution of the Federal Home Loan Bank.
Staff has spoke with representatives of Norwest Banks, who would be willing to apply on the City's
behalf, but will also be meeting with Citizens Independent Bank. Citizens, as a smaller bank, would be
given additional points according to the ranking criteria. The amount of the application will depend on
the results of an income survey which was recently mailed to all Patio Home owners.
Primary Issues to Consider
The Affordable Housing Program through the Federal Home Loan Bank is the only funding source
which has been identified to assist low and moderate income Westbrooke Patio Home owners.
Without this assistance, many owners would not be able to afford the proposed roof - replacement
project which is needed immediately .
Applications for the program are due by October 15, 1996 with awards announced in mid- December.
Supporting Information
o Affordable Housing Program Summary
ASS 4Lt/ .t .IL
Elverum, .using Coordinator
.'' FEDERAL HOME LOAN BANK
OF DES MOINES
INTRODUCTION
PROGRAM PRIORITIES
AFFORDABLE HOUSING PROGRAM SUMMARY
This summary provides a brief overview of the Federal Home Loan Bank of Des Moines' Affordable
Housing Program (AHP), established pursuant to Section 721 of the Financial Institutions. Reform.
Recovery, and Enforcement Act of 1989, and regulations published by the Federal Housing Finance Board
(FTB) in. the Federal Register on March 1 ,1991.
The purpose of the Bank's AHP is to subsidize the interest rate on advances or provide direct subsidies to
member institutions engaged in lending for long -term, very-low, low - and moderate - income, owner-
occupied and affordable rental housing at subsidized interest rates. The program is designed to encourage
members to undertake creative efforts to increase their participation in and support for efforts to increase
the district's supply of affordable housing. Loans by member institutions utilizing AHP subsidies should
meet prudent, flexible and innovative underwriting standards that do not expose members to undue risk
Members are encouraged to fund qualified projects that do not meet customary criteria or existing
secondary mortgage market requirements or for which no seronrtary market exists.
Subsidies under this program may be used in conjunction with other sources of funds such as the Bank's
Community Investment Fund and the federal low - income housing tax credit program, as well as other
federal, state or local private assistance programs.
AHP subsidies must be used for one of two broad purposes:
• to finance the purchase, construction. and/or rehabilitadon of owner-occupied housing for very
low-, low- and moderate - income households; or
to finance the purchase, construction, and/or rehabilitation of rental housing, at least twenty
percent (20%) of the units of which will be occupied by and affordable for very low - income
households for the remaining useful life of such housing or the mortgage term.
There are seven program priorities. Six priorities have been established by the Federal Housing Finance
Board, and the seventh priority listed below has been adopted spedfrally by the Federal Home Loan Bank
of Des Moines. Applications involving projects which meet at least tutee of these priorities will receive
rust consideration in the evaluation process:
(1) Projects of which the principal purpose is to finance the purchase, won, and/or rehabilitation of
owner-occupied horses for very low-, low - and moderate- income households, in that priority Oder, or
(2) Projects of which the principal purpose is to finance the purchase, construction, and/or rehabilitation of
iemal housing, at least twenty percent (20%) of the units of which will be occupied by and affordable
for very low- income households for the iemainiog useful life of such housing or the mortgage term; or
( Projects that finance the purchase and/or rehabilitation of housing owned or bdd by the United States
Cmvemnent or any agency or instrrmnentatity of the United States; for example, the U. S. Department
of Housing and Urban Development, Resolution Trust Corporation, Fanners Home Administration,
Veroo �Admiinistration, Federal National Mortgage Association, or Federal Hone Lan Mortgage
rati or
(4) Projects that fmance the purchase, conswction, and/or rehabilitanon of housing which is sponsored by
any nonp�fit organization, a state or political subdivision of any staie, a local housing authority. ot a
state housing finance agency; or
(5) Projects that empower the urban or rural poor through resident management, homest;eading, self-heip �
housing, and similar programs that meet crirical ur�an or wal housing needs; or
(6} Projects that provide permanent housing for the homeless; or
('7) Points will be awarded based upon the member's asset size as of the most recent calendar quarter end.
� (see Scaring Guidelines).
APPLICATIONS FOR FUNDING
AHP regula6ons require tliat applications for subsidized AI� advancxs or di�t subsidies include the
following infoimation:
(1) A concise description of the purpose of the request, keeping in mind its ielationship to the overall
Progiam's priorities described, in the p�ceding sectiion;
(2) A statemeni of how the pzoject irttends tn comply wi� Fair Housing Laws and Regulaiions;
(3) A disclosure of the membets interest, direct or indirect, in the prnperty or projeci;
(4) A d�.scription of the feasibility of the praject, including local market conditions, justifying the projec�
(S� The qualificanons and role of �e public, private, or nonprofit organization sponsoring me project; �
(� Tbe subsidy or advance amouirt �equested;
("/) An explanation of how the member intends to monitior and report the use of the svbsidized
advance/direct subsidy provided by the Bank, inciuding an ea�lanation of how �e structure of the
. p%ject ensu�es that a p�ponderanc;e of the subsidized advance/di�ct subsidy is ultimately �ceived by
the targ�ted households;
(8) A c�rti£icarion, sig�ed by �e membe�s managing officer, t�at the subsidized advance/direct subsidy
�eceived bY � Pj'�Ject w�l not exceed the maumum aIlowable und�er this pnogtam aad an explanation
of how any ezcess subsidy will be necaptured; and
(9) .A certification, sign�d by the membefs managing officer, that the subsidized advanceldi�ct subsidy
shall be used only for authorized uses.
SCORING AND EVALUATION OF AI� APPLICATIONS
. Tbe Affordable Housing Piogram operates t�uvugh a dishict wide c�mpetition. 11�ene w�11 be no special
aIlocatiions for states or jurisdictions. ProjecLS descn'bed in a�piic�tions w�l fust be evaluated to easuie
that they me�t four "tr�shold" tests: (1) compliaace with fair housing laws and regulations;
(2) feasibility of the Pro.jec� (3) ab�itY of the member t� qualify for an advance m fiuld the projec� a�d
(4) ab�lity of the project to begin using Bank assistan�ce within tweive mo�ths. Upa� mceting all four �
th�e.sh�old tests, applic�tions w�l then be evaluat,ed an the basis of a mimber of criteria a�d obje�ives, using
a 100-point scoring sYstem P�scribed in tl�e AHP iegulations.
Applicatio�s ieceiving ihe high�t ratings w�l be forvvat�d�ed to tbe Federal Housing Financ� Boatd for
�view not later tt�an 30 days after the ctose of ine application periad. Tl�e regulatiions pcovide that the
FHFB w11 armounc� the fimding decisions within 30 days the�after.
The scoring system requires that each application be evaluated on the basis of the following three groups of
objectives:
First Scoring Group: (25 points)
The first and most important objective is the consistency of the project with the priorities identified in the
regulations. Proposals may receive up to 25 points for this scoring group, with a proposal's actual point
total reflecting its consistency with, or potential for achievement of, the priorities.
Second Scoring Group: (45 points)
In the second getup of objectives, the Bank may award up to 15 points for each of the following three
objectives:
(1) Tarreting - the extent to which a project targets mar households below the statutory maximum as
adjusted by family size.
(2) Long -teen retention - the extent to which the project facilitates retention of housing for very low -, low -
and moderate-income households as evidenced through the existence of long -tern guarantees, land
trusts, forgivable liens, and other legally enforceable mechanisms; and
(3) Effectivaress - the effective use of AHP dollars as measured by the number of AHP dollars per unit or
mortgage.
Third Scoring Group: (30 points)
• In the third group of objectives, the Bank may award up to 10 points for each of the following three
objectives:
(1) Commtmity imrolvement - the extent to which a project involves demonstrated support by community
organizations, other than as project sponsor, the community interests served by the project, and the
extent to which support is local in nature;
(2) Cnmmumty stability - the extent to which a project max community stability, serves very low -,
low- and moderate-income members of the community, and minmrizex the displacement of households
in the community; and
(3) bravado - the extent to which the project involves a particularly new or unusual non- financial or
financial approach for meeting housing needs in the community being served.
After the Bank has evaluated and scored its applications, it will forward to the FHFB for final finding
consideration those applications receiving the highest overall rankings. To ensure an adequate pool of
applications for FHFB consideation, the regulations require the Bank to forward to the FHFB the highest-
ranking applications sufficient to award the AIM finds available from the Bank, plus the next four highest-
ranking applications. Based on its own review and the rankings submitted by the Bank. the FHFB will
make the final finding decisions.
SUBSIDY LIMITATIONS AND TERMS OF ADVANCES
ARP regulations prohibit ARP subsidized advances or direct subsidles to mambas in excess of that
amount needed to reduce the monthly housing cost ('including utilities except telephone) for the targeted
household to twenty percent (20%) of the householsds gross monthly income. This aces not apply to rental
projects if another federal or state financial canmlxttion to the projects has more stringent criteria or if the
subsidies per unit is under $5,000 on homeownership manse projects.
Additionally, a member ieceiving a subsidi7.ed advar�ce shall eat,end credit to qualified borrowers at an
effe�rive rate of interest discounted at least to ihe same extent as the subsidy granted to the member by the
Bank.
Members receiving subsidized advances must meex the Bank's normal tesLs of creditworthiness, and the �
Bank's standard collaterat requi�ments apply. AHP advances are available in the full range of maturities
offered by the Bank, up to a maximum of 20 years, and standard prepayment fees apply. Any interest
accrued on AHP funds by the member fuiancial institution may be: (1) �taine� by the member, (2)
donated to a nonprnfit, or (3) retumed to the project
REPORTING REQUIIZEMENTS •
Members iece�ving AHP subsidies w�11 be �quined to file periodic ieports witfi the Bank until the
committed retention period has eapiied. In addition, the boaid of di�+ectots of each member �+eceiving a
subsidized AHP advance w�l be requiried i,o �port at least azmually on me use of the subsidy and certify
that the subsidy has bee.r► passed through to the borrower. All reports flum participating membeis shall be
support,ed by appropriate underlying documentation.
APPLICATION ASSISTANCE
Applications should be submitted to �e Federal Home Loan Bank of Des Moines, Community Imestiment
Officer, 907 Walnut Street, Des Moines, IA 50309.
For addidonal uiformation regarding the sub�mission and/or pneparation of AF� applications, please
contaci ihe Bank's Community Imestment Officer at S15/281-1126 or 1-80a544-3452 (eatension 1126).
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