95-18424. Amendment of Affordable Housing Program Regulation  

  • [Federal Register Volume 60, Number 145 (Friday, July 28, 1995)]
    [Proposed Rules]
    [Pages 38768-38771]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-18424]
    
    
    
    =======================================================================
    -----------------------------------------------------------------------
    
    FEDERAL HOUSING FINANCE BOARD
    
    12 CFR Part 960
    
    [No. 95-N-07]
    
    
    Amendment of Affordable Housing Program Regulation
    
    AGENCY: Federal Housing Finance Board.
    
    ACTION: Proposed rule.
    
    -----------------------------------------------------------------------
    
    SUMMARY: The Federal Housing Finance Board (Board) is soliciting 
    comments on a proposal to amend its regulation governing the operation 
    of the Affordable Housing Program (AHP or Program). The proposed rule 
    would add a new provision authorizing a Federal Home Loan Bank (Bank) 
    to set aside a limited portion of its available AHP subsidies to assist 
    first-time homebuyers pursuant to a program meeting specific 
    requirements set forth in the proposed rule. In addition, the proposed 
    rule would permit a Bank to establish a first-time homebuyer program 
    with requirements different from those specifically set forth, subject 
    to prior approval of the Board.
    
    DATES: Comments on this proposed rule must be received in writing on or 
    before August 28, 1995.
    
    ADDRESSES: Comments should be mailed to: Federal Housing Finance Board, 
    Executive Secretariat, 1777 F Street, NW., Washington, DC 20006. 
    Comments will be available for public inspection at this address.
    
    FOR FURTHER INFORMATION CONTACT: Sharon B. Like, Attorney-Advisor, 
    Office of General Counsel, (202) 408-2930, or Diane E. Dorius, Deputy 
    Director, Office of Housing Finance, 
    
    [[Page 38769]]
    (202) 408-2576, Federal Housing Finance Board, 1777 F Street, NW., 
    Washington, DC 20006.
    
    SUPPLEMENTARY INFORMATION:
    
    I. Statutory and Regulatory Background
    
        Section 10(j)(1) of the Federal Home Loan Bank Act (Bank Act) 
    requires each Bank to establish a Program to subsidize the interest 
    rate on advances to members of the Federal Home Loan Bank System (Bank 
    System) engaged in lending for long-term, low- and moderate-income, 
    owner-occupied and affordable rental housing at subsidized interest 
    rates. See 12 U.S.C. 1430(j)(1). The Board is required to promulgate 
    regulations governing the Program. See 12 U.S.C. 1430(j)(9); 12 CFR 
    part 960.
        Under the Board's AHP regulation, each Bank must make a specified 
    annual contribution to fund its Program. See 12 CFR 960.10. During each 
    calendar year, each Bank accepts applications for funds from its 
    members during two of four quarterly funding periods, or ``rounds.'' 
    See 12 CFR 960.4. Applications are reviewed and recommended, and AHP 
    funds are awarded to applicants through, a competitive scoring process 
    set forth in the AHP regulation. See 12 CFR 960.5. AHP funds are 
    awarded to the applicants whose applications score the highest among 
    all the applications received by the Bank in that funding round. See 
    id.
    
    II. Analysis of the Proposed Rule
    
        The Board believes that promoting homeownership for first-time 
    homebuyers is a significant part of the mission of the Bank System. In 
    furtherance of that goal, the Board and the Banks recently joined a 
    partnership agreement to promote the President's National Homeownership 
    Strategy to expand homeownership to millions of households by the year 
    2000. The Board believes that permitting the Banks to direct a portion 
    of their AHP contribution to assist low- and moderate-income, first-
    time homebuyers is consistent with its commitment to the National 
    Homeownership Strategy.
        The proposed rule would amend the AHP regulation to authorize a 
    Bank to set aside up to the greater of $1 million or 10 percent of its 
    annual required AHP contribution to fund a Matched Savings First-Time 
    Homebuyers' Initiative (Initiative), through which the Bank would 
    assist low- and moderate-income, first-time homebuyers to purchase 
    homes.
        Members may be pre-approved by their Bank for participation in an 
    Initiative if they: have established a savings account program offering 
    dedicated savings accounts to eligible households; have established a 
    first-time homebuyer policy that defines the qualifications for being a 
    ``first-time'' homebuyer and that includes financial or other 
    incentives for such homebuyers; and have established or sponsor a 
    homebuyer counseling program. Eligible households must have incomes at 
    or below 80 percent of area median income. Participating households 
    must make regular deposits in dedicated savings accounts maintained 
    with the members according to an agreed upon schedule of savings for a 
    minimum of 10 months, and must complete the required homebuyer 
    counseling program. Each dollar of a household's savings will be 
    matched by the member with up to three dollars of Bank AHP funds. Each 
    Bank may determine the appropriate ratio of AHP funds-to-savings of a 
    participating household (with a maximum of three-to-one), which ratio 
    shall apply to all households participating in the Bank's initiative. 
    The total amount of AHP funds received by a household may not exceed 
    $5,000. The household is expected to use the funds within one year of 
    its acceptance into the Initiative to pay for downpayment and closing 
    costs in connection with its first-time purchase of a one-to-four 
    family, owner-occupied property (including a condominium or cooperative 
    housing unit) to be used as its primary residence.
        A home purchased by a participating household with funds received 
    under an Initiative must be subject to a deed restriction, ``soft'' 
    second mortgage or other legally enforceable mechanism, pursuant to the 
    requirements set forth in the proposed rule, that would enable the Bank 
    to recapture from the member or directly from the seller a pro rata 
    portion of those funds if the home is sold by the initial household to 
    a household that is not low- or moderate-income, within 5 years (or 
    longer, at the discretion of the Bank) from the date of purchase by the 
    participating household. The proposed rule would allow for Bank waiver 
    of the recapture requirement if its imposition would cause undue 
    hardship on the seller.
        Since the requirements governing the eligibility of households and 
    the uses of set-aside funds under the Initiative are to be uniformly 
    applied, funding of such Initiatives will not be subject to the 
    competitive scoring process applicable to regular AHP applications 
    under the regulation. Instead, a Bank would make set-aside funds 
    available to an Initiative on a rolling, first come, first-served 
    basis. In addition, the proposed rule would allow a Bank to make 
    available up to $1 million of additional AHP funds from the next year's 
    Initiative set-aside if demand for funds under the Initiative exceeds 
    the amount set aside in the current year.
        In order to allow the Banks to implement an Initiative as soon as 
    possible, the Board's proposal would allow a Bank to establish an 
    Initiative meeting the specific requirements set forth in the proposed 
    rule without obtaining prior Board approval. However, the Board 
    recognizes that the Banks may develop strategies for implementing 
    first-time homebuyer programs that differ from the model in the 
    proposed rule, but which may be equally, or more, effective. The Board 
    believes that the Banks should have flexibility for innovation and the 
    ability to respond to local conditions in providing assistance for 
    first-time homebuyers. Therefore, proposed Sec. 960.5(g)(2) would 
    permit Banks to establish first-time homebuyer programs that are 
    different from that described in the proposed rule, with prior Board 
    approval.
        While public comment is being requested on all aspects of the 
    proposed rule, the Board is requesting specific comment on several 
    issues of note.
        First, the Bank Act requires that owner-occupied housing financed 
    under the AHP must be ``long-term.'' See 12 U.S.C. 1430(j)(1). 
    Commenters should be aware that the Board specifically has requested 
    comment on the appropriate ``long-term'' period applicable generally to 
    owner-occupied housing financed under the AHP in a previously published 
    proposal. See 59 FR 1323 (Jan. 10, 1994). In the preamble to that 
    proposal, the Board discussed alternative proposals to set the ``long-
    term'' requirement at 5 years or 30 years. The Board here has proposed 
    5 years as the minimum ``long-term'' requirement that would be 
    applicable solely to homes purchased with funds provided under an 
    Initiative, but that would not apply to AHP projects receiving funding 
    through the regular AHP competitive scoring process set forth in 
    Secs. 960.4 and 960.5 of the AHP regulation. See 12 CFR 960.4, 960.5. 
    In making this proposal, it is not the Board's intention to preclude 
    continuing dialogue on the issue of ``long-term'' retention in this or 
    any other context, but rather is to encourage a full discussion. 
    Therefore, the Board specifically requests comment on the appropriate 
    length of the ``long term'' requirement for homes purchased through an 
    Initiative.
        Second, the proposal would allow a Bank to commit, in any year, a 
    portion of its future AHP contributions if 
    
    [[Page 38770]]
    demand for Initiative funds in that year exceeded that year's set-
    aside. The commitment in the current year of future AHP contributions 
    currently is not permitted under the AHP regulation. The Board 
    specifically requests comment on this aspect of the proposed rule as 
    well.
        Third, the Board specifically solicits comment on whether other, 
    non-conforming set-aside programs proposed by a Bank under proposed 
    Sec. 960.5(g)(2) should be limited to programs that assist first-time 
    homebuyers, or whether it would be practicable to broaden the language 
    of the proposal to allow for assistance to be provided to other 
    categories of activities related to homeownership that promote the 
    National Homeownership Strategy, such as improving and rehabilitating 
    existing homes and encouraging homeownership strategies that revitalize 
    distressed communities.
        Finally, the Board specifically, requests comment on whether the 
    funding limit of the greater of $1 million or 10 percent of a Bank's 
    annual required AHP contribution: (a) is appropriate generally; and (b) 
    should apply to other, non-conforming set-aside programs under proposed 
    Sec. 960.5(g)(2), or whether the funding limits for such other programs 
    should be left to the discretion of the Board.
    
    III. Regulatory Flexibility Act
    
        The proposed rule applies only to the Banks, which do not come 
    within the meaning of ``small entities,'' as defined in the Regulatory 
    Flexibility Act (RFA). See 5 U.S.C. 601(6). Therefore, in accordance 
    with section 605(b) of the RFA, see id. section 605(b), the Board 
    hereby certifies that this proposed rule, if promulgated as a final 
    rule, will not have a significant economic impact on a substantial 
    number of small entities.
    
    List of Subjects for 12 CFR Part 960
        Banks, Banking, Credit, Federal home loan banks, Housing.
    
        Accordingly, part 960, chapter IX, title 12, subchapter E, Code of 
    Federal Regulations, is hereby proposed to be amended as follows:
    
    SUBCHAPTER E--AFFORDABLE HOUSING
    
    PART 960--AFFORDABLE HOUSING PROGRAM
    
        1. The authority citation for part 960 is revised to read as 
    follows:
    
        Authority: 12 U.S.C. 1422a, 1422b, 1430(j).
    
        2. Section 960.4 is amended by revising the first sentence of 
    paragraph (a) to read as follows:
    
    
    Sec. 960.4  Applications for funding.
    
        (a) Except as provided in Sec. 960.5(g), the Program is based on 
    District-wide competitions administered by the Board. * * *
    * * * * *
        3. Section 960.5 is amended by adding a new paragraph (g) and by 
    revising paragraph (a)(1) to read as follows:
    
    
    Sec. 960.5  Project scoring and funding.
    
        (a) General. (1) Each Bank will evaluate all applications received 
    pursuant to Sec. 960.4(a) from its members that satisfy the use 
    provisions identified in Sec. 960.3(b).
    * * * * *
        (g) Set-Aside programs.--(1) Programs exempt from prior board 
    approval. Without the prior approval of the Board, a Bank may set aside 
    annually up to the greater of $1 million or 10 percent of its annual 
    required Affordable Housing Program contribution to implement a matched 
    savings first-time homebuyers' initiative that meets all of the 
    following requirements:
        (i) Announcement of available bank funds. The Bank shall notify its 
    members of the amount of annual funds available under the initiative;
        (ii) Pre-approval of member participants. The Bank shall approve a 
    member's participation in the initiative if the member has:
        (A) Established a savings account program offering dedicated 
    savings accounts to eligible households;
        (B) Established a first-time homebuyer policy that defines the 
    qualifications for being a ``first-time homebuyer'' and that includes 
    financial or other incentives for such first-time homebuyers;
        (C) Established a homebuyer counseling program based on those 
    offered by or in conjunction with a not-for-profit housing agency or 
    other recognized counseling organization;
        (D) Committed that the Bank or member participant will be entitled 
    to recapture of the equivalent amount of the matching funds, as 
    provided in paragraph (g)(1)(ix) of this section;
        (iii) Approval of initial enrollment of households. The Bank shall 
    approve the initial enrollment, through the approved member 
    participant, of a household as a potential beneficiary in the 
    initiative, if the household:
        (A) Is low- or moderate-income, as defined in Sec. 960.1(g);
        (B) Has opened a dedicated savings account with the member 
    participant and established a schedule of savings into the account;
        (C) Meets the requirements of the member participant's first-time 
    homebuyer policy;
        (D) Has enrolled in a homebuyer counseling program established by 
    the member participant that is based on those offered by or in 
    conjunction with a not-for-profit housing agency or other recognized 
    counseling organization;
        (E) Has agreed to obtain mortgage financing from the member 
    participant for the purchase of a home;
        (iv) Bank program acceptance six months after initial enrollment 
    and reservation of bank matching funds. The Bank shall accept a 
    household into its initiative, shall reserve, in the name of the 
    household, matching funds as targeted in the household's schedule of 
    savings for a period of one year, and shall notify the member 
    participant and household of such acceptance, if, six months after the 
    initial enrollment date of the household, the member participant 
    certifies to the Bank that the household is progressing satisfactorily 
    by participating in the homebuyer counseling program and systematically 
    depositing funds to its dedicated savings account according to its 
    agreed schedule of savings;
        (v) Verification of household progress. The Bank shall require the 
    member participant to verify, every six months from a household's 
    acceptance date into the initiative, the household's progress in 
    completing the homebuyer counseling program and making deposits to its 
    dedicated savings account according to its agreed schedule of savings;
        (vi) Approval of matching funds drawdown. The Bank shall approve a 
    request from a member participant for matching funds, in an amount 
    equal to, in the Bank's discretion, up to three times the amount of a 
    household's savings in its dedicated savings account, up to a maximum 
    of $5,000 per household, and shall credit such funds to the member 
    participant's account, if the member participant certifies to the Bank 
    that:
        (A) The household made deposits to its dedicated savings account 
    according to its agreed schedule of savings for a minimum of ten 
    months;
        (B) Closing on the sale of a home to the household has occurred 
    within one year of the household's acceptance date into the initiative, 
    or a later period if the Bank determines that reasonable circumstances 
    justified extending such time period for the use of the funds;
        (C) The household has completed the required homebuyer counseling 
    program;
        (D) The household has received the financial or other incentives 
    committed by the member participant pursuant to its first-time 
    homebuyer policy; 
    
    [[Page 38771]]
    
        (E) A deed restriction, ``soft'' second mortgage or other legally 
    enforceable mechanism exists on the household's home that entitles the 
    Bank or member participant to recapture of the equivalent amount of the 
    matching funds, as provided in paragraph (g)(1)(ix) of this section;
        (vii) Eligible uses of funds. Households receiving funds under an 
    initiative may use such funds only for the payment of downpayment or 
    closing costs in connection with the household's purchase of a one-to-
    four family, owner-occupied residential property (including a 
    condominium or cooperative housing unit) to be used as its primary 
    residence;
        (viii) Availability of funds. (A) The Bank shall make its 
    initiative funds available on a rolling, first come, first-served 
    basis;
        (B) The Bank may reserve the option, if needed because demand for 
    its funds in a given year exceeds the amount of set-aside funds 
    available for that year, to:
        (i) Make available up to an additional $1 million from the next 
    year's set-aside of funds under such initiative; or
        (ii) Establish a waiting list or other process by which households 
    would be approved by the Bank to receive funds under the initiative;
        (ix) Long-term requirement--Recapture of funds upon resale. The 
    Bank shall require that a home purchased using funds under an 
    initiative be subject to a deed restriction, ``soft'' second mortgage 
    or other legally enforceable mechanism that requires that, if the home 
    is sold prior to the end of a period of not less than 5 years from the 
    date of purchase by the initial household, to a household that is not 
    low- or moderate-income:
        (I) The Bank or its designee be given notice of the sale; and
        (II) The seller be required to repay a pro rata share, except for 
    de minimis amounts determined by the Bank, of the funds provided under 
    the initiative, reduced for every year the seller owned the home, to be 
    repaid from any net gain from the sale of the home after deduction for 
    sales expenses, and to be returned to the Bank to be made available for 
    other Affordable Housing Program projects, except that the Bank in its 
    discretion may waive such repayment requirement if its imposition would 
    cause undue hardship on the seller, as defined by the Bank;
        (x) Each Bank may establish its own procedures for further 
    implementation of the requirements of this paragraph (g)(1).
        (2) Other programs. A Bank may set aside a portion of its annual 
    required Affordable Housing Program contribution to implement a first-
    time homebuyer program that does not meet the requirements of 
    Sec. 960.5(g)(1), provided the program otherwise satisfies the 
    requirements of 12 U.S.C. 1430(j), and receives the prior approval of 
    the Board.
    
        Dated: July 13, 1995.
    
        By the Federal Housing Finance Board.
    Bruce A. Morrison,
    Chairman.
    [FR Doc. 95-18424 Filed 7-27-95; 8:45 am]
    BILLING CODE 6725-01-P
    
    

Document Information

Published:
07/28/1995
Department:
Federal Housing Finance Board
Entry Type:
Proposed Rule
Action:
Proposed rule.
Document Number:
95-18424
Dates:
Comments on this proposed rule must be received in writing on or before August 28, 1995.
Pages:
38768-38771 (4 pages)
Docket Numbers:
No. 95-N-07
PDF File:
95-18424.pdf
CFR: (4)
12 CFR 960.5(g)(2)
12 CFR 960.5(g)(1)
12 CFR 960.4
12 CFR 960.5