Comment Detail

Comment

(FULL PDF letter attached)
Mr. Pollard,

Thank you for the opportunity to comment on your recent release of proposed rulemaking regarding the Affordable Housing Program (“AHP”) of the Federal Home Loan Banks (FHLBanks). I am presently Director of Strategic Partnerships at Habitat for Humanity Philadelphia.

Federal Home Loan Bank AHP funding is a critical source of funding for both Habitat’s homeownership program and our Home Repair Program. Habitat’s homeownership program undertakes mainly new construction to build and sell homes to low-income Philadelphian’s making 30-60% of the Area Median Income. In exchange for 350 hours of sweat-equity, preparing to become an empowered homeowner and building theirs and others’ homes, families purchase their home from Habitat for a zero-interest, 30-year mortgage held by Habitat.

Often we are the only opportunity for hard-working, lower-income families to purchase a safe, healthy, energy-efficient and affordable home. Our families are those that have been shut out by traditional lenders because of their spotty credit, lower income, redlining and racist banking practice. Furthermore, the families we work with cannot afford to purchase property that would not require a considerable infusion of additional capital to be habitable. FHLB applications have become the only source of restricted funding we can tap into. As Philadelphia has moved away from utilizing HOME funds for ownership, Habitat has been left to raise the bulk of funding for homeownership through corporate workdays, philanthropic grants, and individual donations. This is a herculean task, raising funds dollar-by-dollar – even with the prospect of FHLB support for gap funding- but even more so if accessing funds were to become even harder and less likely.

Habitat also has utilized FHLB funding to finance much needed critical rehabilitation work for Philadelphia’s existing homeowners making up to 80% of the Area Median Income. Although there are a few more funding sources for repair and rehabilitation, FHLB provides a critical source for funding this much needed work in Philadelphia.

We are very concerned about these proposed changes. First and foremost, we see the proposed Outcomes Framework as limiting the local FHLBanks’ discretion in addressing local housing needs. One of the strengths of the program is the flexibility that regional FHLBs have to best meet the needs in their footprint. This change, and the proposed re-ranking potential, would also make the AHP program far less transparent. Re-ranking is not objective or predictable (for both applicants and the bank). Less transparency and predictability would make it more difficult for organizations to strategically plan AHP applications for their most compelling projects. At, Habitat, this would greatly impact our ability to plan globally for our programs and best utilize potential funding resources to meet the crushing need for affordable housing in Philadelphia.

The proposed outcomes framework would also prioritize certain types of projects based on regulatory priorities. Under these changes homeownership projects like Habitat’s would be at a competitive disadvantage. This would be devastating for urban Habitat affiliates that greatly rely on FHLB funding for projects. As mentioned above, for Habitat Philadelphia, FHLB applications are currently the only source of restricted funding that we can reliably apply for.

We also urge the FHFA not to adopt the amendment proposing changing the special needs threshold from 20% to 50% for projects. This amendment would diminish the opportunity for Habitat to be competitive and participate in AHP in the future. We also feel it is important the five-year retention agreement for homeownership projects remain in place rather than be eliminated as proposed. Affordable homeownership resources are so incredibly limited, we urge the FHFA to protect units against possible flipping by keeping the five-year retention. This is especially true for projects with a relatively high per unit AHP subsidy, and particularly in rapidly appreciating markets.

Under the proposed amendments, AHP project modifications may be delayed, and AHP sponsors unduly burdened, due to a new “cure-first” requirement. At Habitat we are often reliant on drawing funds from a disbursement immediately upon close of a FHLB unit. We also place families from a fixed waiting list from our programs into homes. When a household’s income presents differently than what our targeting stated on the application we must rely on the current practice of verifying that modification and ensuring our score still warrants funding so we can continue to move forward with the project. We cannot have families in our Habitat queue advance in the waiting list to attempt to cure-first. We recommend that the proposed cure-first requirement be eliminated and the FHLBanks retain their current practice of verifying that any modified project would still have scored high enough in the funding round to receive the AHP award had the sponsor applied for AHP funding with the modifications in place.

Lastly, the proposed amendments require FHLBanks to evaluate the ability of the sponsor and all members of the development team to perform the responsibilities committed to in the application. The entire development team may not be in place at the time of AHP application, making it impossible to assess total capacity. This is sometimes the case at Habitat. We recommend retaining the FHLBanks’ current practice of reviewing the prior experience of the development team.

We commend FHFA for working to update the AHP regulation. However, considering the concerns above, we respectfully ask that you reconsider parts of the proposed amendments, especially the required outcomes framework. Thank you for hearing our ideas on this very important subject. If you have any questions, please feel free to contact me at 215-765-6000 x28, or carrier@habitatphiladelphia.org.

Sincerely,

Carrie Rathmann
Director of Strategic Partnerships
Habitat for Humanity Philadelphia