The Board of Directors of the Federal Housing Finance Board (Finance Board) passed a resolution permitting the Federal Home Loan Bank of San Francisco to develop a pilot program to use a portion of its Affordable Housing Program (AHP) homeownership set-aside allocation to assist low- and moderate-income households that, as a result of a recent or scheduled increase in monthly mortgage payments, will no longer be able to afford their mortgages. The Bank’s program, known as the Homeownership Preservation Subsidy (HPS), will replace the household’s non-traditional or subprime mortgage with a fixed-rate, fully-amortizing, 30 year mortgage at a market or below-market interest rate.
To institute the program, the Bank requested that the Finance Board waive, through December 31, 2009, certain requirements of Section 951.6 of the Finance Board’s regulations, which governs the AHP homeownership set-aside program. As a condition of the program, a Bank member would have to fully absorb the costs associated with foregoing scheduled interest rate adjustments and replacing the current loan with market rate financing. The AHP subsidy could be used to reduce the interest rate further, reduce the loan principal, and pay for reasonable, third-party closing costs. The members would be required to double the amount of any AHP assistance, thereby covering two-thirds of the eligible costs associated with the refinancing.
Because the resolution permitting the Bank’s pilot program could have broader policy implications regarding the permissible uses of the AHP subsidy, the Finance Board will also initiate a formal rulemaking that will solicit public comment on whether the Finance Board should amend its rules to permit the Federal Home Loan Banks to use the AHP subsidy to refinance or restructure certain mortgage loans and, if so, under what circumstances and subject to what limitations.
The Federal Housing Finance Board is a non-appropriated agency that assesses the Federal Home Loan Banks for the costs of its operations.