Letter to FHFA on the Federal Home Loan Bank Affordable Housing Program Competitive Application Process

Dear Director Thompson:

The American Bankers Association is pleased to offer comments on the Request for Input (RFI) published by the Federal Housing Finance Agency (FHFA) regarding the Federal Home Loan Banks' (FHLB) Affordable Housing Program (AHP) Competitive Application Process.

We continue to welcome the thoughtful and inclusive process that FHFA has followed since announcing the Comprehensive Review of the FHLBs. The multiple opportunities for stakeholders to engage should promote understanding among interested parties about the strengths of the FHLB System and encourage feedback on potential areas for improvement and innovation. We believe that this request for input will encourage FHFA to adopt durable rules and other policy changes that reflect stakeholder input and consensus.

Summary of Comment

As noted by FHFA, the RFI is an outgrowth of the Comprehensive Review of the FHLBs conducted in 2023.Recognizing the importance of practitioner feedback, the comments below were provided by ABA member banks with experience applying for AHP funds; however, it should be noted that the complexities and costs associated with participating in the AHP limits the universe from which to draw recommendations. Many banks, especially smaller banks, simply do not have the resources or staffing to seek AHP funding. We have attempted to incorporate feedback from these institutions as well, as it is important for their perspectives to be factored into considerations on how to simplify and streamline the AHP application process with a goal of increasing participation from a larger universe of bankers.

In general, our members welcome this effort by FHFA to find ways to streamline and simplify the AHP application process. There is broad consensus that aligning the AHP with the requirements of other funding sources, which usually are larger components of a deal – and which frequently are less complex and burdensome than AHP requirements – is desirable. For example, the FHLBs should be encouraged to adopt underwriting guidelines similar to those used by member banks, which encourage positive cash flow, strong debt to coverage ratios, and sufficient capital reserves. The ultimate goal of the FHLBs’ underwriting requirements should be to make a reasonable determination that these affordable housing projects are financially viable for the long run.

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