Basic Laws on Housing and Community Development

PART XIII-OTHER RELATED PROVISIONS OF

LAW

FEDERAL HOME LOAN BANKS COMMUNITY INVESTMENT AND AFFORDABLE HOUSING PROGRAMS

(i) [12 U.S.C. 1430] COMMUNITY INVESTMENT PROGRAM.

(1) IN GENERAL.-Each Bank 1 shall establish a program to provide funding for members to undertake community-oriented mortgage lending. Each Bank shall designate a community investment officer to implement community lending and affordable housing advance programs of the Banks under this subsection and subsection (j) and provide technical assistance and outreach to promote such programs. Advances under this program shall be priced at the cost of consolidated Federal Home Loan Bank obligations of comparable maturities, taking into account reasonable administrative costs.

(2) COMMUNITY-ORIENTED MORTGAGE LENDING.-For purposes of this subsection, the term "community-oriented mortgage lending" means providing loans—

(A) to finance home purchases by families whose income does not exceed 115 percent of the median income for the area,

(B) to finance purchase or rehabilitation of housing for occupancy by families whose income does not exceed 115 percent of median income for the area,

(C) to finance commercial and economic development activities that benefit low- and moderate-income families or activities that are located in low- and moderate-income neighborhoods, and

(D) to finance projects that further a combination of the purposes described in subparagraphs (A) through (C). (j) AFFORDABLE HOUSING PROGRAM.

1Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) provides that, for purposes of such Act, the "term Federal Home Loan Bank' or 'Bank' means a bank established under the authority of the Federal Home Loan Bank Act.".

(1) IN GENERAL.-Pursuant to regulations promulgated by the Board,1 each Bank shall establish an Affordable Housing Program to subsidize the interest rate on advances to members engaged in lending for long term, low- and moderate-income, owner-occupied and affordable rental housing at subsidized interest rates.

(2) STANDARDS.-The Board's regulations shall permit Bank members to use subsidized advances received from the Banks to

(A) finance homeownership by families with incomes at or below 80 percent of the median income for the area;

(B) finance the purchase, construction, or rehabilitation of rental housing, at least 20 percent 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.

(3) PRIORITIES FOR MAKING ADVANCES.—In using advances authorized under paragraph (1), each Bank member shall give priority to qualified projects such as the following:

(A) purchase 2 of homes by families whose income is 80 percent or less of the median income for the area, 3

(B) purchase 2 or rehabilitation of housing owned or held by the United States Government or any agency or instrumentality of the United States; and

(C) purchase 2 or rehabilitation of housing sponsored by any nonprofit organization, any State or political subdivision of any State, any local housing authority or State housing finance agency.

(4) REPORT.-Each member receiving advances under this program shall report annually to the Bank making such advances concerning the member's use of advances received under this program.

(5) CONTRIBUTION TO PROGRAM. Each Bank shall annually contribute the percentage of its annual net earnings prescribed in the following subparagraphs to support subsidized advances through the Affordable Housing Program:

(A) In 1990, 1991, 1992, and 1993, 5 percent of the preceding year's net income, or such prorated sums as may be required to assure that the aggregate contribution of all the Banks shall not be less than $50,000,000 for each such year.

(B) In 1994, 6 percent of the preceding year's net income, or such prorated sum as may be required to assure that the aggregate contribution of the Banks shall not be less than $75,000,000 for such year.

1Section 2 of the Federal Home Loan Bank Act (12 U.S.C. 1422) provides that, for purposes of such Act, the "term 'Board' means the Federal Housing Finance Board established under section 2A".

2 So in law. In subparagraphs (A) through (C) the first letter of the first word probably should be capitalized and subparagraphs (A) and (B) should probably end with a period.

3 So in law. The comma probably should be a semicolon.

be required to assure that the aggregate contribution of the Banks shall not be less than $100,000,000 for each such year.

(6) GROUNDS FOR SUSPENDING CONTRIBUTIONS.—

(A) IN GENERAL.-If a Bank finds that the payments required under this paragraph are contributing to the financial instability of such Bank, it may apply to the Federal Housing Finance Board for a temporary suspension of such payments.

(B) FINANCIAL INSTABILITY.—In determining the financial instability of a Bank, the Federal Housing Finance Board shall consider such factors as (i) whether the Bank's earnings are severely depressed, (ii) whether there has been a substantial decline in membership capital, and (iii) whether there has been a substantial reduction in advances outstanding.

(C) REVIEW.-The Board shall review the application and any supporting financial data and issue a written decision approving or disapproving such application. The Board's decision shall be accompanied by specific findings and reasons for its action.

(D) MONITORING SUSPENSION.-If the Board grants a suspension, it shall specify the period of time such suspension shall remain in effect and shall continue to monitor the Bank's financial condition during such suspension.

(E) LIMITATIONS ON GROUNDS FOR SUSPENSION.—The Board shall not suspend payments to the Affordable Housing Program if the Bank's reduction in earnings is a result of (i) a change in the terms for advances to members which is not justified by market conditions, (ii) inordinate operating and administrative expenses, or (iii) mismanagement.

(F) The Federal Housing Finance Board shall notify the Committee on Banking, Finance and Urban Affairs of the House of Representatives 1 and the Committee on Banking, Housing, and Urban Affairs of the Senate not less than 60 days before such suspension takes effect. Such suspension shall become effective unless a joint resolution is enacted disapproving such suspension.

(7) FAILURE TO USE AMOUNTS FOR AFFORDABLE HOUSING.– If any Bank fails to utilize or commit the full amount provided in this subsection in any year, 90 percent of the amount that has not been utilized or committed in that year shall be deposited by the Bank in an Affordable Housing Reserve Fund administered by the Board. The 10 percent of the unutilized and uncommitted amount retained by a Bank should be fully utilized or committed by that Bank during the following year and any remaining portion must be deposited in the Affordable Housing Reserve Fund. Under regulations established by the Board, funds from the Affordable Housing Reserve Fund may

'Section 1(a) of Public Law 104-14, 109 Stat. 186, provides, in part, that "any_reference_in any provision of law enacted before January 4, 1995, to . the Committee on Banking, Finance and Urban Affairs of the House of Representatives shall be treated as referring to the Committee on Banking and Financial Services of the House of Representatives".

be made available to any Bank to meet additional affordable housing needs in such Bank's district pursuant to this section. (8) NET EARNINGS.-The net earnings of any Federal Home Loan Bank shall be determined be determined for purposes of this

paragraph

(A) after reduction for any payment required under section 21 or 21B of this Act; and

(B) before declaring any dividend under section 16.

(9) REGULATIONS.-The Federal Housing Finance Board shall promulgate regulations to implement this subsection. Such regulations shall, at a minimum

(A) specify activities eligible to receive subsidized advances from the Banks under this program;

(B) specify priorities for the use of such advances;

(C) ensure that advances made under this program will be used only to assist projects for which adequate long-term monitoring is available to guarantee that affordability standards and other requirements of this subsection are satisfied;

(D) ensure that a preponderance of assistance provided under this subsection is ultimately received by lowand moderate-income households;

(E) ensure that subsidies provided by Banks to member institutions under this program are passed on to the ultimate borrower;

(F) establish uniform standards for subsidized advances under this program and subsidized lending by member institutions supported by such advances, including maximum subsidy and risk limitations for different categories of loans made under this subsection; and

(G) coordinate activities under this subsection with other Federal or federally-subsidized affordable housing activities to the maximum extent possible.

(10) OTHER PROGRAMS.-No provision of this subsection or subsection (i) shall preclude any Bank from establishing additional community investment cash advance programs or contributing additional sums to the Affordable Housing Reserve Fund.

(11) ADVISORY COUNCIL.-Each Bank shall appoint an Advisory Council of 7 to 15 persons drawn from community and nonprofit organizations actively involved in providing or promoting low- and moderate-income housing in its district. The Advisory Council shall meet with representatives of the board of directors of the Bank quarterly to advise the Bank on lowand moderate-income housing programs and needs in the district and on the utilization of the advances for these purposes. Each Advisory Council established under this paragraph shall submit to the Board at least annually its analysis of the lowincome housing activity of the Bank by which it is appointed. (12) REPORTS TO CONGRESS.—

(A) The Board shall monitor and report annually to the Congress and the Advisory Council for each Bank the support of low-income housing and community develop

ment by the Banks and the utilization of advances for these purposes.

(B) The analyses submitted by the Advisory Councils to the Board under paragraph (11) shall be included as part of the report required by this paragraph.

(C) The Comptroller General of the United States shall audit and evaluate the Affordable Housing Program established by this subsection after such program has been operating for 2 years. The Comptroller General shall report to Congress on the conclusions of the audit and recommend improvements or modifications to the program. (13) DEFINITIONS. For purposes of this subsection

(A) Low- OR MODERATE-INCOME HOUSEHOLD.-The term "low- or moderate-income household" means any household which has an income of 80 percent or less of the area median.

(B) VERY LOW-INCOME HOUSEHOLD.—The term "very low-income household" means any household that has an income of 50 percent or less of the area median.

(C) Low- OR MODERATE-INCOME NEIGHBORHOOD.-The term "low- or moderate-income neighborhood" means any neighborhood in which 51 percent or more of the households are low- or moderate-income households.

(D) AFFORDABLE FOR VERY-LOW INCOME HOUSEHOLDS. For purposes of paragraph (2)(B) the term "affordable for very-low income households" means that rents charged to tenants for units made available for occupancy by low-income families shall not exceed 30 percent of the adjusted income of a family whose income equals 50 percent of the income for the area (as determined by the Secretary of Housing and Urban Development) with adjustment for family size.

(A) LOW- OR MODERATE-INCOME HOUSEHOLD.-The term "low- or moderate-income household" means any household which has an income of 80 percent or less of the area median.

(B) VERY LOW-INCOME HOUSEHOLD.-The term "very low-income household" means any household that has an income of 50 percent or less of the area median.

(C) LOW- OR MODERATE-INCOME NEIGHBORHOOD.-The term "low- or moderate-income neighborhood" means any neighborhood in which 51 percent or more of the households are low- or moderate-income households.

55-816 99-50

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