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The Value of Membership - Opportunities for Community Investment February/March 2012. “Community Dividend” We Deliver. FHLBI annually reinvests at least 10 percent of our net earnings into affordable housing in partnership with our members

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The Value of Membership -

Opportunities for Community Investment

February/March 2012


“Community Dividend” We Deliver

  • FHLBI annually reinvests at least 10 percent of our net earnings into affordable housing in partnership with our members
  • Like every “dividend,” this contribution is predicated on earnings
  • FHLB’s Affordable Housing Program (AHP) constitutes the largest single source of private “capital” for affordable housing in the country
  • No other provider of liquidity pays this dividend

Community Investment Programs


FHLBI Community Investment Programs

  • Affordable Housing Program (AHP) – grant funding to create rental and homeownership opportunities for low- and moderate-income households
  • Homeownership Initiatives – grant funding for down payment, closing cost assistance and homeowner rehabilitation to income-eligible households
  • Community Investment Program (CIP) Advances and Letters of Credit – discounted advances and letters of credit to support targeted housing and economic development

Community Investment Programs

2012 ahp allocation to be determined
2012 AHP Allocation to be determined

2011 AHP Contribution (based on 2010 results)

implementation plan
Implementation Plan
  • Reviewed by AHAC annually before approval by Board, or as amended
  • Establishes scoring and set-aside criteria in response to district needs and within regulations
  • Establishes competitive application round deadlines and set-aside holdback dates
  • Allocates required annual contributions

Affordable Housing Program (AHP)

  • Provides a direct subsidy (grant) for acquisition, rehabilitation or construction of affordable housing of various types
  • Only FHLBI members may apply for this grant funding
  • Project sponsors are non-profit or for-profit housing developers who partner with FHLBI member

Community Investment Programs


Brotherhood Mutual Insurance Co. partnered with Ft. Wayne Rescue Mission Ministries to obtain an AHP grant of $750,000 to help Charis House build a larger facility for women and children suffering from homelessness, mental illness, addictions, or trauma.


Affordable Housing Program (AHP)

  • A single funding round in 2012
  • Competitive application process
  • Maximum grant $500,000 per project
  • Grants - direct subsidies
  • No limit on how many AHP projects a member can apply for or be awarded per round
  • Deliver funds to project through member’s deposit account at the FHLBI

Community Investment Programs


Typical AHP Projects

  • Senior or family rental projects (not assisted living, hospice or nursing homes)
  • Scattered site single family homes for homeownership, lease purchase or rental
  • Emergency shelters
  • Transitional housing
  • Permanent supportive housing
  • Habitat for Humanity projects
  • Neighborhood revitalization projects

Community Investment Programs


Post Secondary Transition House, a collaborative between SVRC Industries, Inc. and the Saginaw Intermediate School District, provides transitional housing for developmentally disabled persons aged 18 to 26. The school district will provide education and training services to residents. An AHP grant of $750,000 was awarded to Wanigas Credit Union in 2009.


AHP Definition of Affordable:

  • 80% of area median income for homeowner projects
  • 50% of area median for rental projects (at least 20% of units must be affordable to households at 50% of area median income)
  • Mixed income rental projects are allowed

Community Investment Programs


AHP Affordability, continued


  • Rent does not exceed 30% of household income


  • Mortgage payments that do not exceed 35% of borrower’s monthly income. Borrower’s total debt must be less than 45%

Community Investment Programs


Key 2012 Scoring Changes

  • Comprehensive community development
  • Aging in Place for seniors and permanent supportive housing
  • Green building and rehabilitation standards continue to be a focus
  • Readiness to proceed
  • Economic diversity

Community Investment Programs


AHP Monitoring

  • Sponsor prepares reports and submits to member semi-annually during development phase. Member submits reports to FHLBI.
  • Initial monitoring at completion
  • Long-term monitoring for rental projects
    • Project is habitable
    • Rents and incomes are in compliance with targeting commitments

Community Investment Programs


The FHLBI’s homeownership initiative programs can help first-time homebuyers with down payments and closing costs or assist homeowners with repairs to individual homes or entire neighborhoods. The NSA program created in 2009 helps to address the foreclosure crisis by redeveloping foreclosed properties.


Homeownership Initiatives

  • Homeownership Opportunities Program (HOP) provides up to $7,500 in down payment and closing cost assistance for first-time homebuyers
  • Neighborhood Stabilization Assistance (NSA) provides up to $10,000 in down payment and closing cost assistance to buyers of NSP-assisted homes
  • Neighborhood Impact Program (NIP) provides up to $10,000 for rehabilitation of owner-occupied homes

Community Investment Programs


Homeownership Initiatives Similarities

  • Income limit of 80% or less of AMI
  • FHLBI provides $3 per $1 of matching funds
  • If counseling is required, it must be face-to-face with state or HUD-certified counselor
  • Member cap of $300,000 per program
  • 5 year retention required, prorated recapture over the 5 years
  • Funding on a first come – first served basis
  • Available balance posted on FHLBI Website and updated regularly

Community Investment Programs


The Neighborhood Impact Program (NIP) assists homeowners with renovations. These “before” and “after” photos of a home in Detroit, MI, show the dramatic difference that these dollars can make for the homeowner and an entire neighborhood.


What is CIP?

  • Community Investment Program advances for housing or community economic development purposes
  • CIP Letters of Credit to enhance bond issuances funding affordable housing and taxable non-housing municipal bonds

Community Investment Program


Why is it important to FHLBI Members?

  • Community Investment Program advances are FHLBI’s lowest cost funding!
  • Flexible terms/structure
    • Variable and fixed to 20 year
    • Up to 30 year amortization
  • Same collateral, prepayment terms, and activity-based stock requirements as traditional advances
  • Available at FHLBI’s cost of funds, plus a nominal administrative fee (non-competitive)

Community Investment Program


How else does a FHLBI member benefit?

  • Provide low cost funding for many investment and loan opportunities, including AHP projects
  • Offer potentially lower rates than competitors
  • Enhance community relations by meeting the credit needs of your community
  • Match funding to mitigate interest rate risk
  • Fulfill Community Reinvestment Act (CRA) lending and/or investment tests*

* This does not constitute CRA advice. Please consult appropriate advisors.

Community Investment Program


Eligible CIP Uses

  • Use CIP to provide financing for predevelopment, purchase, construction, rehabilitation, or refinance:
    • Housing (residential)… AHP projects qualify automatically!
    • Economic development (nonresidential)
    • Mixed use (combination of residential & nonresidential)
  • Or to fund:
    • Future originations
    • Originations up to 3 months prior
    • Loan refinancing
    • Communities or entities financing eligible housing or economic development initiatives (even fire trucks, hospitals or libraries!)

Community Investment Programs


Eligible CIP Types of Financing

  • Many mortgages made by members are likely to be CIP-eligible
  • Members can purchase a participation interest or participate in a CIP eligible loan consortium
  • Make loans to a community or other entities financing CIP eligible projects, like fire stations or a library
  • Use CIP to purchase mortgage revenue bonds, mortgage-backed securities or Low Income Housing Tax Credits

Community Investment Program


The application process is easy!

  • Complete the short application (available year-round)
  • Multiple ways to qualify a project…
  • FHLBI staff can help find the easiest way to qualify your project
  • FHLBI review time less than 10 business days
  • Minimum typical CIP advance is $100,000

Community Investment Program


The rest is easier!

  • Documentation required at project qualification only
  • No penalty for not taking down a commitment
  • No ongoing monitoring or reporting
  • Project must be closed and funds fully disbursed or construction draws funded within 3 months prior to the CIP funding date and/or ending 6 months after the funding date

Community Investment Program


CIP Housing Project Qualification

  • Ownership Residential
    • Individual owner-occupied units owned or purchased
    • All household incomes <=115% of Area Median Income (AMI)

Documentation requirement: List of originated mortgages

  • Rental Residential
    • Financing of rental units and cooperatives
    • At least 51% of resident incomes <=115% of AMI or
    • Rents affordable to at least 51% residents whose incomes are <=115% AMI

Documentation requirement: Rent roll, FHLBI Rent Schedule or Income Roll

Community Investment Program


The former Hekman Biscuit Company in Grand Rapids, MI, was renovated into Roosevelt Park Lofts. The building offers 21 affordable studio, two- and three-bedroom apartments with loft-style features. It also offers 2,400 square feet of commercial space. Lighthouse Community Development received an AHP grant of $147,000 through Fifth Third Bank to assist with the renovations.

Community Investment Programs


CIP Commercial and Economic Development

Types of Projects:

  • Small Business Administration (SBA) Concern
  • Job creation/retention at qualified wage levels
  • Services and benefits to a qualified area

Community Investment Program


CIP Commercial and Economic Development

Project Qualification:

  • Small Business Concern
    • Small Business Administration revenue/size standards (North American Industry Classification System Codes (NAICS))

Documentation Requirement: Proof of revenue

  • Job creation/retention at qualified wage levels
    • At least 51% of job salaries <=115% AMI

Documentation Requirement: FHLBI Job Information Form

Community Investment Program


Accident Fund Insurance Co. combined the renovation of a vacant power plant built in 1938 with new construction to create its headquarters in downtown Lansing, MI. The FHLBI provided a $50 million CIP advance for the construction/renovation and a $31.3 million CIP letter of credit to support the construction of the parking deck.


CIP Commercial and Economic Development

  • Services and benefits to a qualified area
    • Project provides services/benefits to urban or rural area
      • <=100% AMI for urban areas
      • <=115% AMI for rural areas
    • Project location in targeted area (income exemption)
      • Rural/urban Champion Community/Empowerment Zone or Enterprise Community
      • Native American area
      • Federal Brownfield Tax Credit
      • Area affected by a federal military base closing or realignment
      • State of Michigan Renaissance Zone
      • Federally declared disaster area

Documentation Requirement: Verification of AMI or Targeted Area

Community Investment Program


CIP Mixed Use Project Qualification

  • Combination of housing project and economic development
  • Project only required to qualify as economic development
    • Small Business Concern
    • Job creation/retention at qualified wage levels
    • Services and benefits to income targeted location or targeted area

Community Investment Program


Common CIP Uses

Community Investment Program