Affordable Housing Program Amendments: Federal Home Loan Bank Mortgage Refinancing Authority, 38514-38522 [E9-18484]
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Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Rules and Regulations
(6) Address such other items that the
Director shall provide in writing in
advance of such submission.
(b) Deadline for submission. A Bank
must submit a proposed capital
restoration plan no later than 15
business-days after it receives written
notification that such a plan is required
either because the notice specifically
states that the Director has required the
submission of a plan or the notice
indicates that the Bank’s capital
classification or reclassification is to a
category for which a capital restoration
plan is a mandatory action required of
the Bank. The Director may extend this
deadline if the Director determines that
such extension is necessary. Any such
extension shall be in writing and
provide a specific date by which the
Bank must submit its proposed capital
restoration plan.
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*
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Dated: July 29, 2009.
James B. Lockhart, III,
Director, Federal Housing Finance Agency.
[FR Doc. E9–18581 Filed 8–3–09; 8:45 am]
BILLING CODE P
FEDERAL HOUSING FINANCE
AGENCY
12 CFR Part 1291
RIN 2590–AA04
Affordable Housing Program
Amendments: Federal Home Loan
Bank Mortgage Refinancing Authority
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AGENCY: Federal Housing Finance
Agency.
ACTION: Interim final rule with request
for comments.
SUMMARY: Section 1218 of the Housing
and Economic Recovery Act of 2008
(HERA) requires the Federal Housing
Finance Agency (FHFA) to permit the
Federal Home Loan Banks (Banks) until
July 30, 2010, to use Affordable Housing
Program (AHP) homeownership setaside funds to refinance low- or
moderate-income households’ mortgage
loans. On October 17, 2008, FHFA
amended its AHP regulation to
authorize the Banks to provide AHP
direct subsidies under their
homeownership set-aside programs to
low- or moderate-income households
who qualify for refinancing assistance
under the Hope for Homeowners
Program established by the Federal
Housing Administration (FHA) under
Title IV of HERA. Based on the
comments received on the amendments
and continuing adverse conditions of
the mortgage market, FHFA has
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determined that in order for the AHP
set-aside refinancing program to be
implemented successfully for the
benefit of the intended households, the
scope of the program authority should
be broadened and the Banks should
have greater flexibility in implementing
the program. Accordingly, FHFA is
issuing and seeking comment on an
interim final rule that authorizes the
Banks to provide AHP subsidy through
their members to assist in the
refinancing of eligible households’
mortgages under eligible Federal, State
and local programs for targeted
refinancing in addition to the Hope for
Homeowners Program. These programs
would include the Administration’s
Making Home Affordable Refinancing
program. The interim final rule permits
the Banks to provide AHP direct
subsidy to members and to use the
subsidy for principal reduction and for
loan closing costs, and requires that
households obtain counseling for
qualification for refinancing and
foreclosure mitigation.
In addition, the interim final rule
enhances the ability of the Banks to
respond to the mortgage crisis by
providing greater flexibility to accelerate
their future annual statutory AHP
contributions for use in their AHP
homeownership set-aside programs in
the current year. The interim final rule
also permits the Banks to adopt multiple
housing needs under their Second
District Priority scoring criterion under
the AHP competitive application
program.
DATES: The interim final rule is effective
on August 4, 2009. FHFA will accept
written comments on the interim final
rule on or before October 5, 2009.
ADDRESSES: Submit comments,
identified by regulatory information
number (RIN) 2590–AA04, by any of the
following methods:
• Mail/Hand Delivery: Federal
Housing Finance Agency, Fourth Floor,
1700 G Street, NW., Washington, DC
20552, Attention: Public Comments/RIN
2590–AA04.
• E-mail: regcomments@fhfa.gov.
Please include ‘‘RIN 2590–AA04’’ in the
subject line of the message.
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments. If
you submit your comment to the
Federal eRulemaking Portal, please also
send it by e-mail to FHFA at
regcomments@fhfa.gov to ensure timely
receipt by the agency. Include the
following information in the subject line
of your submission ‘‘Affordable Housing
Program Amendments: Federal Home
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Loan Bank Mortgage Refinancing
Authority; RIN 2590–AA04.’’
We will post all public comments we
receive without change, including any
personal information you provide, such
as your name and address, on the FHFA
Web site at https://www.fhfa.gov.
FOR FURTHER INFORMATION CONTACT:
Nelson Hernandez, Senior Associate
Director, Housing Mission and Goals,
202–408–2819,
Nelson.Hernandez@fhfa.gov; Charles E.
McLean, Jr., Acting Manager, Housing
Mission and Goals, 202–408–2537,
Charles.McLean@fhfa.gov; or Melissa L.
Allen, Senior Policy Analyst, 202–408–
2524, Melissa.Allen@fhfa.gov, Federal
Housing Finance Agency, 1625 Eye
Street, NW., Washington, DC 20006; or
Sharon B. Like, Associate General
Counsel, 202–414–8950,
Sharon.Like@fhfa.gov, Federal Housing
Finance Agency, 1700 G Street, NW.,
Washington, DC 20552. The telephone
number for the Telecommunications
Device for the Hearing Impaired is 800–
877–8339.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects
of the interim final rule, and will revise
the rule as appropriate after taking all
comments into consideration. Copies of
all comments will be posted on the
FHFA Internet Web site at https://
www.fhfa.gov. In addition, copies of all
comments received will be available for
examination by the public on business
days between the hours of 10 a.m. and
3 p.m., at the Federal Housing Finance
Agency, Fourth Floor, 1700 G Street,
NW., Washington, DC 20552. To make
an appointment to inspect comments,
please call the Office of General Counsel
at 202–414–6924.
II. Background
A. HERA
Effective July 30, 2008, Division A of
HERA, Public Law 110–289, 122 Stat.
2654 (2008), created FHFA as an
independent agency of the Federal
Government. HERA transferred the
supervisory and oversight
responsibilities over the Federal
National Mortgage Association (Fannie
Mae), Federal Home Loan Mortgage
Corporation (Freddie Mac) (collectively,
Enterprises), the Banks, and the Bank
System’s Office of Finance, from the
Office of Federal Housing Enterprise
Oversight (OFHEO) and the Federal
Housing Finance Board (FHFB) to
FHFA. HERA provides for the
abolishment of OFHEO and FHFB one
year after the date of enactment. FHFA
is responsible for ensuring that the
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Enterprises and the Banks operate in a
safe and sound manner, including being
capitalized adequately, and carry out
their public policy missions, including
fostering liquid, efficient, competitive,
and resilient national housing finance
markets. The Enterprises and the Banks
continue to operate under regulations
promulgated by OFHEO and FHFB until
FHFA issues its own regulations. See
HERA at § 1302, 122 Stat. 2795.
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B. The Banks’ Affordable Housing
Program
Section 10(j) of the Federal Home
Loan Bank Act (Bank Act) requires each
Bank to establish an affordable housing
program, the purpose of which is to
enable a Bank’s members to finance
homeownership by households with
incomes at or below 80% of the area
median income (low- or moderateincome households), and to finance the
purchase, construction, or rehabilitation
of rental projects in which at least 20%
of the units will be occupied by and
affordable for households earning 50%
or less of the area median income (very
low-income households). See 12 U.S.C.
1430(j)(1) and (2). The Bank Act
requires each Bank to contribute 10% of
its previous year’s net earnings to its
AHP annually, subject to a minimum
annual combined contribution by the 12
Banks of $100 million. See 12 U.S.C.
1430(j)(5)(C). Section 1218 of HERA
amended section 10(j) by adding a new
paragraph (2)(C) which requires FHFA
to allow the Banks until July 30, 2010,
to use AHP homeownership set-aside
funds to refinance low- or moderateincome households’ first mortgage loans
on their primary residences. See 12
U.S.C. 1430(j)(2)(C). The Director of
FHFA must establish the percentage of
set-aside funds eligible for this use by
regulation.
The AHP regulation authorizes a
Bank, in its discretion, to set aside a
portion of its annual required AHP
contribution to establish
homeownership set-aside programs for
the purpose of promoting
homeownership for low- or moderateincome households. See 12 CFR 1291.6.
Under the homeownership set-aside
programs, a Bank may provide AHP
direct subsidy (grants) to members to
pay for down payment assistance,
closing costs, and counseling costs in
connection with a household’s purchase
of its primary residence, and for
rehabilitation assistance in connection
with a household’s rehabilitation of an
owner-occupied residence. See 12 CFR
1291.6(c)(4). Currently, a Bank may
allocate up to the greater of $4.5 million
or 35% of its annual required AHP
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contribution to homeownership setaside programs in that year.
C. AHP Refinancing Initiative and
Proposed Rule
In January 2008, FHFB waived certain
homeownership set-aside program
provisions of the AHP regulation to
allow the Federal Home Loan Bank of
San Francisco (San Francisco Bank) to
establish a temporary pilot program to
provide AHP direct subsidy to enable
eligible households with subprime or
nontraditional loans held by a San
Francisco Bank member or its affiliate to
refinance or restructure the loans into
affordable, long-term fixed-rate
mortgages. See FHFB Resolution No.
2008–01 (Jan. 15, 2008). The authority
will expire on December 31, 2009.
In April 2008, FHFB published a
proposed rule that would have extended
the temporary authority to use AHP setaside funds for mortgage refinancing or
restructuring to all 12 Banks. See 73 FR
20552 (Apr. 16, 2008). FHFB received
36 comments on the proposal.
Commenters who supported use of AHP
funds for refinancing, recommended
flexibility in the rules governing use of
the funds so that the Banks and their
members would be able to assist a
greater number of borrowers in distress,
including allowing the use of AHP setaside funds in conjunction with other
Federal, State or local mortgage
refinancing programs.
D. October Interim Final Rule
Before FHFB took final action on the
proposed amendments to the AHP
regulation, section 1218 of HERA added
section 10(j)(2)(C) to the Bank Act. Title
IV of HERA also required establishment
of the Hope for Homeowners Program,
a temporary mortgage refinancing
program under the FHA, which will
expire on September 30, 2011. To
implement the requirements of section
1218 of HERA, on October 17, 2008,
FHFA published an interim final rule
(‘‘October amendments’’), which added
new § 1291.6(f) to the AHP
homeownership set-aside regulation
authorizing the Banks, in their
discretion, to temporarily establish an
AHP set-aside refinancing program. See
73 FR 61660 (Oct. 17, 2008).
Specifically, § 1291.6(f) authorized the
Banks to provide AHP direct subsidy to
their members to assist in the
refinancing of low- or moderate-income
homeowners’ mortgage loans under the
Hope for Homeowners Program through
the use of AHP subsidy to reduce loan
principal and pay FHA-approved
closing costs. By linking the use of the
AHP subsidy with the Hope for
Homeowners Program, FHFA intended
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to leverage and enhance the
effectiveness of each program, ensure
that the full range of Federal assistance
to affected homeowners was available
quickly, and provide the flexibility that
the Banks and their members need to
make the AHP refinancing program
successful.
FHFA received 38 comment letters on
the October amendments, representing
40 commenters.1 Commenters included:
8 Banks; 2 Bank Advisory Councils; 3
trade associations; 2 housing advocacy
and assistance organizations; and 25
individuals. Thirteen of the 40
commenters supported the use of AHP
subsidies for refinancing households
with unaffordable mortgages. The other
27 commenters opposed the use of AHP
subsidies for refinancing, citing the
ongoing, critical need for AHP
homeownership set-aside subsidies to
assist home purchases.
E. HERA Section 1201
Section 1201 of HERA requires the
FHFA Director to consider the
differences between the Banks and the
Enterprises in rulemakings that affect
the Banks with respect to the Banks’
cooperative ownership structure,
mission of providing liquidity to
members, affordable housing and
community development mission,
capital structure and joint and several
liability. See 12 U.S.C. 4513(f). In
preparing the interim final rule, the
Director considered these factors and
determined that the rule is appropriate,
particularly because the rule
implements a statutory provision of the
Bank Act that applies only to the Banks.
See 12 U.S.C. 1430(j). Nonetheless,
FHFA requests comment on whether
these factors should result in a revision
of the rule as it relates to the Banks.
III. Analysis of the Interim Final Rule
A. Definition of Eligible Targeted
Refinancing Program: § 1291.1
The October amendments provided
that a household’s loan is eligible to be
refinanced with AHP direct subsidy if
the loan is secured by a first mortgage
on an owner-occupied unit that is the
primary residence of the household, and
the loan is refinanced under the Hope
for Homeowners Program. FHFA
specifically requested comment on
whether the Banks should be permitted
to use AHP set-aside funds to assist
homeowners refinancing under other
programs intended to aid distressed
homeowners, such as those offered by
the Enterprises, FHASecure, or any
1 Letters from two of the Banks also incorporate
the comments of those Banks’ respective Affordable
Housing Advisory Councils (Advisory Councils).
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State housing finance agency programs.
See 73 FR 61660, 61662 (Oct. 17, 2008).
Thirteen commenters supported AHP
refinancing authority for the Banks but
opposed limiting the authority to
assistance under the Hope for
Homeowners Program. The commenters
stated that the Hope for Homeowners
Program is too narrowly tailored to
assist a large number of households and
has attracted little lender interest. The
commenters pointed out that there are
other, successful Federal and State
programs targeted to assisting
households refinance their unaffordable
mortgages, and that the Banks should be
permitted to provide AHP subsidy in
conjunction with these programs.
Twelve of the 13 commenters
specifically supported use of AHP
subsidy with the FHASecure Program,
U.S. Department of Agriculture (USDA)
programs, and State and local housing
finance agency programs. Ten
commenters recommended that the
Banks be permitted to provide AHP
subsidy in conjunction with targeted
refinancing or restructuring programs of
Fannie Mae and Freddie Mac, which
had established the Streamlined
Modification Program at the time of the
October amendments. Since then, the
Administration has superseded the
Streamlined Modification Program with
the Making Home Affordable Refinance
and Modification programs for
mortgages owned or guaranteed by the
Enterprises. The commenters stated that
each Bank should have discretion and
flexibility to determine which programs
in its district would make best use of
AHP subsidy.
In the past year or so, a number of
State housing finance agencies
established taxable bond programs to
refinance households with unaffordable
mortgages. To help State and local
housing finance agencies address the
need for refinancing households into
affordable mortgages, HERA authorized
the temporary use of tax-exempt
mortgage-revenue bonds for refinancing
at-risk households with subprime
mortgages. See HERA, § 3021. Housing
finance agencies are likely to increase
their refinancing activity in light of this
new authority. Most of the Banks work
closely with the housing finance
agencies in their districts, some of
which are also housing associates of the
Banks, and many Bank members are
participating lenders in existing housing
finance agency mortgage-revenue bond
programs for home purchasers.
In addition, as part of the
Administration’s Homeowner
Affordability and Stability Plan, Fannie
Mae and Freddie Mac are now
responsible for implementing the
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Making Home Affordable programs,
which include the Home Affordable
Refinance program for first mortgage
loans owned or guaranteed by these
agencies. Many Bank members are also
Fannie Mae and Freddie Mac approved
seller/servicers that already participate
in Fannie Mae and Freddie Mac
homeownership mortgage programs.
Based on the comments and FHFA’s
review of Federal, State and local
refinancing programs, FHFA has
determined that the Hope for
Homeowners Program has experienced
limited usage due to statutory and
regulatory restrictions and market
conditions, rendering the current AHP
refinancing authority of limited utility.2
To date, no Bank has implemented an
AHP refinancing program pursuant to
the current AHP regulatory refinancing
authority. However, other Federal, State
and local targeted mortgage refinancing
programs could be used in conjunction
with the AHP set-aside refinancing
authority. Accordingly, the interim final
rule provides that loans are eligible for
refinancing with AHP subsidy if they
are refinanced under an ‘‘eligible
targeted refinancing program,’’ which is
defined in § 1291.1 as a program offered
by the Department of Housing and
Urban Development (HUD), USDA,
Fannie Mae, Freddie Mac, a State or
local government, or a State or local
housing finance agency for the limited
purpose of refinancing first mortgages
on primary residences for households
that cannot afford or are at risk of not
being able to afford their monthly
payments, as defined by the program, in
order to prevent foreclosure. The Hope
for Homeowners Program, as a HUD
program, continues to be an eligible
program that may be used in
conjunction with the AHP set-aside
refinancing program. Making the AHP
subsidy available for State and local
housing finance agency refinancing
programs is consistent with the
provision in HERA authorizing housing
finance agencies to issue Federal taxexempt mortgage-revenue bonds
through the end of 2010 in order to
refinance households that have
subprime mortgages and are at risk of
financial hardship. Including additional
eligible targeted refinancing programs of
other Federal, State and local agencies
is also consistent with the requirement
in section 10(j)(9)(G) of the Bank Act
that the AHP regulation coordinate AHP
activities with other Federal or
federally-subsidized affordable housing
2 Recent changes to the Hope for Homeowners
Program enacted by Congress may expand its usage.
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activities to the maximum extent
possible. See 12 U.S.C. 1430(j)(9)(G).
FHFA believes that there should be
sufficient demand among these eligible
targeted refinancing programs to absorb
the limited amount of AHP subsidy that
will be available for refinancing. Eligible
targeted refinancing programs do not
include programs that permit
households to refinance for any reason,
programs that provide the full amount
of subsidy or other financing
concessions needed for a household to
achieve an affordable mortgage in
accordance with the program’s terms
(see discussion under the Eligible Uses
of Subsidy section below), or programs
that involve the modification or
restructuring of the loans, rather than
refinancing (i.e., paying off the original
mortgage with the proceeds of a new
loan).
The interim final rule does not limit
eligible targeted refinancing programs to
those in existence as of the effective
date of the rule. Federal, State and local
agencies and housing authorities are
likely to add or replace refinancing
programs during the period of AHP setaside refinancing authorization, based
on refinancing needs and housing
market conditions, and FHFA does not
wish to preclude the use of AHP
subsidy with such programs that are
consistent with the purposes of this
rule. USDA is a primary source of
Federal funding for owner-occupied
housing primarily in rural areas, and
although it has not announced a
targeted refinancing program to date, it
may do so in the future. A number of
State housing finance agencies are also
expected to implement targeted
refinancing programs under their new
tax-exempt mortgage-revenue bond
authority in the near future. The
FHASecure Program, which ended in
December 2008 and assisted thousands
of households in troubled mortgages,
may be revived, or a program of a
similar nature may be established.
Several commenters suggested that
FHFA permit AHP subsidy to be used in
conjunction with private targeted
refinancing programs including not-forprofit programs. One commenter
recommended limiting the AHP
refinancing set-aside program to
assisting in the refinancing of loans
originated by Bank members. Three
commenters also supported the use of
AHP subsidy to restructure or refinance
mortgages originated by members and
purchased by the Banks for their
Mortgage Partnership Finance (MPF)
and Mortgage Purchase Program (MPP)
portfolios, as consistent with efforts by
the Federal Deposit Insurance
Corporation to promote lender
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modifications. The interim final rule
does not authorize the use of AHP
subsidy in conjunction with private
refinancing programs, Bank-sponsored
targeted advances programs for
refinancing, Bank member loan
refinancing programs such as the San
Francisco Bank AHP refinancing pilot
program, or refinancing of MPF or MPP
loans. Authorizing the use of AHP
subsidy in conjunction with such
private refinancing sources would
require the establishment of minimum
program standards for eligible
refinancing, including affordability
requirements for the refinanced loan,
loan-to-value ratios and other lending
terms. If AHP subsidy were permitted to
be used in conjunction with refinancing
member loans, the interim final rule
would need to establish member
contribution requirements to ensure that
the subsidy was not rewarding members
or the Banks for poor underwriting or
investment decisions. The comments on
the April 2008 AHP refinancing
proposal, which was based largely on
the San Francisco Bank AHP
refinancing pilot program and which
included explicit program loan
underwriting and member contribution
requirements, indicated that the
circumstances of the pilot program were
not applicable outside of the San
Francisco Bank district.
B. Funding Allocation: § 1291.2(b)(2)(i)
The AHP regulation permits a Bank,
in its discretion, to set aside annually,
in the aggregate, a maximum of the
greater of $4.5 million or 35% of its
annual required AHP contribution to
provide funds to members participating
in homeownership set-aside programs,
including mortgage refinancing
programs established under § 1291.6(f).
See 12 CFR 1291.2(b)(2). Prior to the
October amendments, the AHP
regulation also required that at least
one-third of a Bank’s aggregate annual
set-aside allocation to such programs be
targeted for first-time homebuyers. The
October amendments changed this
requirement by allowing a Bank to
allocate the maximum permissible
homeownership set-aside allocation
entirely to a mortgage refinancing
program established under § 1291.6(f).
See 12 CFR 1291.2(b)(2)(i)(A). The
October amendments also provided that
if a Bank sets aside funds solely for
homeownership set-aside programs
other than a mortgage refinancing
program established under § 1291.6(f),
at least one-third of the Bank’s aggregate
annual set-aside allocation to such
programs shall be to assist first-time
homebuyers. See 12 CFR
1291.2(b)(2)(i)(B).
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All 27 commenters that opposed the
October amendments opposed using
AHP subsidies for refinancing at the
expense of assisting new home
purchases, especially at a time when
there are fewer sources of purchase
assistance and the decline in home
prices is making homeownership
possible for more low- or moderateincome households. Two of these
commenters expressed concern that
refinancing often does not prevent a
household from losing its home due to
factors other than the terms of the
original mortgage and, therefore, does
not constitute a better use of AHP
subsidy than purchase assistance. Three
commenters stated that the regulation
should retain the existing
homeownership set-aside requirement
that a minimum one-third of the total
set-aside allocation be allocated for firsttime homebuyers in order to ensure that
some minimum amount of AHP home
purchase assistance is available.
FHFA finds these comments to be
persuasive. In the current market where
many existing homeowners are unable
to sell their homes and purchase moveup homes because their mortgages
exceed their homes’ value, efforts to
promote new home purchases could
contribute to recovery and stabilization
of the housing market. Ensuring that at
least some portion of AHP set-aside
subsidies is available for home purchase
assistance is also consistent with
HERA’s establishment of Federal
funding for what is commonly referred
to as the Neighborhood Stabilization
Program (NSP). See HERA, §§ 2301
through 2305. The NSP provides
funding to State and local government
programs for purchasing, rehabilitating
and renting or selling foreclosed
properties in order to mitigate the blight
on communities resulting from the
housing crisis. A number of State
housing finance agencies are using NSP
and mortgage-revenue bond funds to
assist first-time homebuyers in
purchasing these foreclosed properties.
Consequently, the interim final rule
reinstates in § 1291.2(b)(2)(i) the
requirement that at least one-third of a
Bank’s total annual set-aside allocation
shall be targeted to assist first-time
homebuyers, regardless of whether the
set-aside allocation is being used for
homeownership or refinancing
assistance, or both. Thus, a Bank may
use up to two-thirds of its annual setaside allocation for the AHP set-aside
refinancing program. If a Bank wants to
increase the amount of AHP subsidy
dollars available for refinancing
assistance, the Bank may increase its
total AHP set-aside allocation, and
thereby its refinancing set-aside amount,
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by accelerating additional funding from
subsequent years’ AHP contributions as
permitted under § 1291.2(b)(3) and
discussed further below. In addition, the
first-time homebuyers provision
requires that the Bank allocate one-third
of the Bank’s set-aside funding for firsttime homebuyers but does not require
the Bank to commit or use the amount
of the allocation for first-time
homebuyers. If there is not sufficient
demand for the first-time homebuyers
allocation and the Bank does not
commit the entire allocation to first-time
homebuyers, then the Bank may
ultimately carry over the unused portion
of the first-time homebuyers allocation
to other AHP set-aside uses, including
refinancing.
C. Acceleration of Future AHP
Contributions: § 1291.2(b)(3)
Under the Bank Act, a Bank is
required to contribute at least 10% of its
prior year’s net earnings to its current
year’s AHP. See 12 U.S.C. 1430(j)(5)(C).
Section 1291.2(b)(3) of the current AHP
regulation permits a Bank, in its
discretion, to reallot (i.e., accelerate),
from the subsequent year’s required
annual AHP contribution for use in the
current year, an amount up to the
greater of $2 million or 20% of its
required annual AHP contribution for
the current year. See 12 CFR
1291.2(b)(3). Prior to amendment in
2007, the AHP regulation based the
percentage amount on the Bank’s
estimated amount of its required AHP
contribution for the subsequent year,
rather than on its required contribution
for the current year.
The current housing and financial
crises have created unprecedented
financial conditions not contemplated
by the AHP regulation. Bank earnings
declined in 2008, and the Banks’
earnings potential in the near future is
uncertain and more unpredictable than
in previous years because of market
instability. In this environment, a Bank
that accelerates AHP funds from the
subsequent year’s required contribution
may find that the subsequent year’s
actual required AHP contribution is less
than the amount accelerated. At the
same time, a Bank may have no required
current year AHP contribution on which
to base a percentage calculation, or even
expectation of a required subsequent
year AHP contribution. In 2009, two
Banks with no 2008 earnings have no
required AHP contributions, while
several other Banks have very small
required AHP contributions. The ability
to accelerate funds from future required
AHP contributions would enable these
Banks to make some level of AHP
funding available in 2009.
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Consequently, the interim final rule
amends § 1291.2(b)(3) to increase the
maximum amount that a Bank may
accelerate in any one year to the greater
of $5 million (an increase from $2
million) or 20% of the Bank’s required
annual AHP contribution for the current
year. In addition, because of the
uncertainty of future earnings and the
possibility that a Bank may find itself in
the same situation of having little or no
required AHP contribution in the
subsequent year, the interim final rule
allows a Bank to credit the amount of
the accelerated contribution against
required AHP contributions over one or
more of the subsequent five years. This
is consistent with FHFA’s policy for
treatment of excess AHP annual
contributions, under which a Bank that
restates its earnings with the result that
its annual AHP contribution exceeded
the statutorily required amount, may
credit the excess contributions against
required AHP contributions in future
periods. See Advisory Bulletin 06–01,
‘‘AHP and REFCORP Contributions’’
(Jan. 25, 2006). FHFA specifically
requests comment on the revised
acceleration provision in the interim
final rule, including whether it provides
sufficient flexibility to enable the Banks
to maintain adequate AHP contributions
during the current housing market and
economic crisis.
As a technical matter, FHFA has
found that use of the term ‘‘allot’’ in the
current AHP regulation to describe the
acceleration process has been confused
with the process of allocating AHP
funding between the homeownership
set-aside and competitive application
programs, and may also be confused
with the process of allocating AHP setaside funds between the
homeownership set-aside and
refinancing set-aside programs.
Accordingly, the interim final rule uses
the term ‘‘acceleration,’’ which was
used prior to 2007, in lieu of the term
‘‘allot’’ to describe the process of using
future required AHP contributions in
the current year.
D. General AHP Refinancing Program
Authority; Retention Agreements:
§ 1291.6(f)(1)
Section 1291.6(f)(1) authorizes a
Bank, in its discretion, to establish a
homeownership set-aside program for
the use of AHP direct subsidy by its
members to assist in the refinancing of
a household’s mortgage loan that meets
the requirements in § 1291.6, except for
certain specified provisions, as well as
with the requirements of part 1291. The
October amendments exempted the
AHP set-aside refinancing program from
the provisions in § 1291.6 governing
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five-year retention agreements on AHPassisted household’s units. See 12 CFR
1291.6(c)(5). Thus, an AHP-assisted
household under the refinancing
program would not repay AHP subsidy
in the event of a subsequent sale or
refinancing of the unit during the fiveyear retention period. See 12 CFR
1291.6(c)(5) and 1291.9(a)(7). This
exemption from the AHP retention
requirements was considered in light of
the equity and appreciation sharing
requirements of the Hope for
Homeowners Program. See HERA,
§ 1402(a) (National Housing Act sec.
257(e)(4)(B), and (k)); 73 FR 61660,
61663 (Oct. 17, 2008).
Three commenters recommended that
the Banks be able to require AHP
retention agreements for repayment of
the AHP subsidy in the event of a sale
or refinancing during the five-year
retention period. Four commenters
stated that there could be cases where
households receive AHP subsidy but
subsequently fail to qualify under the
Hope for Homeowners Program because
they fail to make the first payment on
their newly refinanced loan, and the
Bank could not recover the AHP subsidy
in such cases if the household
subsequently sold or refinanced the
home.
Under the Banks’ current AHP
competitive application and home
purchase set-aside programs, AHP
retention agreements, which may be
subordinate liens or other forms of
legally enforceable agreements, are used
in conjunction with all types of
mortgage financing provided by all
Federal, State and local agencies,
including other FHA programs. Because
the AHP regulation requires that AHP
subsidy only be repaid from any net
gain from the sale or refinancing, the
AHP repayment requirement should not
interfere with any appreciation or equity
sharing requirements of the eligible
targeted refinancing programs.
Requiring AHP retention agreements for
the AHP set-aside refinancing program
would also maintain consistency
between the refinancing program and all
other AHP programs, which are subject
to the retention agreement requirement.
Accordingly, the interim final rule
requires that a household assisted under
the AHP set-aside refinancing program
be subject to an AHP five-year retention
agreement in accordance with
§ 1291.6(c)(5).
E. Eligible Loans: § 1291.6(f)(2)
As discussed above, the interim final
rule amends § 1291.6(f)(2) to make loans
refinanced under other eligible targeted
refinancing programs in addition to the
Hope for Homeowners Program eligible
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for AHP refinancing subsidy. To be
eligible for AHP refinancing assistance,
a household must meet the terms of
refinancing established by the eligible
targeted refinancing program, such as
the mortgage debt-to-income ratio, loanto-value ratio, payment history, type of
original loan (e.g., subprime or
nontraditional), and reasons for
delinquency. In addition, pursuant to
HERA, the household must have an
income at or below 80% of the area
median income (AMI), and the
household’s loan being refinanced must
be a first mortgage on an owneroccupied unit that is the household’s
primary residence. Two commenters
recommended that FHFA establish
parameters or details for eligibility and
underwriting standards under which
other programs’ requirements would
fall. In the October amendments, FHFA
noted that it was not necessary to
establish underwriting and other
household and loan eligibility
requirements for the AHP set-aside
refinancing program, because the
requirements and standards of the Hope
for Homeowners Program provide
adequate protections to borrowers
whose loans will be refinanced and
protect the integrity of the AHP. See 73
FR at 61662. The requirements and
standards of the other eligible targeted
refinancing programs included in the
interim final rule similarly protect
borrowers and the integrity of the AHP.
Reliance on the requirements and
standards of other lenders is also
consistent with the AHP home purchase
set-aside program, which does not
establish specific requirements for
underwriting a household’s mortgage,
leaving the establishment of such
requirements to the individual lender.
Five commenters supported this
approach, and several commenters
stated that FHFA should not limit
eligible loans to subprime and
nontraditional mortgages, or require that
a household be delinquent in order to
receive assistance.
Consistent with the October
amendments, for purposes of
determining whether a household is at
or below 80% of AMI under the AHP
set-aside refinancing program, the
interim final rule does not establish
specific requirements for how a Bank
should calculate a household’s income.
Thus, a Bank may make its own
calculation of total household income,
or may use the eligible targeted
refinancing program’s calculation of
total household income for purposes of
determining whether a household meets
the 80% of AMI income limit. This is
also consistent with the AHP home
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purchase set-aside program, under
which each Bank establishes
requirements for how to calculate
household income, which may include
relying on the member’s calculation of
household income determined in the
process of underwriting the mortgage.
The Hope for Homeowners Program and
the Home Affordable Refinance program
do not require households to meet
certain income limits in order to be
eligible for the program, but do calculate
total household income for purposes of
determining loan underwriting ratios.
State housing finance agency
refinancing programs have specific
household income limits under their
mortgage-revenue bond programs
(generally 100% of AMI), and calculate
total household income for purposes of
determining compliance with those
income limits as well as for purposes of
determining underwriting ratios. The
housing finance agency refinancing
programs vary in how they calculate
total household income with regard to
the income time period (past income or
current income) and the income sources
(only the mortgage borrowers or all
adult household members) used. Ten
commenters recommended that the
Banks rely on the calculation of total
household income determined by other
programs providing the refinancing
assistance where such programs
calculate income.
Section 1291.6(c)(2)(i) of the existing
AHP regulation requires a Bank or
member to determine a household’s
income eligibility at the time the
member enrolls the household in the
AHP homeownership set-aside program.
Consistent with this requirement, the
Bank or member must determine that
the household is at or below 80% of
AMI at the time of enrollment in the
AHP set-aside refinancing program.
However, a Bank or member may use
the total household income provided by
the eligible targeted refinancing program
regardless of when that program
calculated the amount.
F. Eligible Uses of AHP Subsidy:
§ 1291.6(f)(3)
1. Reduction in Outstanding Loan
Principal Balance
The October amendments provided
that AHP subsidy may pay to reduce the
outstanding principal balance of the
household’s loan below the maximum
loan-to-value ratio required under the
Hope for Homeowners Program in order
for the household to also meet that
program’s maximum debt-to-income
ratio. 12 CFR 1291.6(f)(3)(i). However,
there may also be cases where the
household meets the program’s
maximum mortgage debt-to-income
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ratio but the outstanding principal
balance of the loan exceeds the
program’s maximum loan-to-value ratio.
To take into account such cases, the
interim final rule amends the AHP
regulation to permit use of the AHP
subsidy to reduce the outstanding loan
principal balance to the eligible targeted
refinancing program’s maximum loanto-value ratio even if this results in the
household having a mortgage debt-toincome ratio below the program’s
maximum mortgage debt-to-income
ratio. The maximum amount of AHP
subsidy that may be provided for the
refinancing is the least amount that
results in the loan meeting both the
program’s maximum loan-to-value ratio
and maximum mortgage debt-to-income
ratio. Consequently, there is no need for
any AHP subsidy where a refinancing
program already provides concessions
and subsidy sufficient for a household
to achieve an affordable mortgage in
accordance with the program’s terms.
For example, the Fannie Mae and
Freddie Mac Home Affordable
Refinance program, with certain
exceptions, does not require maximum
mortgage debt-to-income ratios, so,
generally, the AHP subsidy could be
used only to reduce loan principal to
achieve that program’s maximum loanto-value ratio. The interim final rule
also clarifies that the applicable
program underwriting debt-to-income
ratio is the mortgage debt-to-income
ratio.
2. Loan Closing Costs
The October amendments also
authorized a member to use the AHP
subsidy to pay only FHA-approved loan
closing costs in connection with the
refinancing of an eligible loan under the
Hope for Homeowners Program. 12 CFR
1291.6(f)(3)(ii). One commenter opposed
restricting the use of AHP subsidy for
loan closing costs that are FHAapproved, noting that this is
inconsistent with the provision in the
AHP regulation that does not specify
that AHP subsidy may pay only for
FHA-approved closing costs in
connection with the purchase of a home
under the homeownership set-aside
program or under the competitive
application program. See 12 CFR
1291.6(c)(4) and (8). To maintain
consistency between the AHP
homeownership and refinancing setaside programs, the interim final rule
removes the language restricting eligible
closing costs to FHA-approved closing
costs.
Two commenters requested
clarification that AHP subsidy may be
used to pay FHA up-front insurance
premiums under the AHP set-aside
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38519
refinancing program. Because they are
required for the mortgage financing,
FHA up-front insurance premiums are
eligible costs under the AHP
homeownership set-aside and
competitive application programs.
Consequently, AHP subsidy may pay for
such insurance premiums under the
AHP set-aside refinancing program.
The October amendments excluded
the current requirement of the AHP
homeownership set-aside program that
the rate of interest, points, fees and any
other charges for all loans made in
conjunction with the AHP subsidy
cannot exceed a reasonable market rate
of interest, points, fees and other
charges for loans of similar maturity,
terms and risk. 12 CFR 1291.6(c)(7). As
part of the goal to achieve consistency,
where applicable, between the
requirements of the AHP
homeownership set-aside and the
refinancing set-aside programs, the
interim final rule applies § 1291.6(c)(7)
to the refinancing set-aside program.
G. Eligible Lender Participants:
§ 1291.6(f)(4)
The October amendments stated that
a Bank may provide AHP direct subsidy
to members that are FHA-approved
lenders for the purpose of refinancing
an eligible loan with an FHA-insured
loan by the member under the Hope for
Homeowners Program. The October
amendments also stated that a Bank
may, in its discretion, provide the AHP
subsidy to members that will provide
the subsidy to FHA-approved lenders
that are not members of the Bank for the
purpose of refinancing an eligible loan
if, after consulting with the Bank’s
Advisory Council, the Bank determines
that such action would be in the best
interests of borrowers in the Bank’s
district. 12 CFR 1291.6(f)(4). All 13
commenters supporting refinancing,
opposed limiting participants in the
AHP set-aside refinancing program to
FHA-approved lenders, noting that
relatively few Bank members are FHAapproved lenders and many Bank
members participate in housing finance
agency mortgage-revenue bond
programs and are Fannie Mae and
Freddie Mac approved seller/servicers.
Several commenters also stated that
assistance should be available to
households based on their
qualifications, regardless of whether the
member providing the AHP subsidy is
FHA-approved. In addition, the
requirement that members be FHAapproved is too restrictive since the
interim final rule permits the use of the
AHP subsidy with other eligible targeted
refinancing programs in addition to the
FHA’s Hope for Homeowners Program.
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Accordingly, the interim final rule
eliminates the FHA-approved lender
requirement.
Under the current AHP home
purchase set-aside program, the Banks
have discretionary authority to decide
whether to permit a household to obtain
a purchase-money mortgage from any
lender or to require the household to
obtain its mortgage from the member
providing the AHP assistance.3
Consistent with this authority,
§ 1291.6(f)(4) of the interim final rule
permits a Bank, in its discretion, to
require a household to obtain its
refinancing loan through a member
participating in the eligible targeted
refinancing program that is providing
the new mortgage to the household. The
interim final rule also removes the
requirement that a Bank must consult
with its Advisory Council before
determining that a household may use
a lender other than a member of the
Bank. This requirement is not specified
in § 1291.6(c)(2)(iii) with respect to the
adoption of other optional household
eligibility requirements under the home
purchase set-aside program and, in any
case, is redundant with the general
regulatory requirement that the Banks
consult with their Advisory Councils in
adopting their AHP Implementation
Plans. 12 CFR 1291.3(a) and (b).
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H. Household Counseling: § 1291.6(f)(5)
Section 1291.6(c)(2)(iii) of the current
AHP regulation permits a Bank, in its
discretion, to require homebuyers who
are not first-time homebuyers to obtain
homeownership counseling under the
AHP home purchase set-aside program.
See 12 CFR 1291.6(c)(2)(iii). The
October amendments did not make the
discretionary authority to adopt
additional household eligibility
requirements, such as counseling,
applicable to the AHP set-aside
refinancing program. Several
commenters objected to the exclusion of
counseling as an optional household
eligibility requirement, noting the
importance of counseling for
households with troubled loans. The
2008 Consolidated Appropriations Bill
recognized the importance of
homeowner counseling by establishing
and funding the National Foreclosure
Mitigation Counseling (NFMC) program
to assist households seeking refinancing
or restructuring of their mortgages in
order to avoid foreclosure. See Public
Law 110–161. The NFMC program,
under the auspices of NeighborWorks
3 Requiring a household to obtain a new mortgage
through the member is one of several types of
optional household eligibility requirements that a
Bank may establish under § 1291.6(c)(2)(iii).
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America, is comprised of an array of
counseling groups including
NeighborWorks’ partner organizations,
the Homeownership Preservation
Foundation, HUD’s HOPE NOW
counseling coalition, the National Urban
League, USA Cares (military assistance),
and State and local housing finance
agency counseling programs. Most, if
not all, of the State housing finance
agency refinancing programs require
households to be reviewed and vetted
by these counseling organizations before
applying to their programs. The Home
Affordable Refinance program
encourages households to seek
counseling assistance to determine if
they qualify for the Fannie Mae/Freddie
Mac refinance program. The NFMC
program is playing an important role in
counseling households to help them
determine their options and
qualifications for refinancing assistance
under these Fannie Mae, Freddie Mac
and State housing finance agency
eligible targeted refinancing programs.
FHFA agrees that counseling is an
important component of successful
refinancing, and should be provided by
competent and reputable counseling
programs, such as the NFMC program or
other counseling programs used by State
or local government or housing finance
agencies that may not be part of the
NFMC program. These counseling
programs can also serve as an efficient
and effective means of identifying for
households the assistance programs for
which they may qualify. Accordingly,
§ 1291.6(f)(5) of the interim final rule
requires that a household seeking AHP
assistance must obtain counseling for
foreclosure mitigation and qualification
for refinancing by an eligible targeted
refinancing program, through the NFMC
program or other counseling program
used by a State or local government or
housing finance agency. Bank members
would refer interested households to an
NFMC program participant, or to a State
or local government or housing finance
agency counseling program, which
would determine whether the
households are eligible to have their
loans refinanced through an eligible
targeted refinancing program.
Households determined by a counseling
organization to qualify for refinancing
under an eligible targeted refinancing
program would then be referred to
participating Bank members, who
would enroll the households in the AHP
set-aside refinancing program upon
determination of their AHP income
eligibility.
Under the interim final rule, the
NFMC program and other permissible
counseling organizations would thereby
act as a gateway for households seeking
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refinancing assistance. The interim final
rule does not establish a requirement for
the type of educational counseling that
may take a period of time that could
delay the closing on the refinancing.
Rather, the interim final rule requires
the household to go to an NFMC
program principally to determine if its
loan can be refinanced by one of the
eligible targeted refinancing programs
and whether AHP subsidy will be
needed in order for the household to
obtain the refinancing. Although the
household will benefit from
accompanying foreclosure mitigation
and credit counseling, the primary
purpose of the interim final rule
requirement is to ensure that the
household receives counseling on a
variety of available refinancing options
that are suitable for that household. For
example, a lender, such as an FHA
lender or Fannie Mae/Freddie Mac
seller/servicer, may be able to determine
if a household is eligible for a specific
program involving that lender, but is not
likely to know if the household has
other options if it is not eligible for the
lender’s specific program.
Consequently, under the interim final
rule, when a household contacts a
member directly, the member would
refer the household to the NFMC
program or other State or local
government or housing finance agency
counseling program, to determine the
household’s eligibility before enrolling
the household in the AHP refinancing
program and committing AHP subsidy.
All NFMC program counseling is free
to households; therefore, the interim
final rule does not authorize the use of
AHP subsidy to pay for such counseling
costs. FHFA specifically requests
comment on whether households
should be required to obtain counseling
for foreclosure mitigation and
qualification for refinancing by an
eligible targeted refinancing program
prior to enrollment in the AHP set-aside
refinancing program.
I. Sunset Date: § 1291.6(f)(6)
The October amendments included a
provision terminating the Banks’
authority to commit AHP subsidy for
refinancing after July 30, 2010, which is
the expiration date of the two-year
period in section 1218 of HERA. 12 CFR
1291.6(f)(5). FHFA specifically
requested comment on whether the
sunset date should be extended to be coextensive with the sunset date of the
Hope for Homeowners Program on
September 30, 2011. See 73 FR at 61663.
Two commenters supported an
extension of this sunset date to coincide
with the sunset date for the Hope for
Homeowners Program. See HERA,
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§ 1402(a) (National Housing Act sec.
257(r)). One commenter recommended
that FHFA consider adopting the sunset
dates of other refinancing programs. The
interim final rule retains the sunset date
of July 30, 2010 in redesignated
§ 1291.6(f)(6). FHFA may reconsider an
extension of the sunset date based on
program performance as the sunset date
approaches.
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J. Competitive Application Program;
Second District Priority Scoring
Criterion: § 1291.5(d)(5)(vii)
Under the Banks’ AHP competitive
application program, the Second District
Priority is the only one of nine scoring
criteria in the AHP regulation for which
a Bank may select a housing need that
is not prescribed in the regulation.
Unlike the First District Priority scoring
criterion, the Second District Priority
permits a Bank to establish only one
housing need in its district. 12 CFR
1291.5(d)(5)(vi), (d)(5)(vii). The current
housing crisis has led to acute housing
needs that the AHP regulation does not
contemplate. These needs reflect a
number of interconnected factors related
to foreclosures and declining home
values, which adversely affect all
participants in the housing industry.
The hardest hit areas must contend with
blighted properties and declining
communities where there is a critical
need for sustainable and affordable
homeownership and assistance to rental
sponsors to absorb properties being sold
to avoid foreclosure or that are in
foreclosure. At the same time, there is
an increased demand for affordable
rental housing in the wake of
households losing their homes,
compounded by a significant decline in
investors for low-income housing tax
credits and housing finance agency
bonds for rental production.
FHFA believes that these housing
market conditions have generated an
urgent need for more flexibility in the
Banks’ capacity to respond under the
AHP. The current scoring system in the
AHP regulation can address foreclosed
properties only marginally within the
context of other, more general housing
needs. Permitting the Banks to establish
one or more housing needs under the
Second District Priority scoring criterion
would allow the AHP competitive
application program to complement the
efforts of the AHP refinancing set-aside
and other targeted refinancing programs
for foreclosure prevention and HERA’s
NSP for the disposition of foreclosed
properties. Accordingly, the interim
final rule amends § 1291.5(d)(5)(vii) of
the AHP regulation to permit a Bank to
establish one or more housing needs in
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the Bank’s district under the Second
District Priority scoring criterion.
FHFA believes that the severity of the
housing market and the urgent need for
housing assistance create exigent
circumstances for amending the Second
District Priority scoring criterion
through an interim final rule. An
immediate change is also necessary to
allow the Banks and their Advisory
Councils the opportunity to make any
scoring revisions in this regard to their
AHP Implementation Plans that would
be applicable to their 2009 AHP
competitive application funding rounds.
FHFA specifically requests comment on
whether this scoring change benefits the
AHP competitive application program.
IV. Notice and Public Participation
FHFA for good cause finds that the
notice and comment procedure required
by the Administrative Procedure Act is
impracticable or contrary to the public
interest in this instance. See 5 U.S.C.
553(b)(B). Section 1218 of HERA
requires that FHFA’s regulations
authorize the use of AHP set-aside
subsidy for mortgage refinancing for a
two-year period commencing on July 30,
2008. Issuance of an interim final rule
will enable the Banks to expedite
implementation of AHP set-aside
refinancing programs pursuant to
§ 1218. In addition, as discussed above,
exigent circumstances exist for
amending the Second District Priority
scoring criterion through an interim
final rule. The delay that would ensue
during a proposed notice and comment
rulemaking would significantly curtail
the available period of time for
implementation and operation by the
Banks of AHP mortgage refinancing
programs and revised Second District
Priorities. In view of the number and
nature of the changes being made by
this rule, FHFA is requesting comments
and will consider all comments received
on or before October 5, 2009 in
promulgating a final rule.
V. Effective Date
For the reasons stated in part IV.
above, FHFA for good cause finds that
the interim final rule should become
effective on August 4, 2009. See 5 U.S.C.
553(d)(3).
VI. Paperwork Reduction Act
The information collection contained
in the current AHP regulation, entitled
‘‘Affordable Housing Program (AHP),’’
has been assigned control number 3069–
0006 by the Office of Management and
Budget (OMB). The interim final rule
does not substantively or materially
modify the approved information
collection. Consequently, FHFA has not
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38521
submitted any information to OMB for
review under the Paperwork Reduction
Act of 1995. See 44 U.S.C. 3501 et seq.
VII. Regulatory Flexibility Act
FHFA is issuing this regulation in the
form of an interim final rule and not as
a proposed rule. Therefore, the
provisions of the Regulatory Flexibility
Act do not apply. See 5 U.S.C. 601(2)
and 603(a).
List of Subjects in 12 CFR Part 1291
Community development, Credit,
Federal home loan banks, Housing,
Reporting and recordkeeping
requirements.
For the reasons stated in the preamble,
FHFA hereby amends chapter XII of title
12 of the Code of Federal Regulations as
follows:
■
PART 1291—FEDERAL HOME LOAN
BANKS’ AFFORDABLE HOUSING
PROGRAM
1. The authority citation for part 1291
continues to read as follows:
■
Authority: 12 U.S.C. 1430(j).
2. In § 1291.1, add the following
definition in alphabetical order:
■
§ 1291.1
Definitions
*
*
*
*
*
Eligible targeted refinancing program
means a program offered by the U.S.
Department of Housing and Urban
Development (HUD), the U.S.
Department of Agriculture (USDA), the
Federal National Mortgage Association
(Fannie Mae), the Federal Home Loan
Mortgage Corporation (Freddie Mac), a
State or local government, or a State or
local housing finance agency for the
limited purpose of refinancing (i.e.,
paying off) first mortgages on primary
residences for households that cannot
afford or are at risk of not being able to
afford their monthly payments, as
defined by the program, in order to
prevent foreclosure.
*
*
*
*
*
■ 3. Amend § 1291.2(b)(2)(i) and (b)(3)
to read as follows:
§ 1291.2 Required annual AHP
contributions; allocation of contributions.
*
*
*
*
*
(b) * * *
(2) Homeownership set-aside
programs.—(i) Allocation amount; firsttime homebuyers. A Bank, in its
discretion, may set aside annually, in
the aggregate, up to the greater of $4.5
million or 35% of the Bank’s annual
required AHP contribution to provide
funds to members participating in
homeownership set-aside programs,
E:\FR\FM\04AUR1.SGM
04AUR1
38522
Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Rules and Regulations
including a mortgage refinancing setaside program established under
paragraph (f) of this section, provided
that at least one-third of the Bank’s
aggregate annual set-aside allocation to
such programs shall be to assist firsttime homebuyers, pursuant to the
requirements of this part.
*
*
*
*
*
(3) Additional funding. A Bank may
accelerate to its current year’s program
from future annual required AHP
contributions an amount up to the
greater of $5 million or 20% of its
annual required AHP contribution for
the current year. The Bank may credit
the amount of the accelerated
contribution against required AHP
contributions under this part 1291 over
one or more of the subsequent five
years.
■ 4. Amend § 1291.5(d)(5)(vii) to read as
follows:
§ 1291.5
Competitive application program.
*
*
*
*
*
(d) * * *
(5) * * *
(vii) Second District priority: Defined
housing needs in the District. The
satisfaction of one or more housing
needs in the Bank’s District, as defined
by the Bank in its AHP Implementation
Plan. The Bank may, but is not required
to, use one of the criteria listed in
paragraph (d)(5)(vi) of this section,
provided it is different from the
criterion or criteria adopted by the Bank
under such paragraph.
*
*
*
*
*
■ 5. Amend § 1291.6(f) to read as
follows:
§ 1291.6 Homeownership set-aside
programs.
(i) Reduce the outstanding principal
balance of the loan by no more than the
amount necessary for the new loan to
qualify under both the maximum loanto-value ratio and the maximum
household mortgage debt-to-income
ratio required by the eligible targeted
refinancing program; or
(ii) Pay loan closing costs.
(4) Eligible lender participants. A
Bank, in its discretion, may require that
a household obtain its refinancing loan
through a member participating in an
eligible targeted refinancing program.
(5) Counseling. Prior to enrollment in
an AHP set-aside refinancing program
established under this paragraph (f), a
household must obtain counseling for
foreclosure mitigation and for
qualification for refinancing by an
eligible targeted refinancing program
through the National Foreclosure
Mitigation Counseling program or other
counseling program used by a State or
local government or housing finance
agency.
(6) Sunset.—(i) This paragraph (f)
shall expire on July 30, 2010, and a
Bank may not commit AHP subsidy to
households under its AHP set-aside
refinancing program after such date.
(ii) A lender may use the AHP subsidy
committed by such date for a loan
submitted to the eligible targeted
refinancing program for approval on or
before July 30, 2010 that is approved for
refinancing under such program after
such date.
Dated: July 28, 2009.
James B. Lockhart, III,
Director, Federal Housing Finance Agency.
[FR Doc. E9–18484 Filed 8–3–09; 8:45 am]
BILLING CODE P
rmajette on DSK29S0YB1PROD with RULES
*
*
*
*
*
(f) Mortgage refinancing program.—
(1) General. A Bank may establish a
homeownership set-aside program for
the use of AHP direct subsidy by its
members to assist in the refinancing of
a household’s mortgage loan, provided
such program meets the requirements of
this paragraph (f) and otherwise meets
the requirements of regulations in this
part. The provisions of paragraphs
(c)(2)(ii), (c)(2)(iii), (c)(4), (c)(6) and
(c)(8) of this section, shall not apply to
such program.
(2) Eligible loans. A loan is eligible to
be refinanced with AHP direct subsidy
if the loan is secured by a first mortgage
on an owner-occupied unit that is the
primary residence of the household, and
the loan is refinanced under an eligible
targeted refinancing program.
(3) Eligible uses of AHP direct
subsidy. Members may provide the AHP
direct subsidy to:
VerDate Nov<24>2008
15:40 Aug 03, 2009
Jkt 217001
changed one of the regulatory references
in § 135.427(a).
DATES: Effective Dates: Effective on
August 4, 2009.
FOR FURTHER INFORMATION CONTACT: Kim
A. Barnette, Flight Standards Service
(AFS–320), Federal Aviation
Administration, 800 Independence
Ave., SW., Washington, DC; phone (202)
385–6403; e-mail
Kim.A.Barnette@faa.gov.
On
February 2, 2005, the FAA published a
final rule in the Federal Register (70 FR
5533), better known as ‘Aging Airplane
Safety’, clarifying the content
requirements in the maintenance
manual. In the process, this final rule redesignated 14 CFR 135.424 to § 135.423,
and failed to revise § 135.427(a), which
still referenced § 135.424.
SUPPLEMENTARY INFORMATION:
Technical Amendment
This technical amendment will
correct § 135.427(a) to properly
reference § 135.423.
List of Subjects
14 CFR Part 135
Air taxis, Aircraft, Airmen, Alcohol
abuse, Aviation safety, Drug abuse, Drug
testing, Reporting and recordkeeping
requirements.
Accordingly, Title 14 of the Code of
Federal Regulations (CFR) part 135 is
amended as follows:
■
PART 135—OPERATING
REQUIREMENTS; COMMUTER AND
ON DEMAND OPERATIONS AND
RULES GOVERNING PERSONS ON
BOARD SUCH AIRCRAFT
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 135
[Docket No. FAA–1999–5401; Amendment
No. 135–118]
Manual Requirements
AGENCY: Federal Aviation
Administration, DOT.
ACTION: Final rule; technical
amendment.
Frm 00020
Fmt 4700
Sfmt 4700
Authority: 49 U.S.C. 106(g), 41706, 44113,
44101, 44701–44702, 44705, 44709, 44711–
44713, 44715–44717, 44722.
2. Amend § 135.427 by revising
paragraph (a) to read as follows:
■
§ 135.427
SUMMARY: The Federal Aviation
Administration (FAA) is making a
minor technical change to a final rule
published in the Federal Register on
February 2, 2005. This final rule
established new manual requirements
for aging aircraft under 14 CFR part 135.
In the final rule, the FAA inadvertently
PO 00000
1. The authority citation for part 135
continues to read as follows:
■
Manual requirements.
(a) Each certificate holder shall put in
its manual the chart or description of
the certificate holder’s organization
required by § 135.423 and a list of
persons with whom it has arranged for
the performance of any of its required
inspections, other maintenance,
preventive maintenance, or alterations,
including a general description of that
work.
*
*
*
*
*
E:\FR\FM\04AUR1.SGM
04AUR1
Agencies
[Federal Register Volume 74, Number 148 (Tuesday, August 4, 2009)]
[Rules and Regulations]
[Pages 38514-38522]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-18484]
-----------------------------------------------------------------------
FEDERAL HOUSING FINANCE AGENCY
12 CFR Part 1291
RIN 2590-AA04
Affordable Housing Program Amendments: Federal Home Loan Bank
Mortgage Refinancing Authority
AGENCY: Federal Housing Finance Agency.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: Section 1218 of the Housing and Economic Recovery Act of 2008
(HERA) requires the Federal Housing Finance Agency (FHFA) to permit the
Federal Home Loan Banks (Banks) until July 30, 2010, to use Affordable
Housing Program (AHP) homeownership set-aside funds to refinance low-
or moderate-income households' mortgage loans. On October 17, 2008,
FHFA amended its AHP regulation to authorize the Banks to provide AHP
direct subsidies under their homeownership set-aside programs to low-
or moderate-income households who qualify for refinancing assistance
under the Hope for Homeowners Program established by the Federal
Housing Administration (FHA) under Title IV of HERA. Based on the
comments received on the amendments and continuing adverse conditions
of the mortgage market, FHFA has determined that in order for the AHP
set-aside refinancing program to be implemented successfully for the
benefit of the intended households, the scope of the program authority
should be broadened and the Banks should have greater flexibility in
implementing the program. Accordingly, FHFA is issuing and seeking
comment on an interim final rule that authorizes the Banks to provide
AHP subsidy through their members to assist in the refinancing of
eligible households' mortgages under eligible Federal, State and local
programs for targeted refinancing in addition to the Hope for
Homeowners Program. These programs would include the Administration's
Making Home Affordable Refinancing program. The interim final rule
permits the Banks to provide AHP direct subsidy to members and to use
the subsidy for principal reduction and for loan closing costs, and
requires that households obtain counseling for qualification for
refinancing and foreclosure mitigation.
In addition, the interim final rule enhances the ability of the
Banks to respond to the mortgage crisis by providing greater
flexibility to accelerate their future annual statutory AHP
contributions for use in their AHP homeownership set-aside programs in
the current year. The interim final rule also permits the Banks to
adopt multiple housing needs under their Second District Priority
scoring criterion under the AHP competitive application program.
DATES: The interim final rule is effective on August 4, 2009. FHFA will
accept written comments on the interim final rule on or before October
5, 2009.
ADDRESSES: Submit comments, identified by regulatory information number
(RIN) 2590-AA04, by any of the following methods:
Mail/Hand Delivery: Federal Housing Finance Agency, Fourth
Floor, 1700 G Street, NW., Washington, DC 20552, Attention: Public
Comments/RIN 2590-AA04.
E-mail: regcomments@fhfa.gov. Please include ``RIN 2590-
AA04'' in the subject line of the message.
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. If you submit your
comment to the Federal eRulemaking Portal, please also send it by e-
mail to FHFA at regcomments@fhfa.gov to ensure timely receipt by the
agency. Include the following information in the subject line of your
submission ``Affordable Housing Program Amendments: Federal Home Loan
Bank Mortgage Refinancing Authority; RIN 2590-AA04.''
We will post all public comments we receive without change,
including any personal information you provide, such as your name and
address, on the FHFA Web site at https://www.fhfa.gov.
FOR FURTHER INFORMATION CONTACT: Nelson Hernandez, Senior Associate
Director, Housing Mission and Goals, 202-408-2819,
Nelson.Hernandez@fhfa.gov; Charles E. McLean, Jr., Acting Manager,
Housing Mission and Goals, 202-408-2537, Charles.McLean@fhfa.gov; or
Melissa L. Allen, Senior Policy Analyst, 202-408-2524,
Melissa.Allen@fhfa.gov, Federal Housing Finance Agency, 1625 Eye
Street, NW., Washington, DC 20006; or Sharon B. Like, Associate General
Counsel, 202-414-8950, Sharon.Like@fhfa.gov, Federal Housing Finance
Agency, 1700 G Street, NW., Washington, DC 20552. The telephone number
for the Telecommunications Device for the Hearing Impaired is 800-877-
8339.
SUPPLEMENTARY INFORMATION:
I. Comments
FHFA invites comments on all aspects of the interim final rule, and
will revise the rule as appropriate after taking all comments into
consideration. Copies of all comments will be posted on the FHFA
Internet Web site at https://www.fhfa.gov. In addition, copies of all
comments received will be available for examination by the public on
business days between the hours of 10 a.m. and 3 p.m., at the Federal
Housing Finance Agency, Fourth Floor, 1700 G Street, NW., Washington,
DC 20552. To make an appointment to inspect comments, please call the
Office of General Counsel at 202-414-6924.
II. Background
A. HERA
Effective July 30, 2008, Division A of HERA, Public Law 110-289,
122 Stat. 2654 (2008), created FHFA as an independent agency of the
Federal Government. HERA transferred the supervisory and oversight
responsibilities over the Federal National Mortgage Association (Fannie
Mae), Federal Home Loan Mortgage Corporation (Freddie Mac)
(collectively, Enterprises), the Banks, and the Bank System's Office of
Finance, from the Office of Federal Housing Enterprise Oversight
(OFHEO) and the Federal Housing Finance Board (FHFB) to FHFA. HERA
provides for the abolishment of OFHEO and FHFB one year after the date
of enactment. FHFA is responsible for ensuring that the
[[Page 38515]]
Enterprises and the Banks operate in a safe and sound manner, including
being capitalized adequately, and carry out their public policy
missions, including fostering liquid, efficient, competitive, and
resilient national housing finance markets. The Enterprises and the
Banks continue to operate under regulations promulgated by OFHEO and
FHFB until FHFA issues its own regulations. See HERA at Sec. 1302, 122
Stat. 2795.
B. The Banks' Affordable Housing Program
Section 10(j) of the Federal Home Loan Bank Act (Bank Act) requires
each Bank to establish an affordable housing program, the purpose of
which is to enable a Bank's members to finance homeownership by
households with incomes at or below 80% of the area median income (low-
or moderate-income households), and to finance the purchase,
construction, or rehabilitation of rental projects in which at least
20% of the units will be occupied by and affordable for households
earning 50% or less of the area median income (very low-income
households). See 12 U.S.C. 1430(j)(1) and (2). The Bank Act requires
each Bank to contribute 10% of its previous year's net earnings to its
AHP annually, subject to a minimum annual combined contribution by the
12 Banks of $100 million. See 12 U.S.C. 1430(j)(5)(C). Section 1218 of
HERA amended section 10(j) by adding a new paragraph (2)(C) which
requires FHFA to allow the Banks until July 30, 2010, to use AHP
homeownership set-aside funds to refinance low- or moderate-income
households' first mortgage loans on their primary residences. See 12
U.S.C. 1430(j)(2)(C). The Director of FHFA must establish the
percentage of set-aside funds eligible for this use by regulation.
The AHP regulation authorizes a Bank, in its discretion, to set
aside a portion of its annual required AHP contribution to establish
homeownership set-aside programs for the purpose of promoting
homeownership for low- or moderate-income households. See 12 CFR
1291.6. Under the homeownership set-aside programs, a Bank may provide
AHP direct subsidy (grants) to members to pay for down payment
assistance, closing costs, and counseling costs in connection with a
household's purchase of its primary residence, and for rehabilitation
assistance in connection with a household's rehabilitation of an owner-
occupied residence. See 12 CFR 1291.6(c)(4). Currently, a Bank may
allocate up to the greater of $4.5 million or 35% of its annual
required AHP contribution to homeownership set-aside programs in that
year.
C. AHP Refinancing Initiative and Proposed Rule
In January 2008, FHFB waived certain homeownership set-aside
program provisions of the AHP regulation to allow the Federal Home Loan
Bank of San Francisco (San Francisco Bank) to establish a temporary
pilot program to provide AHP direct subsidy to enable eligible
households with subprime or nontraditional loans held by a San
Francisco Bank member or its affiliate to refinance or restructure the
loans into affordable, long-term fixed-rate mortgages. See FHFB
Resolution No. 2008-01 (Jan. 15, 2008). The authority will expire on
December 31, 2009.
In April 2008, FHFB published a proposed rule that would have
extended the temporary authority to use AHP set-aside funds for
mortgage refinancing or restructuring to all 12 Banks. See 73 FR 20552
(Apr. 16, 2008). FHFB received 36 comments on the proposal. Commenters
who supported use of AHP funds for refinancing, recommended flexibility
in the rules governing use of the funds so that the Banks and their
members would be able to assist a greater number of borrowers in
distress, including allowing the use of AHP set-aside funds in
conjunction with other Federal, State or local mortgage refinancing
programs.
D. October Interim Final Rule
Before FHFB took final action on the proposed amendments to the AHP
regulation, section 1218 of HERA added section 10(j)(2)(C) to the Bank
Act. Title IV of HERA also required establishment of the Hope for
Homeowners Program, a temporary mortgage refinancing program under the
FHA, which will expire on September 30, 2011. To implement the
requirements of section 1218 of HERA, on October 17, 2008, FHFA
published an interim final rule (``October amendments''), which added
new Sec. 1291.6(f) to the AHP homeownership set-aside regulation
authorizing the Banks, in their discretion, to temporarily establish an
AHP set-aside refinancing program. See 73 FR 61660 (Oct. 17, 2008).
Specifically, Sec. 1291.6(f) authorized the Banks to provide AHP
direct subsidy to their members to assist in the refinancing of low- or
moderate-income homeowners' mortgage loans under the Hope for
Homeowners Program through the use of AHP subsidy to reduce loan
principal and pay FHA-approved closing costs. By linking the use of the
AHP subsidy with the Hope for Homeowners Program, FHFA intended to
leverage and enhance the effectiveness of each program, ensure that the
full range of Federal assistance to affected homeowners was available
quickly, and provide the flexibility that the Banks and their members
need to make the AHP refinancing program successful.
FHFA received 38 comment letters on the October amendments,
representing 40 commenters.\1\ Commenters included: 8 Banks; 2 Bank
Advisory Councils; 3 trade associations; 2 housing advocacy and
assistance organizations; and 25 individuals. Thirteen of the 40
commenters supported the use of AHP subsidies for refinancing
households with unaffordable mortgages. The other 27 commenters opposed
the use of AHP subsidies for refinancing, citing the ongoing, critical
need for AHP homeownership set-aside subsidies to assist home
purchases.
---------------------------------------------------------------------------
\1\ Letters from two of the Banks also incorporate the comments
of those Banks' respective Affordable Housing Advisory Councils
(Advisory Councils).
---------------------------------------------------------------------------
E. HERA Section 1201
Section 1201 of HERA requires the FHFA Director to consider the
differences between the Banks and the Enterprises in rulemakings that
affect the Banks with respect to the Banks' cooperative ownership
structure, mission of providing liquidity to members, affordable
housing and community development mission, capital structure and joint
and several liability. See 12 U.S.C. 4513(f). In preparing the interim
final rule, the Director considered these factors and determined that
the rule is appropriate, particularly because the rule implements a
statutory provision of the Bank Act that applies only to the Banks. See
12 U.S.C. 1430(j). Nonetheless, FHFA requests comment on whether these
factors should result in a revision of the rule as it relates to the
Banks.
III. Analysis of the Interim Final Rule
A. Definition of Eligible Targeted Refinancing Program: Sec. 1291.1
The October amendments provided that a household's loan is eligible
to be refinanced with AHP direct subsidy if the loan is secured by a
first mortgage on an owner-occupied unit that is the primary residence
of the household, and the loan is refinanced under the Hope for
Homeowners Program. FHFA specifically requested comment on whether the
Banks should be permitted to use AHP set-aside funds to assist
homeowners refinancing under other programs intended to aid distressed
homeowners, such as those offered by the Enterprises, FHASecure, or any
[[Page 38516]]
State housing finance agency programs. See 73 FR 61660, 61662 (Oct. 17,
2008). Thirteen commenters supported AHP refinancing authority for the
Banks but opposed limiting the authority to assistance under the Hope
for Homeowners Program. The commenters stated that the Hope for
Homeowners Program is too narrowly tailored to assist a large number of
households and has attracted little lender interest. The commenters
pointed out that there are other, successful Federal and State programs
targeted to assisting households refinance their unaffordable
mortgages, and that the Banks should be permitted to provide AHP
subsidy in conjunction with these programs. Twelve of the 13 commenters
specifically supported use of AHP subsidy with the FHASecure Program,
U.S. Department of Agriculture (USDA) programs, and State and local
housing finance agency programs. Ten commenters recommended that the
Banks be permitted to provide AHP subsidy in conjunction with targeted
refinancing or restructuring programs of Fannie Mae and Freddie Mac,
which had established the Streamlined Modification Program at the time
of the October amendments. Since then, the Administration has
superseded the Streamlined Modification Program with the Making Home
Affordable Refinance and Modification programs for mortgages owned or
guaranteed by the Enterprises. The commenters stated that each Bank
should have discretion and flexibility to determine which programs in
its district would make best use of AHP subsidy.
In the past year or so, a number of State housing finance agencies
established taxable bond programs to refinance households with
unaffordable mortgages. To help State and local housing finance
agencies address the need for refinancing households into affordable
mortgages, HERA authorized the temporary use of tax-exempt mortgage-
revenue bonds for refinancing at-risk households with subprime
mortgages. See HERA, Sec. 3021. Housing finance agencies are likely to
increase their refinancing activity in light of this new authority.
Most of the Banks work closely with the housing finance agencies in
their districts, some of which are also housing associates of the
Banks, and many Bank members are participating lenders in existing
housing finance agency mortgage-revenue bond programs for home
purchasers.
In addition, as part of the Administration's Homeowner
Affordability and Stability Plan, Fannie Mae and Freddie Mac are now
responsible for implementing the Making Home Affordable programs, which
include the Home Affordable Refinance program for first mortgage loans
owned or guaranteed by these agencies. Many Bank members are also
Fannie Mae and Freddie Mac approved seller/servicers that already
participate in Fannie Mae and Freddie Mac homeownership mortgage
programs.
Based on the comments and FHFA's review of Federal, State and local
refinancing programs, FHFA has determined that the Hope for Homeowners
Program has experienced limited usage due to statutory and regulatory
restrictions and market conditions, rendering the current AHP
refinancing authority of limited utility.\2\ To date, no Bank has
implemented an AHP refinancing program pursuant to the current AHP
regulatory refinancing authority. However, other Federal, State and
local targeted mortgage refinancing programs could be used in
conjunction with the AHP set-aside refinancing authority. Accordingly,
the interim final rule provides that loans are eligible for refinancing
with AHP subsidy if they are refinanced under an ``eligible targeted
refinancing program,'' which is defined in Sec. 1291.1 as a program
offered by the Department of Housing and Urban Development (HUD), USDA,
Fannie Mae, Freddie Mac, a State or local government, or a State or
local housing finance agency for the limited purpose of refinancing
first mortgages on primary residences for households that cannot afford
or are at risk of not being able to afford their monthly payments, as
defined by the program, in order to prevent foreclosure. The Hope for
Homeowners Program, as a HUD program, continues to be an eligible
program that may be used in conjunction with the AHP set-aside
refinancing program. Making the AHP subsidy available for State and
local housing finance agency refinancing programs is consistent with
the provision in HERA authorizing housing finance agencies to issue
Federal tax-exempt mortgage-revenue bonds through the end of 2010 in
order to refinance households that have subprime mortgages and are at
risk of financial hardship. Including additional eligible targeted
refinancing programs of other Federal, State and local agencies is also
consistent with the requirement in section 10(j)(9)(G) of the Bank Act
that the AHP regulation coordinate AHP activities with other Federal or
federally-subsidized affordable housing activities to the maximum
extent possible. See 12 U.S.C. 1430(j)(9)(G).
---------------------------------------------------------------------------
\2\ Recent changes to the Hope for Homeowners Program enacted by
Congress may expand its usage.
---------------------------------------------------------------------------
FHFA believes that there should be sufficient demand among these
eligible targeted refinancing programs to absorb the limited amount of
AHP subsidy that will be available for refinancing. Eligible targeted
refinancing programs do not include programs that permit households to
refinance for any reason, programs that provide the full amount of
subsidy or other financing concessions needed for a household to
achieve an affordable mortgage in accordance with the program's terms
(see discussion under the Eligible Uses of Subsidy section below), or
programs that involve the modification or restructuring of the loans,
rather than refinancing (i.e., paying off the original mortgage with
the proceeds of a new loan).
The interim final rule does not limit eligible targeted refinancing
programs to those in existence as of the effective date of the rule.
Federal, State and local agencies and housing authorities are likely to
add or replace refinancing programs during the period of AHP set-aside
refinancing authorization, based on refinancing needs and housing
market conditions, and FHFA does not wish to preclude the use of AHP
subsidy with such programs that are consistent with the purposes of
this rule. USDA is a primary source of Federal funding for owner-
occupied housing primarily in rural areas, and although it has not
announced a targeted refinancing program to date, it may do so in the
future. A number of State housing finance agencies are also expected to
implement targeted refinancing programs under their new tax-exempt
mortgage-revenue bond authority in the near future. The FHASecure
Program, which ended in December 2008 and assisted thousands of
households in troubled mortgages, may be revived, or a program of a
similar nature may be established.
Several commenters suggested that FHFA permit AHP subsidy to be
used in conjunction with private targeted refinancing programs
including not-for-profit programs. One commenter recommended limiting
the AHP refinancing set-aside program to assisting in the refinancing
of loans originated by Bank members. Three commenters also supported
the use of AHP subsidy to restructure or refinance mortgages originated
by members and purchased by the Banks for their Mortgage Partnership
Finance (MPF) and Mortgage Purchase Program (MPP) portfolios, as
consistent with efforts by the Federal Deposit Insurance Corporation to
promote lender
[[Page 38517]]
modifications. The interim final rule does not authorize the use of AHP
subsidy in conjunction with private refinancing programs, Bank-
sponsored targeted advances programs for refinancing, Bank member loan
refinancing programs such as the San Francisco Bank AHP refinancing
pilot program, or refinancing of MPF or MPP loans. Authorizing the use
of AHP subsidy in conjunction with such private refinancing sources
would require the establishment of minimum program standards for
eligible refinancing, including affordability requirements for the
refinanced loan, loan-to-value ratios and other lending terms. If AHP
subsidy were permitted to be used in conjunction with refinancing
member loans, the interim final rule would need to establish member
contribution requirements to ensure that the subsidy was not rewarding
members or the Banks for poor underwriting or investment decisions. The
comments on the April 2008 AHP refinancing proposal, which was based
largely on the San Francisco Bank AHP refinancing pilot program and
which included explicit program loan underwriting and member
contribution requirements, indicated that the circumstances of the
pilot program were not applicable outside of the San Francisco Bank
district.
B. Funding Allocation: Sec. 1291.2(b)(2)(i)
The AHP regulation permits a Bank, in its discretion, to set aside
annually, in the aggregate, a maximum of the greater of $4.5 million or
35% of its annual required AHP contribution to provide funds to members
participating in homeownership set-aside programs, including mortgage
refinancing programs established under Sec. 1291.6(f). See 12 CFR
1291.2(b)(2). Prior to the October amendments, the AHP regulation also
required that at least one-third of a Bank's aggregate annual set-aside
allocation to such programs be targeted for first-time homebuyers. The
October amendments changed this requirement by allowing a Bank to
allocate the maximum permissible homeownership set-aside allocation
entirely to a mortgage refinancing program established under Sec.
1291.6(f). See 12 CFR 1291.2(b)(2)(i)(A). The October amendments also
provided that if a Bank sets aside funds solely for homeownership set-
aside programs other than a mortgage refinancing program established
under Sec. 1291.6(f), at least one-third of the Bank's aggregate
annual set-aside allocation to such programs shall be to assist first-
time homebuyers. See 12 CFR 1291.2(b)(2)(i)(B).
All 27 commenters that opposed the October amendments opposed using
AHP subsidies for refinancing at the expense of assisting new home
purchases, especially at a time when there are fewer sources of
purchase assistance and the decline in home prices is making
homeownership possible for more low- or moderate-income households. Two
of these commenters expressed concern that refinancing often does not
prevent a household from losing its home due to factors other than the
terms of the original mortgage and, therefore, does not constitute a
better use of AHP subsidy than purchase assistance. Three commenters
stated that the regulation should retain the existing homeownership
set-aside requirement that a minimum one-third of the total set-aside
allocation be allocated for first-time homebuyers in order to ensure
that some minimum amount of AHP home purchase assistance is available.
FHFA finds these comments to be persuasive. In the current market
where many existing homeowners are unable to sell their homes and
purchase move-up homes because their mortgages exceed their homes'
value, efforts to promote new home purchases could contribute to
recovery and stabilization of the housing market. Ensuring that at
least some portion of AHP set-aside subsidies is available for home
purchase assistance is also consistent with HERA's establishment of
Federal funding for what is commonly referred to as the Neighborhood
Stabilization Program (NSP). See HERA, Sec. Sec. 2301 through 2305.
The NSP provides funding to State and local government programs for
purchasing, rehabilitating and renting or selling foreclosed properties
in order to mitigate the blight on communities resulting from the
housing crisis. A number of State housing finance agencies are using
NSP and mortgage-revenue bond funds to assist first-time homebuyers in
purchasing these foreclosed properties.
Consequently, the interim final rule reinstates in Sec.
1291.2(b)(2)(i) the requirement that at least one-third of a Bank's
total annual set-aside allocation shall be targeted to assist first-
time homebuyers, regardless of whether the set-aside allocation is
being used for homeownership or refinancing assistance, or both. Thus,
a Bank may use up to two-thirds of its annual set-aside allocation for
the AHP set-aside refinancing program. If a Bank wants to increase the
amount of AHP subsidy dollars available for refinancing assistance, the
Bank may increase its total AHP set-aside allocation, and thereby its
refinancing set-aside amount, by accelerating additional funding from
subsequent years' AHP contributions as permitted under Sec.
1291.2(b)(3) and discussed further below. In addition, the first-time
homebuyers provision requires that the Bank allocate one-third of the
Bank's set-aside funding for first-time homebuyers but does not require
the Bank to commit or use the amount of the allocation for first-time
homebuyers. If there is not sufficient demand for the first-time
homebuyers allocation and the Bank does not commit the entire
allocation to first-time homebuyers, then the Bank may ultimately carry
over the unused portion of the first-time homebuyers allocation to
other AHP set-aside uses, including refinancing.
C. Acceleration of Future AHP Contributions: Sec. 1291.2(b)(3)
Under the Bank Act, a Bank is required to contribute at least 10%
of its prior year's net earnings to its current year's AHP. See 12
U.S.C. 1430(j)(5)(C). Section 1291.2(b)(3) of the current AHP
regulation permits a Bank, in its discretion, to reallot (i.e.,
accelerate), from the subsequent year's required annual AHP
contribution for use in the current year, an amount up to the greater
of $2 million or 20% of its required annual AHP contribution for the
current year. See 12 CFR 1291.2(b)(3). Prior to amendment in 2007, the
AHP regulation based the percentage amount on the Bank's estimated
amount of its required AHP contribution for the subsequent year, rather
than on its required contribution for the current year.
The current housing and financial crises have created unprecedented
financial conditions not contemplated by the AHP regulation. Bank
earnings declined in 2008, and the Banks' earnings potential in the
near future is uncertain and more unpredictable than in previous years
because of market instability. In this environment, a Bank that
accelerates AHP funds from the subsequent year's required contribution
may find that the subsequent year's actual required AHP contribution is
less than the amount accelerated. At the same time, a Bank may have no
required current year AHP contribution on which to base a percentage
calculation, or even expectation of a required subsequent year AHP
contribution. In 2009, two Banks with no 2008 earnings have no required
AHP contributions, while several other Banks have very small required
AHP contributions. The ability to accelerate funds from future required
AHP contributions would enable these Banks to make some level of AHP
funding available in 2009.
[[Page 38518]]
Consequently, the interim final rule amends Sec. 1291.2(b)(3) to
increase the maximum amount that a Bank may accelerate in any one year
to the greater of $5 million (an increase from $2 million) or 20% of
the Bank's required annual AHP contribution for the current year. In
addition, because of the uncertainty of future earnings and the
possibility that a Bank may find itself in the same situation of having
little or no required AHP contribution in the subsequent year, the
interim final rule allows a Bank to credit the amount of the
accelerated contribution against required AHP contributions over one or
more of the subsequent five years. This is consistent with FHFA's
policy for treatment of excess AHP annual contributions, under which a
Bank that restates its earnings with the result that its annual AHP
contribution exceeded the statutorily required amount, may credit the
excess contributions against required AHP contributions in future
periods. See Advisory Bulletin 06-01, ``AHP and REFCORP Contributions''
(Jan. 25, 2006). FHFA specifically requests comment on the revised
acceleration provision in the interim final rule, including whether it
provides sufficient flexibility to enable the Banks to maintain
adequate AHP contributions during the current housing market and
economic crisis.
As a technical matter, FHFA has found that use of the term
``allot'' in the current AHP regulation to describe the acceleration
process has been confused with the process of allocating AHP funding
between the homeownership set-aside and competitive application
programs, and may also be confused with the process of allocating AHP
set-aside funds between the homeownership set-aside and refinancing
set-aside programs. Accordingly, the interim final rule uses the term
``acceleration,'' which was used prior to 2007, in lieu of the term
``allot'' to describe the process of using future required AHP
contributions in the current year.
D. General AHP Refinancing Program Authority; Retention Agreements:
Sec. 1291.6(f)(1)
Section 1291.6(f)(1) authorizes a Bank, in its discretion, to
establish a homeownership set-aside program for the use of AHP direct
subsidy by its members to assist in the refinancing of a household's
mortgage loan that meets the requirements in Sec. 1291.6, except for
certain specified provisions, as well as with the requirements of part
1291. The October amendments exempted the AHP set-aside refinancing
program from the provisions in Sec. 1291.6 governing five-year
retention agreements on AHP-assisted household's units. See 12 CFR
1291.6(c)(5). Thus, an AHP-assisted household under the refinancing
program would not repay AHP subsidy in the event of a subsequent sale
or refinancing of the unit during the five-year retention period. See
12 CFR 1291.6(c)(5) and 1291.9(a)(7). This exemption from the AHP
retention requirements was considered in light of the equity and
appreciation sharing requirements of the Hope for Homeowners Program.
See HERA, Sec. 1402(a) (National Housing Act sec. 257(e)(4)(B), and
(k)); 73 FR 61660, 61663 (Oct. 17, 2008).
Three commenters recommended that the Banks be able to require AHP
retention agreements for repayment of the AHP subsidy in the event of a
sale or refinancing during the five-year retention period. Four
commenters stated that there could be cases where households receive
AHP subsidy but subsequently fail to qualify under the Hope for
Homeowners Program because they fail to make the first payment on their
newly refinanced loan, and the Bank could not recover the AHP subsidy
in such cases if the household subsequently sold or refinanced the
home.
Under the Banks' current AHP competitive application and home
purchase set-aside programs, AHP retention agreements, which may be
subordinate liens or other forms of legally enforceable agreements, are
used in conjunction with all types of mortgage financing provided by
all Federal, State and local agencies, including other FHA programs.
Because the AHP regulation requires that AHP subsidy only be repaid
from any net gain from the sale or refinancing, the AHP repayment
requirement should not interfere with any appreciation or equity
sharing requirements of the eligible targeted refinancing programs.
Requiring AHP retention agreements for the AHP set-aside refinancing
program would also maintain consistency between the refinancing program
and all other AHP programs, which are subject to the retention
agreement requirement. Accordingly, the interim final rule requires
that a household assisted under the AHP set-aside refinancing program
be subject to an AHP five-year retention agreement in accordance with
Sec. 1291.6(c)(5).
E. Eligible Loans: Sec. 1291.6(f)(2)
As discussed above, the interim final rule amends Sec.
1291.6(f)(2) to make loans refinanced under other eligible targeted
refinancing programs in addition to the Hope for Homeowners Program
eligible for AHP refinancing subsidy. To be eligible for AHP
refinancing assistance, a household must meet the terms of refinancing
established by the eligible targeted refinancing program, such as the
mortgage debt-to-income ratio, loan-to-value ratio, payment history,
type of original loan (e.g., subprime or nontraditional), and reasons
for delinquency. In addition, pursuant to HERA, the household must have
an income at or below 80% of the area median income (AMI), and the
household's loan being refinanced must be a first mortgage on an owner-
occupied unit that is the household's primary residence. Two commenters
recommended that FHFA establish parameters or details for eligibility
and underwriting standards under which other programs' requirements
would fall. In the October amendments, FHFA noted that it was not
necessary to establish underwriting and other household and loan
eligibility requirements for the AHP set-aside refinancing program,
because the requirements and standards of the Hope for Homeowners
Program provide adequate protections to borrowers whose loans will be
refinanced and protect the integrity of the AHP. See 73 FR at 61662.
The requirements and standards of the other eligible targeted
refinancing programs included in the interim final rule similarly
protect borrowers and the integrity of the AHP. Reliance on the
requirements and standards of other lenders is also consistent with the
AHP home purchase set-aside program, which does not establish specific
requirements for underwriting a household's mortgage, leaving the
establishment of such requirements to the individual lender. Five
commenters supported this approach, and several commenters stated that
FHFA should not limit eligible loans to subprime and nontraditional
mortgages, or require that a household be delinquent in order to
receive assistance.
Consistent with the October amendments, for purposes of determining
whether a household is at or below 80% of AMI under the AHP set-aside
refinancing program, the interim final rule does not establish specific
requirements for how a Bank should calculate a household's income.
Thus, a Bank may make its own calculation of total household income, or
may use the eligible targeted refinancing program's calculation of
total household income for purposes of determining whether a household
meets the 80% of AMI income limit. This is also consistent with the AHP
home
[[Page 38519]]
purchase set-aside program, under which each Bank establishes
requirements for how to calculate household income, which may include
relying on the member's calculation of household income determined in
the process of underwriting the mortgage. The Hope for Homeowners
Program and the Home Affordable Refinance program do not require
households to meet certain income limits in order to be eligible for
the program, but do calculate total household income for purposes of
determining loan underwriting ratios. State housing finance agency
refinancing programs have specific household income limits under their
mortgage-revenue bond programs (generally 100% of AMI), and calculate
total household income for purposes of determining compliance with
those income limits as well as for purposes of determining underwriting
ratios. The housing finance agency refinancing programs vary in how
they calculate total household income with regard to the income time
period (past income or current income) and the income sources (only the
mortgage borrowers or all adult household members) used. Ten commenters
recommended that the Banks rely on the calculation of total household
income determined by other programs providing the refinancing
assistance where such programs calculate income.
Section 1291.6(c)(2)(i) of the existing AHP regulation requires a
Bank or member to determine a household's income eligibility at the
time the member enrolls the household in the AHP homeownership set-
aside program. Consistent with this requirement, the Bank or member
must determine that the household is at or below 80% of AMI at the time
of enrollment in the AHP set-aside refinancing program. However, a Bank
or member may use the total household income provided by the eligible
targeted refinancing program regardless of when that program calculated
the amount.
F. Eligible Uses of AHP Subsidy: Sec. 1291.6(f)(3)
1. Reduction in Outstanding Loan Principal Balance
The October amendments provided that AHP subsidy may pay to reduce
the outstanding principal balance of the household's loan below the
maximum loan-to-value ratio required under the Hope for Homeowners
Program in order for the household to also meet that program's maximum
debt-to-income ratio. 12 CFR 1291.6(f)(3)(i).\\ However, there may also
be cases where the household meets the program's maximum mortgage debt-
to-income ratio but the outstanding principal balance of the loan
exceeds the program's maximum loan-to-value ratio. To take into account
such cases, the interim final rule amends the AHP regulation to permit
use of the AHP subsidy to reduce the outstanding loan principal balance
to the eligible targeted refinancing program's maximum loan-to-value
ratio even if this results in the household having a mortgage debt-to-
income ratio below the program's maximum mortgage debt-to-income ratio.
The maximum amount of AHP subsidy that may be provided for the
refinancing is the least amount that results in the loan meeting both
the program's maximum loan-to-value ratio and maximum mortgage debt-to-
income ratio. Consequently, there is no need for any AHP subsidy where
a refinancing program already provides concessions and subsidy
sufficient for a household to achieve an affordable mortgage in
accordance with the program's terms. For example, the Fannie Mae and
Freddie Mac Home Affordable Refinance program, with certain exceptions,
does not require maximum mortgage debt-to-income ratios, so, generally,
the AHP subsidy could be used only to reduce loan principal to achieve
that program's maximum loan-to-value ratio. The interim final rule also
clarifies that the applicable program underwriting debt-to-income ratio
is the mortgage debt-to-income ratio.
2. Loan Closing Costs
The October amendments also authorized a member to use the AHP
subsidy to pay only FHA-approved loan closing costs in connection with
the refinancing of an eligible loan under the Hope for Homeowners
Program. 12 CFR 1291.6(f)(3)(ii).\\ One commenter opposed restricting
the use of AHP subsidy for loan closing costs that are FHA-approved,
noting that this is inconsistent with the provision in the AHP
regulation that does not specify that AHP subsidy may pay only for FHA-
approved closing costs in connection with the purchase of a home under
the homeownership set-aside program or under the competitive
application program. See 12 CFR 1291.6(c)(4) and (8). To maintain
consistency between the AHP homeownership and refinancing set-aside
programs, the interim final rule removes the language restricting
eligible closing costs to FHA-approved closing costs.
Two commenters requested clarification that AHP subsidy may be used
to pay FHA up-front insurance premiums under the AHP set-aside
refinancing program. Because they are required for the mortgage
financing, FHA up-front insurance premiums are eligible costs under the
AHP homeownership set-aside and competitive application programs.
Consequently, AHP subsidy may pay for such insurance premiums under the
AHP set-aside refinancing program.
The October amendments excluded the current requirement of the AHP
homeownership set-aside program that the rate of interest, points, fees
and any other charges for all loans made in conjunction with the AHP
subsidy cannot exceed a reasonable market rate of interest, points,
fees and other charges for loans of similar maturity, terms and risk.
12 CFR 1291.6(c)(7). As part of the goal to achieve consistency, where
applicable, between the requirements of the AHP homeownership set-aside
and the refinancing set-aside programs, the interim final rule applies
Sec. 1291.6(c)(7) to the refinancing set-aside program.
G. Eligible Lender Participants: Sec. 1291.6(f)(4)
The October amendments stated that a Bank may provide AHP direct
subsidy to members that are FHA-approved lenders for the purpose of
refinancing an eligible loan with an FHA-insured loan by the member
under the Hope for Homeowners Program. The October amendments also
stated that a Bank may, in its discretion, provide the AHP subsidy to
members that will provide the subsidy to FHA-approved lenders that are
not members of the Bank for the purpose of refinancing an eligible loan
if, after consulting with the Bank's Advisory Council, the Bank
determines that such action would be in the best interests of borrowers
in the Bank's district. 12 CFR 1291.6(f)(4). All 13 commenters
supporting refinancing, opposed limiting participants in the AHP set-
aside refinancing program to FHA-approved lenders, noting that
relatively few Bank members are FHA-approved lenders and many Bank
members participate in housing finance agency mortgage-revenue bond
programs and are Fannie Mae and Freddie Mac approved seller/servicers.
Several commenters also stated that assistance should be available to
households based on their qualifications, regardless of whether the
member providing the AHP subsidy is FHA-approved. In addition, the
requirement that members be FHA-approved is too restrictive since the
interim final rule permits the use of the AHP subsidy with other
eligible targeted refinancing programs in addition to the FHA's Hope
for Homeowners Program.
[[Page 38520]]
Accordingly, the interim final rule eliminates the FHA-approved lender
requirement.
Under the current AHP home purchase set-aside program, the Banks
have discretionary authority to decide whether to permit a household to
obtain a purchase-money mortgage from any lender or to require the
household to obtain its mortgage from the member providing the AHP
assistance.\3\ Consistent with this authority, Sec. 1291.6(f)(4) of
the interim final rule permits a Bank, in its discretion, to require a
household to obtain its refinancing loan through a member participating
in the eligible targeted refinancing program that is providing the new
mortgage to the household. The interim final rule also removes the
requirement that a Bank must consult with its Advisory Council before
determining that a household may use a lender other than a member of
the Bank. This requirement is not specified in Sec. 1291.6(c)(2)(iii)
with respect to the adoption of other optional household eligibility
requirements under the home purchase set-aside program and, in any
case, is redundant with the general regulatory requirement that the
Banks consult with their Advisory Councils in adopting their AHP
Implementation Plans. 12 CFR 1291.3(a) and (b).
---------------------------------------------------------------------------
\3\ Requiring a household to obtain a new mortgage through the
member is one of several types of optional household eligibility
requirements that a Bank may establish under Sec.
1291.6(c)(2)(iii).
---------------------------------------------------------------------------
H. Household Counseling: Sec. 1291.6(f)(5)
Section 1291.6(c)(2)(iii) of the current AHP regulation permits a
Bank, in its discretion, to require homebuyers who are not first-time
homebuyers to obtain homeownership counseling under the AHP home
purchase set-aside program. See 12 CFR 1291.6(c)(2)(iii). The October
amendments did not make the discretionary authority to adopt additional
household eligibility requirements, such as counseling, applicable to
the AHP set-aside refinancing program. Several commenters objected to
the exclusion of counseling as an optional household eligibility
requirement, noting the importance of counseling for households with
troubled loans. The 2008 Consolidated Appropriations Bill recognized
the importance of homeowner counseling by establishing and funding the
National Foreclosure Mitigation Counseling (NFMC) program to assist
households seeking refinancing or restructuring of their mortgages in
order to avoid foreclosure. See Public Law 110-161. The NFMC program,
under the auspices of NeighborWorks America, is comprised of an array
of counseling groups including NeighborWorks' partner organizations,
the Homeownership Preservation Foundation, HUD's HOPE NOW counseling
coalition, the National Urban League, USA Cares (military assistance),
and State and local housing finance agency counseling programs. Most,
if not all, of the State housing finance agency refinancing programs
require households to be reviewed and vetted by these counseling
organizations before applying to their programs. The Home Affordable
Refinance program encourages households to seek counseling assistance
to determine if they qualify for the Fannie Mae/Freddie Mac refinance
program. The NFMC program is playing an important role in counseling
households to help them determine their options and qualifications for
refinancing assistance under these Fannie Mae, Freddie Mac and State
housing finance agency eligible targeted refinancing programs.
FHFA agrees that counseling is an important component of successful
refinancing, and should be provided by competent and reputable
counseling programs, such as the NFMC program or other counseling
programs used by State or local government or housing finance agencies
that may not be part of the NFMC program. These counseling programs can
also serve as an efficient and effective means of identifying for
households the assistance programs for which they may qualify.
Accordingly, Sec. 1291.6(f)(5) of the interim final rule requires that
a household seeking AHP assistance must obtain counseling for
foreclosure mitigation and qualification for refinancing by an eligible
targeted refinancing program, through the NFMC program or other
counseling program used by a State or local government or housing
finance agency. Bank members would refer interested households to an
NFMC program participant, or to a State or local government or housing
finance agency counseling program, which would determine whether the
households are eligible to have their loans refinanced through an
eligible targeted refinancing program. Households determined by a
counseling organization to qualify for refinancing under an eligible
targeted refinancing program would then be referred to participating
Bank members, who would enroll the households in the AHP set-aside
refinancing program upon determination of their AHP income eligibility.
Under the interim final rule, the NFMC program and other
permissible counseling organizations would thereby act as a gateway for
households seeking refinancing assistance. The interim final rule does
not establish a requirement for the type of educational counseling that
may take a period of time that could delay the closing on the
refinancing. Rather, the interim final rule requires the household to
go to an NFMC program principally to determine if its loan can be
refinanced by one of the eligible targeted refinancing programs and
whether AHP subsidy will be needed in order for the household to obtain
the refinancing. Although the household will benefit from accompanying
foreclosure mitigation and credit counseling, the primary purpose of
the interim final rule requirement is to ensure that the household
receives counseling on a variety of available refinancing options that
are suitable for that household. For example, a lender, such as an FHA
lender or Fannie Mae/Freddie Mac seller/servicer, may be able to
determine if a household is eligible for a specific program involving
that lender, but is not likely to know if the household has other
options if it is not eligible for the lender's specific program.
Consequently, under the interim final rule, when a household contacts a
member directly, the member would refer the household to the NFMC
program or other State or local government or housing finance agency
counseling program, to determine the household's eligibility before
enrolling the household in the AHP refinancing program and committing
AHP subsidy.
All NFMC program counseling is free to households; therefore, the
interim final rule does not authorize the use of AHP subsidy to pay for
such counseling costs. FHFA specifically requests comment on whether
households should be required to obtain counseling for foreclosure
mitigation and qualification for refinancing by an eligible targeted
refinancing program prior to enrollment in the AHP set-aside
refinancing program.
I. Sunset Date: Sec. 1291.6(f)(6)
The October amendments included a provision terminating the Banks'
authority to commit AHP subsidy for refinancing after July 30, 2010,
which is the expiration date of the two-year period in section 1218 of
HERA. 12 CFR 1291.6(f)(5). FHFA specifically requested comment on
whether the sunset date should be extended to be co-extensive with the
sunset date of the Hope for Homeowners Program on September 30, 2011.
See 73 FR at 61663. Two commenters supported an extension of this
sunset date to coincide with the sunset date for the Hope for
Homeowners Program. See HERA,
[[Page 38521]]
Sec. 1402(a) (National Housing Act sec. 257(r)). One commenter
recommended that FHFA consider adopting the sunset dates of other
refinancing programs. The interim final rule retains the sunset date of
July 30, 2010 in redesignated Sec. 1291.6(f)(6). FHFA may reconsider
an extension of the sunset date based on program performance as the
sunset date approaches.
J. Competitive Application Program; Second District Priority Scoring
Criterion: Sec. 1291.5(d)(5)(vii)
Under the Banks' AHP competitive application program, the Second
District Priority is the only one of nine scoring criteria in the AHP
regulation for which a Bank may select a housing need that is not
prescribed in the regulation. Unlike the First District Priority
scoring criterion, the Second District Priority permits a Bank to
establish only one housing need in its district. 12 CFR
1291.5(d)(5)(vi), (d)(5)(vii). The current housing crisis has led to
acute housing needs that the AHP regulation does not contemplate. These
needs reflect a number of interconnected factors related to
foreclosures and declining home values, which adversely affect all
participants in the housing industry. The hardest hit areas must
contend with blighted properties and declining communities where there
is a critical need for sustainable and affordable homeownership and
assistance to rental sponsors to absorb properties being sold to avoid
foreclosure or that are in foreclosure. At the same time, there is an
increased demand for affordable rental housing in the wake of
households losing their homes, compounded by a significant decline in
investors for low-income housing tax credits and housing finance agency
bonds for rental production.
FHFA believes that these housing market conditions have generated
an urgent need for more flexibility in the Banks' capacity to respond
under the AHP. The current scoring system in the AHP regulation can
address foreclosed properties only marginally within the context of
other, more general housing needs. Permitting the Banks to establish
one or more housing needs under the Second District Priority scoring
criterion would allow the AHP competitive application program to
complement the efforts of the AHP refinancing set-aside and other
targeted refinancing programs for foreclosure prevention and HERA's NSP
for the disposition of foreclosed properties. Accordingly, the interim
final rule amends Sec. 1291.5(d)(5)(vii) of the AHP regulation to
permit a Bank to establish one or more housing needs in the Bank's
district under the Second District Priority scoring criterion.
FHFA believes that the severity of the housing market and the
urgent need for housing assistance create exigent circumstances for
amending the Second District Priority scoring criterion through an
interim final rule. An immediate change is also necessary to allow the
Banks and their Advisory Councils the opportunity to make any scoring
revisions in this regard to their AHP Implementation Plans that would
be applicable to their 2009 AHP competitive application funding rounds.
FHFA specifically requests comment on whether this scoring change
benefits the AHP competitive application program.
IV. Notice and Public Participation
FHFA for good cause finds that the notice and comment procedure
required by the Administrative Procedure Act is impracticable or
contrary to the public interest in this instance. See 5 U.S.C.
553(b)(B). Section 1218 of HERA requires that FHFA's regulations
authorize the use of AHP set-aside subsidy for mortgage refinancing for
a two-year period commencing on July 30, 2008. Issuance of an interim
final rule will enable the Banks to expedite implementation of AHP set-
aside refinancing programs pursuant to Sec. 1218. In addition, as
discussed above, exigent circumstances exist for amending the Second
District Priority scoring criterion through an interim final rule. The
delay that would ensue during a proposed notice and comment rulemaking
would significantly curtail the available period of time for
implementation and operation by the Banks of AHP mortgage refinancing
programs and revised Second District Priorities. In view of the number
and nature of the changes being made by this rule, FHFA is requesting
comments and will consider all comments received on or before October
5, 2009 in promulgating a final rule.
V. Effective Date
For the reasons stated in part IV. above, FHFA for good cause finds
that the interim final rule should become effective on August 4, 2009.
See 5 U.S.C. 553(d)(3).
VI. Paperwork Reduction Act
The information collection contained in the current AHP regulation,
entitled ``Affordable Housing Program (AHP),'' has been assigned
control number 3069-0006 by the Office of Management and Budget (OMB).
The interim final rule does not substantively or materially modify the
approved information collection. Consequently, FHFA has not submitted
any information to OMB for review under the Paperwork Reduction Act of
1995. See 44 U.S.C. 3501 et seq.
VII. Regulatory Flexibility Act
FHFA is issuing this regulation in the form of an interim final
rule and not as a proposed rule. Therefore, the provisions of the
Regulatory Flexibility Act do not apply. See 5 U.S.C. 601(2) and
603(a).
List of Subjects in 12 CFR Part 1291
Community development, Credit, Federal home loan banks, Housing,
Reporting and recordkeeping requirements.
0
For the reasons stated in the preamble, FHFA hereby amends chapter XII
of title 12 of the Code of Federal Regulations as follows:
PART 1291--FEDERAL HOME LOAN BANKS' AFFORDABLE HOUSING PROGRAM
0
1. The authority citation for part 1291 continues to read as follows:
Authority: 12 U.S.C. 1430(j).
0
2. In Sec. 1291.1, add the following definition in alphabetical order:
Sec. 1291.1 Definitions
* * * * *
Eligible targeted refinancing program means a program offered by
the U.S. Department of Housing and Urban Development (HUD), the U.S.
Department of Agriculture (USDA), the Federal National Mortgage
Association (Fannie Mae), the Federal Home Loan Mortgage Corporation
(Freddie Mac), a State or local government, or a State or local housing
finance agency for the limited purpose of refinancing (i.e., paying
off) first mortgages on primary residences for households that cannot
afford or are at risk of not being able to afford their monthly
payments, as defined by the program, in order to prevent foreclosure.
* * * * *
0
3. Amend Sec. 1291.2(b)(2)(i) and (b)(3) to read as follows:
Sec. 1291.2 Required annual AHP contributions; allocation of
contributions.
* * * * *
(b) * * *
(2) Homeownership set-aside programs.--(i) Allocation amount;
first-time homebuyers. A Bank, in its discretion, may set aside
annually, in the aggregate, up to the greater of $4.5 million or 35% of
the Bank's annual required AHP contribution to provide funds to members
participating in homeownership set-aside programs,
[[Page 38522]]
including a mortgage refinancing set-aside program established under
paragraph (f) of this section, provided that at least one-third of the
Bank's aggregate annual set-aside allocation to such programs shall be
to assist first-time homebuyers, pursuant to the requirements of this
part.
* * * * *
(3) Additional funding. A Bank may accelerate to its current year's
program from future annual required AHP contributions an amount up to
the greater of $5 million or 20% of its annual required AHP
contribution for the current year. The Bank may credit the amount of
the accelerated contribution against required AHP contributions under
this part 1291 over one or more of the subsequent five years.
0
4. Amend Sec. 1291.5(d)(5)(vii) to read as follows:
Sec. 1291.5 Competitive application program.
* * * * *
(d) * * *
(5) * * *
(vii) Second District priority: Defined housing needs in the
District. The satisfaction of one or more housing needs in the Bank's
District, as defined by the Bank in its AHP Implementation Plan. The
Bank may, but is not required to, use one of the criteria listed in
paragraph (d)(5)(vi) of this section, provided it is different from the
criterion or criteria adopted by the Bank under such paragraph.
* * * * *
0
5. Amend Sec. 1291.6(f) to read as follows:
Sec. 1291.6 Homeownership set-aside programs.
* * * * *
(f) Mortgage refinancing program.-- (1) General. A Bank may
establish a homeownership set-aside program for the use of AHP direct
subsidy by its members to assist in the refinancing of a household's
mortgage loan, provided such program meets the requirements of this
paragraph (f) and otherwise meets the requirements of regulations in
this part. The provisions of paragraphs (c)(2)(ii), (c)(2)(iii),
(c)(4), (c)(6) and (c)(8) of this section, shall not apply to such
program.
(2) Eligible loans. A loan is eligible to be refinanced with AHP
direct subsidy if the loan is secured by a first mortgage on an owner-
occupied unit that is the primary residence of the household, and the
loan is refinanced under an eligible targeted refinancing program.
(3) Eligible uses of AHP direct subsidy. Members may provide the
AHP direct subsidy to:
(i) Reduce the outstanding principal balance of the loan by no more
than the amount necessary for the new loan to qualify under both the
maximum loan-to-value ratio and the maximum household mortgage debt-to-
income ratio required by the eligible targeted refinancing program; or
(ii) Pay loan closing costs.
(4) Eligible lender participants. A Bank, in its discretion, may
require that a household obtain its refinancing loan through a member
participating in an eligible targeted refinancing program.
(5) Counseling. Prior to enrollment in an AHP set-aside refinancing
program established under this paragraph (f), a household must obtain
counseling for foreclosure mitigation and for qualification for
refinancing by an eligible targeted refinancing program through the
National Foreclosure Mitigation Counseling program or other counseling
program used by a State or local government or housing finance agency.
(6) Sunset.--(i) This paragraph (f) shall expire on July 30, 2010,
and a Bank may not commit AHP subsidy to households under its AHP set-
aside refinancing program after such date.
(ii) A lender may use the AHP subsidy committed by such date for a
loan submitted to the eligible targeted refinancing program for
approval on or before July 30, 2010 that is approved for refinancing
under such program after such date.
Dated: July 28, 2009.
James B. Lockhart, III,
Director, Federal Housing Finance Agency.
[FR Doc. E9-18484 Filed 8-3-09; 8:45 am]
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