Many banks, especially smaller banks, do not have the resources or staffing to apply for funding through the Federal Home Loan Banks’ Affordable Housing Program, so efforts to streamline the process are welcome, the American Bankers Association said today in a letter to the Federal Housing Finance Agency. ABA offered recommendations for how to simplify the AHP application process “with a goal of increasing participation from a larger universe of bankers.”
FHFA in June issued a request for input on opportunities to improve the FHLBs’ application process for AHP funding. In its letter, ABA said there is broad consensus among its member banks that aligning the program with the requirements of other funding sources is desirable. “For example, the FHLBs should be encouraged to adopt underwriting guidelines similar to those used by member banks, which encourage positive cash flow, strong debt to coverage ratios and sufficient capital reserves,” the association said.
Another recommendation concerned the need for training resources from the FHLBs on the application process. “While simplification of the application process is a desirable goal, even with simplification, additional training resources would be welcome and would benefit members of all sizes,” ABA said. “Training resources would be especially helpful to smaller banks that have smaller staffs and typically must rely on outside consultants or forgo applying.”
ABA offered other recommendations in response to specific questions posed by FHFA in its request for input. For example, the agency asked what single change would most improve the application process. “[T]he most important change would be to discontinue the requirements for banks to provide unconditional financing commitments,” ABA answered. “This requirement ignores the reality that prior to closing, a project may not be economically viable if the application for AHP funding is unsuccessful.”
