Building Stronger Communities

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Habitat for Humanity of Ohio State ConferenceOctober 30, 2015

Congressionally chartered in 1932, privately owned wholesale bank. Government Sponsored Enterprise (GSE) Not a government agency; no Federal appropriations

Owned by “Member Financial Institutions” Cooperative Structure; Members are both owners

and customers.

General FHLB Profile

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FHLB Mission

Provide liquidity and term finance to our Members for housing and economic development through:

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Housing and Community Investment(HCI)

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Housing and Community Investment Programs

Affordable Housing Program (AHP) Welcome Home Program (WHP) Carol M. Peterson Housing Fund (CMPHF) Disaster Reconstruction Program (DRP) Community Investment Program (CIP) Economic Development Program (EDP) Zero Interest Fund (ZIF)

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Affordable Housing Program

Provides direct grants to support development of housing for households with income at or below 80% of the area median income (AMI). Federally Regulated AHP Implementation Plan sets forth policies for administering

the federal regulations

Competitive application process; projects are evaluated based on: Eligibility and Threshold Requirements Financial Feasibility Scoring Criteria

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Source of AHP

10% of FHLB Net Earnings Private dollars

25 years of providing AHP Subsidy

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10 percent

Creates

AHP Subsidy

Welcome Home

Competitive

AHP Participants

Members are the applicants Commercial Banks, Savings Institutions, Thrifts Credit Unions Community Development Financial Institutions Insurance Companies

‾ Only a Member financial institution of the FHLB Cincinnati can submit an AHP application.

Sponsors are housing providers & developers Non-profit organizations For-profit entities Government Agencies

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AHP Eligible Uses Ownership or Rental Housing Costs directly related to housing development

New Construction Rehabilitation Acquisition/Purchase of land or buildings Any of combination of the above

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AHP Threshold Requirements Enough funds to cover all project costs. Demand for the housing at the income and occupancy

targets, and rent or mortgage expected. Appropriate for the population being served. Marketed to the target population and comply with all

Fair Housing and Accessibility Laws. Sponsor has experience/capacity to complete the

project. Sponsor has site control/acquisition plan.

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AHP Threshold Requirements Development costs are reasonable. All units will be occupied by households with incomes

at or below 80% AMI. Units will be affordable to targeted households (no more

than 31% of buyer’s monthly income for ownership projects).

Project will begin incurring AHP eligible expenses within 12 months and be complete within 36 months.

If project requires new permanent debt, the Member must provide the permanent loan.

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AHP Feasibility Guidelines

Total Project Cost (TPC) per unit <=$185,000 Total Project Cost for Owner-occupied Rehab

<=$50,000

Total Contractor Costs (as percent of hard costs) <= 14%

Developer Fee (as percent of TDC) <= 15% Owner-occupied Rehab or Acquisition Only <= 10% or <= 5%

AHP Subsidy per Unit <= $50,000 AHP Subsidy per Owner-occupied Rehab Unit <= $15,000

Total AHP subsidy lesser of $1,000,000 or 75% of TPC

Identifies all development costs and funding sources for projects that are Habitat-like.

Enter permanent funding sources directly onto the attachment, not within the body of the application.

Present value of Sponsor-provided mortgage(s) populates from data entry within the body of the AHP application, so complete Attachment D after the “Background Information” section.

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Attachment D: Sources and Uses of Funds for Habitats

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Attachment D

Click often to save progress

Identifies amount of AHP subsidy for which project is eligible

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Data entered onto financial attachments in the AHP online application will populate a feasibility analysis report for each project.

Consult your project’s report to see if it meets the feasibility guidelines.

Justify any alerts that appear in red on the right or bottom (or top of the second page) of the report.

Alerts that are not adequately justified will likely result in denial of AHP funds to the project.

AHP Feasibility Analysis Reports

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Ownership Feasibility Analysis

Justify this alert!!!

AHP Scoring Criteria(100 Point System)

FHLB Cincinnati Priorities Member Participation (5)

First-time Homebuyers (5) Community Involvement (3) Projects in OH, KY& TN (5)

Special Needs Housing (10) Housing in Appalachia (3) Funding Commitments (4) AHP Leveraging (5)

All FHLBs Donated Property (5) Sponsorship (5) Empowerment (5) AHP Subsidy per Unit (10) Income Targeting (20) Homeless Housing (5) Community Stability (10)

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Caution: “Trying to Score High” Please do not commit to serving persons with special

needs, homeless households, or very low-income persons JUST to receive a high score. Should the project request a modification to either increase the

income targeting or decrease the number of special needs or homeless units, the FHLB will only approve the request if there is good cause and the project would continue to score high enough to have been approved in the offering in which it was originally approved.

If the project cannot be modified, all AHP subsidy will be withdrawn or recaptured.

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AHP Steps for Sponsors

Sponsor plans the project, develop a written plan: Identify location (site control or acquisition plan); Project type (ownership, owner-occupied rehab or acquisition only); Income and occupancy targets (special needs/elderly/homeless); Size and number of housing units (floor plan); Development costs (cost estimates); Sources of funds for development (including AHP subsidy); Mortgage affordability for targeted households; and, Identify and meet with a Member to present the project

plan.

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AHP Steps for Members Meets with Sponsor to review project concept; and, If Member decides to partner with Sponsor, then:

Determines what type of contributions or concessions will be made to the project;

If a loan is needed, underwrite the Sponsor and project or homebuyers;

Sets deadline to receive the online application from Sponsor in order to gain necessary approvals prior to submission deadline.

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AHP Application Process Sponsor registers online for a Sponsor ID and

Password, completes the online application and submits the application to the Member electronically.

Member reviews the application, completes the Member information, and submits the application electronically to the FHLB Cincinnati.

Sponsor and Member submit Required Documents to support the online application. AHP application is not complete until the Required

Documents are received by the FHLB Cincinnati.

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AHP Required Documents

AHP online application identifies documents required based on answers to certain questions.

AHP online application sends an email to the Sponsor and Member listing the Required Documents that must be submitted to complete the application.

Examples: Member & Sponsor Certifications (FHLB forms signed by

authorized representatives, dated in the current year)

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Required Documents – Exhibits D3Sponsor Financial/Predevelopment Sponsor commitment to provide cash contribution

of at least $500 or provide predevelopment activities to the project.

Cash contribution must be specified on Attachment D: Sources and Uses of Funds as “Other Grants.”

Predevelopment activities must described in detail.

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Common Errors Contribution amount does not appear on Attachment D or

the stated amount in the Sponsor commitment letter does not match the figure shown on Attachment D.

Sponsor did not demonstrate “significant” predevelopment activities would be performed.

Letter is not signed by authorized signer. Letter is not dated in current year. Letter does not reference project name.

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Required Documents – Exhibits D3Sponsor Financial/Predevelopment

Provision of Homebuyer Counseling, Credit Counseling/Budgeting or Financial Literacy (E1/E2); Employment and Skills Training (E3); Education Services (E4); and Daycare Services (E6)

Provide a brochure or other published material demonstrating the Sponsor’s provision of service; OR

Provide a MOU between the Sponsor and a third party, identifying the service that will be provided and a brochure from the service provider.

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Required Documents – Exhibit E’sEmpowerment

Common Errors MOU is with a referral service and not the service

provider. MOU is filled out incorrectly and/or is not signed by all

parties. A brochure is not provided or does not adequately address

service to be provided. Service is not appropriate for the population being served. Service will not be provided in proximity to the project

location.

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Required Documents – Exhibit E’sEmpowerment

Ownership projects must provide an acquisition plan that contains all of the following information: Description of how homebuyers will be selected and

qualified; Statement on how special needs and homeless

households will be identified; Number of homes that will be rehabbed/constructed and

the county locations; Description of how the acquisition costs shown on

Attachment D was calculated.

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Required Documents – Exhibit H5Site Control – Ownership Projects

Common Errors Plan does not describe how families meeting special

needs or homeless targeting commitments will be identified.

Plan does not explain how acquisition costs were determined.

Costs, number of homes, or other targeting commitments do not match information provided in the online application.

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Required Documents – Exhibit H5Site Control – Ownership Projects

Common Application Errors

FHLB is unable to determine feasibility due to conflicting information in the online application, financials, and supporting documentation submitted.

Sources and uses did not match the information provided in the online application.

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Reminders The FHLB is only obligated to correspond with the

Sponsor and Member. It is the responsibility of the Sponsor to relay correspondence to

developers, consultants, application preparers, etc.

The FHLB assumes no obligation to reconcile conflicting information, accept incomplete information, or seek additional information or clarification.

The Sponsor is ultimately responsible for ensuring that: Financial information is correct and consistent; Project’s financial structure meets AHP’s guidelines; and, Any deviations are adequately explained, justified, and

documented.

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AHP Retention AHP-assisted units are subject to a deed restriction

requiring FHLB be notified of any sale, refinancing, foreclosure, deed in lieu of foreclosure, or assignment to HUD within five (5) years of funding for ownership projects. Enforced by deed restriction or restrictive covenant on the

property. Specific restrictive language is provided by the FHLB.

AHP Monitoring All approved AHP projects are subject to

monitoring by the FHLB through: Periodic Progress Reports (until completion and final funding)

for both ownership and rental projects.

Initial Monitoring completed at disbursement for ownership projects.

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AHP Application Scoring Sheet

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AHP Monitoring Benchmarks

12 Months – One other funding source committed; project must be incurring eligible expenses

18 Months – All funding sources must be committed

24 Months – Construction must have started

36 Months – Construction must be complete

48 Months – Project must have drawn all AHP funds

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Disbursement of AHP Funds AHP funds are disbursed to the Member only

after construction or rehabilitation is complete.

Member disburses AHP funds to the Sponsor.

Documentation sufficient to allow the FHLB to disburse AHP funds must be submitted no later than six months prior to the AHP commitment expiration.

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AHP Disbursement Manuals

Manuals are available at www.fhlbcin.com. Review the appropriate manual prior to submitting

any request. Manuals describe the documentation that FHLB’s

regulators deem acceptable to document the fulfillment of AHP commitments.

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Compare the households in your pipeline to the commitments listed on the project’s AHP Application Scoring Sheet for: First-Time Homebuyers Special Needs Housing Income Targeting Housing for Homeless Households

Track fulfillment of commitments. Consider timing—you have 3 years to complete!

Selecting Households for Projects

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Once the households have been selected, submit an AHP Pre-approval Request form along with the required supporting documentation.

New for 2015, FHLB must pre-approve each household prior to honoring a request for funds.

Use the instructions in the AHP Pre-approval Request Manual to submit a pre-approval request.

Qualifying Households for Projects

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Items Submitted with Request

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Signed loan application/intake form dated or updated within 180 days of submission to FHLB.

Documentation of household size and ages of all household members, if the information does not appear on the loan application/intake form.

Third-party income documentation for all sources of household income and all household members over age 18 dated within 180 days of submission to FHLB.

Items Submitted with Request

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Evidence that household meets any of the following commitments as applicable to project: First-Time Homebuyers Special Needs Housing Income Targeting Housing for Homeless Households

Documentation must meet criteria specified in the AHP Pre-approval Request Manual.

Most documentation must be dated within 180 days of submission of the request to FHLB.

Acceptable Income Documentation

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For Employment: two consecutive pay stubs, a signed Verification of Employment (W-2s or signed tax returns are only accepted, if submitted prior to July 1 of the calendar year).

For Social Security: award letter, benefit statement, payment history (1099-SSA are only accepted, if submitted prior to July 1 of the calendar year).

For Child Support: notarized statement from the payer to the payee, child support court order or divorce decree from any year, or payment history report from child support enforcement agency.

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For Self-Employment: two most recent, signed federal tax returns with all schedules or the most recent tax return plus a current profit-and-loss.

For No Income for a household member over the age of 18: Certification of Zero Income available on the FHLB website (individual self-certifies)

For Assets: two most recent bank statements or certification from a banker.

For Other Income: refer to Manual.

Acceptable Income Documentation

Calculating Gross Annual Income

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Use income documentation for all sources shown on the loan application/intake form.

Count liquid assets that are valued over $5,000. Count gross (not net) income from all sources,

including overtime, bonuses, commissions, etc. Use FHLB’s Income and Affordability

Workbook.

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Income & Affordability Workbook

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Affordability Analysis FHLB collects information on the anticipated loan

principal, loan term/amortization, interest rate, and amounts for other predetermined housing costs (insurance, taxes, etc.) to calculate the housing expense ratio.

Only provide mortgage information for hard debt. Provide payment information on any periodic

payments the household will have to make. The housing expense ratio of annual payments to

gross annual income cannot exceed 31%.

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After Closing Is Complete

Submit one AHP Habitat Disbursement Request for each household within 60 days of loan closing AND completion of the work on the home.

Do NOT wait until all units are complete to request funds.

Use the instructions in the AHP Habitat Disbursement Manual to submit a disbursement request.

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Evidence of Completion Submit one of the following to verify

construction completion: Signed certificate of occupancy for the unit Passing final whole-house inspection AND a copy of

the inspector’s license Construction cannot have been completed prior

to the award of AHP funds but can have occurred prior to AHP pre-approval of the household.

Inspections for individual systems require a copy of the inspector’s license for each.

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Executed Notes and Deeds of Trust Provide executed copies of the note and deed of

trust for all loans to the homebuyer, even if they are forgivable.

Make sure that the loan principal, term, and rate mentioned in the note match those mentioned in the deed of trust (if the deed of trust mentions such).

If there is no second mortgage (forgivable or not), Habitat must confirm this in writing.

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Acquisition Costs Document ALL acquisition costs with one of the

following: Fully-executed settlement statement/closing disclosure Warranty deed with price indicated Fully-executed purchase contract Letter from the grantor Evidence of the outstanding balance of the loan from

the loan servicer if Habitat foreclosed on the home If Habitat did not pay anything for the land,

submit evidence of the donation using one of the items mentioned above.

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Verification of Acquisition Value Document the value of the property at the time of

acquisition with one of the following: Appraisal dated within six months of acquisition Auditor’s PVA dated within six months of acquisition

If the land acquisition constitutes a related-party transaction, an appraisal is required.

If your affiliate paid more for the property than it is valued according to the documentation submitted, FHLB will reduce the AHP grant by the difference.

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More on Donations ALL portions of the homebuyer’s property must

have been donated to Habitat to meet FHLB’s definition of “Donated.”

If Habitat paid off loans or paid back taxes to acquire the property, it was not donated!

Donations from the family member of the homebuyer receive only one point in the AHP scoring system (as a related-party acquisition).

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Acquisition Example

New parcel#1New parcel#2

Counting either new parcel as donated would require what circumstances?

Evidence of Commitments

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Evidence of commitments cannot contradict other documentation provided (loan application/intake form or income documentation) without an explanation from you and supporting documents.

FHLB’s definitions and requirements are very specific!!

FHLB’s definitions may not match Habitat’s. We will only consider what you can document! A diagnosis from a licensed individual is not

what FHLB needs to define “Special needs.”

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Evidence of Funding Sources If the household received grant funds besides

AHP, submit the fully-executed grant/funding agreement for the grant source along with any attachments/exhibits.

If the agreement does not specify an amount of funding per unit akin to what the household received, provide an explanation.

If the approved AHP application indicates that the project would receive other grant funds but the homebuyer did not, explain why not.

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Warranty Deed Submit a copy of the deed that transfers

ownership from Habitat to the homebuyer. The property referenced in the deed must tie to

the acquisition cost documentation provided. FHLB retention language must appear in the

deed, in an addendum or exhibit explicitly referenced in the deed, or in a separately-recorded restrictive covenant that explicitly references the warranty deed.

Use only the most current retention language!!!

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Financial Workbook Instructions For each disbursement request submitted, access

the workbook entitled “AHP Attachment D and Detailed Cost Breakdown” on FHLB’s website.

Use the “Instructions” tab of the workbook to complete its “Input” tab.

Print its “Output” and “Attachment D” tabs to send in the disbursement request package.

Do not forget to sign the “Output” before sending!

Any changes needed subsequent to submission require back-up with invoices/receipts.

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Completing the “Input” Tab

Must match land cost

documentation exactly!

Do not input costs that

FHLB deems ineligible

here!

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Completing the “Input” Tab (cont.)

Can include overhead,

ineligible items, etc., but is

limited to 15%

Put value of donations here, not

above

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Attachment D

Include all repayable mortgages

here

Correct before

submitting!

Does not count as Habitat’s

cash contribution

Amount of AHP funds for which household is eligible,

which cannot exceed $50,000

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Current Appraisal If the “TOTAL COSTS” shown on Attachment D

exceed the total principal of repayable mortgages to the homebuyer, submit a current appraisal that justifies the principal amount.

Do NOT submit a current appraisal for evidence of land value, as this must be dated within six months of Habitat’s acquisition of the property!

If the market value is not equal to or higher than the mortgage amount, the AHP grant will be reduced by the difference.

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Training Completion Add the date to the request form that the

volunteer for or employee of Habitat attended the disbursement webinar or workshop.

FHLB will cross-reference this date with its database of training attendees.

Pre-approval training is a separate webinar. If the person who took the training leaves your

affiliate, a new person must attend the training. Training must be taken annually. Today’s training counts in lieu of two webinars!

What Happens Next

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FHLB will request any additional information or documentation necessary to qualify the family.

Allow up to 30 days for a response to all documentation.

Only the Sponsor and Member contacts FHLB has on file will receive notification via e-mail of whether or not a household is pre-approved.

If the Sponsor contact in FHLB’s system needs to change, contact FHLB.

More Information at www.fhlbcin.com

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We encourage all FHLB Members and housing Sponsors to notify us of plans to celebrate or recognize any FHLB-funded housing

or community investment project. The FHLB is often available to participate and to offer public relations assistance for community events such as ribbon

cuttings, groundbreakings, and dedications.

Please contact Member Services/Public Affairs, toll-free, at (877) 925-FHLB(3452).

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Contact list for AHPName Phone E-mail Address

Mary L. Hernandez (513) 852-7604hernandezml@fhlbcin.comAffordable Housing Program Manager

Cassandra L. Larcarte (513) 852-7619 larcartecl@fhlbcin.comHousing Financial Analyst II

Laura K. Overton (513) 852-7603 overtonlk@fhlbcin.comHousing Financial Analyst II

T. Scott Prowse (513) 852-7612 prowsets@fhlbcin.comHousing Financial Analyst II

Samantha M. Walker (513) 852-7621 walkersm@fhlbcin.comHousing Financial Analyst I

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Federal Home Loan Bank of CincinnatiP.O. Box 598Cincinnati, OH 45201-0598Toll free: (888) 345-2246Fax: (513) 852-7647Website: www.fhlbcin.com

Contact Us

Questions?

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