To All Members and Interested Community Groups:
In the course of reviewing and monitoring homeownership projects using Affordable Housing Program (AHP) subsidy, the Bank has encountered a variety of financial structures involving deferred payment loans, or “soft loans,” made by the sponsor to the homebuyer, and shared equity appreciation agreements, where the homebuyer must share a portion of the appreciated value of the home with the sponsor upon resale of the unit.
The Federal Housing Finance Board’s AHP Regulation requires the Bank to perform an analysis of sources and uses to determine each project’s need for subsidy. However, the Regulation does not address, and the Finance Board has not provided guidance on, how to treat and value these financial structures. In addition, these structures raise other regulatory and policy issues that the Bank is working to resolve at this time. If repayment proceeds from these instruments are factored into the project’s sources of funds, the result is often a surplus of funds, thus obviating the need for AHP subsidy.
The Bank is seeking regulatory guidance from the Finance Board on how to treat and value these structures under the AHP rules. Until the Bank receives that guidance, the Bank may not be able to disburse funds to existing projects with these features. Please note that projects funded under the Bank’s IDEA or WISH programs are not affected by this issue.
The Bank is committed to pursuing a rapid resolution of this issue.
Please call the Community Investment Department at (415) 616-2542 if you have any questions.
James E. Yacenda
Vice President and Community Investment Officer