Building Partnerships by Investing your Community - Federal Home

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					      The Value of Membership -
Opportunities for Community Investment

           February/March 2012

“Community Dividend” We Deliver

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

                                           Community Investment Programs   3
FHLBI Community Investment Programs

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

                                         Community Investment Programs   4
2012 AHP Allocation to be determined

        2011 AHP Contribution (based on 2010 results)

  $9 million
                           Initiatives                  NSA
                          $4.8 million

Implementation Plan

 Reviewed by AHAC annually before approval by Board,
  or as amended
 Establishes scoring and set-aside criteria in response to
  district needs and within regulations
 Establishes competitive application round deadlines and
  set-aside holdback dates
 Allocates required annual contributions
Affordable Housing Program (AHP)

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

                                            Community Investment Programs   7
Brotherhood Mutual Insurance Co. partnered with Ft. Wayne Rescue
Mission Ministries to obtain an AHP grant of $750,000 to help
Charis House build a larger facility for women and children suffering
from homelessness, mental illness, addictions, or trauma.
Affordable Housing Program (AHP)

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

                                         Community Investment Programs   9
Typical AHP Projects

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

                                             Community Investment Programs   10
Post Secondary Transition House, a collaborative between SVRC Industries,
Inc. and the Saginaw Intermediate School District, provides transitional
housing for developmentally disabled persons aged 18 to 26. The school
district will provide education and training services to residents. An AHP
grant of $750,000 was awarded to Wanigas Credit Union in 2009.
AHP Definition of Affordable:

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

                                       Community Investment Programs   12
AHP Affordability, continued

        Rent does not exceed 30%
         of household income

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

                                        Community Investment Programs   13
Key 2012 Scoring Changes

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

                                         Community Investment Programs   14
AHP Monitoring

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

                                              Community Investment Programs   15
The FHLBI’s homeownership initiative
programs can help first-time homebuyers
with down payments and closing costs or
assist homeowners with repairs to
individual homes or entire neighborhoods.
The NSA program created in 2009 helps to
address the foreclosure crisis by
redeveloping foreclosed properties.
Homeownership Initiatives

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

                                       Community Investment Programs   17
Homeownership Initiatives Similarities

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

                                            Community Investment Programs   18
The Neighborhood Impact
Program (NIP) assists
homeowners with
renovations. These “before”
and “after” photos of a home
in Detroit, MI, show the
dramatic difference that
these dollars can make for
the homeowner and an
entire neighborhood.
What is CIP?

     Community Investment Program advances
      for housing or community economic
      development purposes

     CIP Letters of Credit to enhance bond
      issuances funding affordable housing and
      taxable non-housing municipal bonds

                                         Community Investment Program   20
Why is it important to FHLBI Members?

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

                                          Community Investment Program   21
How else does a FHLBI member benefit?

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

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

                                                               Community Investment Program   22
Eligible CIP Uses

     Use CIP to provide financing for
      predevelopment, purchase, construction,
      rehabilitation, or refinance:
       oHousing (residential)… AHP projects qualify
       oEconomic development (nonresidential)
       oMixed use (combination of residential & nonresidential)

     Or to fund:
       oFuture originations
       oOriginations up to 3 months prior
       oLoan refinancing
       oCommunities or entities financing eligible housing
        or economic development initiatives (even fire trucks,
        hospitals or libraries!)
                                                 Community Investment Programs   23
Eligible CIP Types of Financing

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

                                              Community Investment Program   25
The application process is easy!

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

                                           Community Investment Program   26
The rest is easier!

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

           Past Project                 Future Project
            Funding                        Funding

                          CIP Funding

                                               Community Investment Program   27
CIP Housing Project Qualification

 Ownership Residential
  § Individual owner-occupied units owned or purchased

  § All household incomes <=115% of Area Median Income (AMI)

  Documentation requirement: List of originated mortgages

 Rental Residential
  § Financing of rental units and cooperatives
  § At least 51% of resident incomes <=115% of AMI or
  § Rents affordable to at least 51% residents whose incomes are
    <=115% AMI
  Documentation requirement: Rent roll, FHLBI Rent Schedule or
   Income Roll

                                                 Community Investment Program   28
The former Hekman Biscuit Company in Grand Rapids, MI, was renovated into Roosevelt
Park Lofts. The building offers 21 affordable studio, two- and three-bedroom apartments
with loft-style features. It also offers 2,400 square feet of commercial space. Lighthouse
                                                   Community Investment Fifth Third
Community Development received an AHP grant of $147,000 through Programs Bank to
assist with the renovations.                                                                 29
CIP Commercial and Economic Development

    Types of Projects:

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

                                              Community Investment Program   30
CIP Commercial and Economic Development

 Project Qualification:
        Small Business Concern
     §    Small Business Administration revenue/size standards
          (North American Industry Classification System Codes
     Documentation Requirement: Proof of revenue
        Job creation/retention at qualified wage levels
     §    At least 51% of job salaries <=115% AMI
     Documentation Requirement: FHLBI Job Information Form

                                                    Community Investment Program   31
Accident Fund Insurance Co. combined the renovation of a vacant power
plant built in 1938 with new construction to create its headquarters in
downtown Lansing, MI. The FHLBI provided a $50 million CIP advance
for the construction/renovation and a $31.3 million CIP letter of credit
to support the construction of the parking deck.
CIP Commercial and Economic Development

       Services and benefits to a qualified area
    §       Project provides services/benefits to urban or rural area
        ü     <=100% AMI for urban areas

        ü     <=115% AMI for rural areas

    §       Project location in targeted area (income exemption)
        ü     Rural/urban Champion Community/Empowerment Zone or Enterprise Community

        ü     Native American area

        ü     Federal Brownfield Tax Credit

        ü     Area affected by a federal military base closing or realignment

        ü     State of Michigan Renaissance Zone

        ü     Federally declared disaster area

        Documentation Requirement: Verification of AMI or Targeted Area
                                                                                Community Investment Program   33
CIP Mixed Use Project Qualification

 Combination of housing project and economic
 Project only required to qualify as economic
 §   Small Business Concern

 §   Job creation/retention at qualified wage levels

 §   Services and benefits to income targeted location or targeted area

                                                       Community Investment Program   34
Common CIP Uses

      Industrial and                      Commercial initiatives
      manufacturing initiatives           • Shopping Centers
      • Factories                         • Office Buildings
      • Bakeries                          • Hotels
      • Warehouses                        • Retail Stores
      • Assembly Plant                    • Member Branches

      Public-facility initiatives         Social-service initiatives
      • Buildings / vehicles for police   • Office space for nonprofits
        and fire departments              • Day-care Centers
                                          • Hospitals
                                          • Nursing Homes

                           Infrastructure projects
                           • Roads
                           • Sidewalks
                           • Utilities

                                                                Community Investment Program   35

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