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1www.fhlbi.com
The Value of Membership -
Opportunities for Community Investment
February/March 2012
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
“Community Dividend” We Deliver
Affordable Housing Program (AHP) – grant funding to create rental and homeownership opportunities for low- and moderate-income households
Homeownership Initiatives – grant funding for down payment, closing cost assistance and homeowner rehabilitation to income-eligible households
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
FHLBI Community Investment Programs
Competitive AHP $9 million Homeownership
Initiatives$4.8 million
HOP
NSA
NIP
2012 AHP Allocation to be determined
2011 AHP Contribution (based on 2010 results)
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
Implementation Plan
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
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Affordable Housing Program (AHP)
Community Investment Programs
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.
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
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Affordable Housing Program (AHP)
Community Investment Programs
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
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Typical AHP Projects
Community Investment Programs
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.
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
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AHP Definition of Affordable:
Community Investment Programs
Rental: Rent does not exceed 30%
of household income
Homebuyer: Mortgage payments that do not
exceed 35% of borrower’s monthly income. Borrower’s total debt must be less than 45%
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AHP Affordability, continued
Community Investment Programs
Comprehensive community development Aging in Place for seniors and permanent supportive
housing Green building and rehabilitation standards continue
to be a focus Readiness to proceed Economic diversity
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Key 2012 Scoring Changes
Community Investment Programs
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
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AHP Monitoring
Community Investment Programs
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 Opportunities Program (HOP) provides up to $7,500 in down payment and closing cost assistance for first-time homebuyers
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
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Homeownership Initiatives
Community Investment Programs
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
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Homeownership Initiatives Similarities
Community Investment Programs
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.
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
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What is CIP?
Community Investment Program
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 advances
Available at FHLBI’s cost of funds, plus a nominal administrative fee (non-competitive)
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Why is it important to FHLBI Members?
Community Investment Program
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.
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How else does a FHLBI member benefit?
Community Investment Program
Use CIP to provide financing for predevelopment, purchase, construction, rehabilitation, or refinance:o Housing (residential)… AHP projects qualify
automatically!o Economic development (nonresidential)o Mixed use (combination of residential & nonresidential)
Or to fund:o Future originationso Originations up to 3 months prioro Loan refinancingo Communities or entities financing eligible housing
or economic development initiatives (even fire trucks, hospitals or libraries!)
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Eligible CIP Uses
Community Investment Programs
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
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Eligible CIP Types of Financing
Community Investment Program
Complete the short application (available year-round) Multiple ways to qualify a project… FHLBI staff can help find the easiest way to qualify your
project FHLBI review time less than 10 business days Minimum typical CIP advance is $100,000
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The application process is easy!
Community Investment Program
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
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The rest is easier!
Community Investment Program
Past Project Funding
CIP Funding
Future Project Funding
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
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CIP Housing Project Qualification
Community Investment Program
Community Investment Programs29
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 Development received an AHP grant of $147,000 through Fifth Third Bank to assist with the renovations.
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
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CIP Commercial and Economic Development
Community Investment Program
Project Qualification:
Small Business Concern
Small Business Administration revenue/size standards (North American Industry Classification System Codes (NAICS))
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
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CIP Commercial and Economic Development
Community Investment Program
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.
Services and benefits to a qualified area
Project provides services/benefits to urban or rural area
<=100% AMI for urban areas
<=115% AMI for rural areas
Project location in targeted area (income exemption)
Rural/urban Champion Community/Empowerment Zone or Enterprise Community
Native American area
Federal Brownfield Tax Credit
Area affected by a federal military base closing or realignment
State of Michigan Renaissance Zone
Federally declared disaster area
Documentation Requirement: Verification of AMI or Targeted Area
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CIP Commercial and Economic Development
Community Investment Program
Combination of housing project and economic development
Project only required to qualify as economic development
Small Business Concern
Job creation/retention at qualified wage levels
Services and benefits to income targeted location or targeted area
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CIP Mixed Use Project Qualification
Community Investment Program
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Common CIP Uses
Community Investment Program
Industrial and manufacturing initiatives• Factories• Bakeries• Warehouses• Assembly Plant
Commercial initiatives• Shopping Centers• Office Buildings• Hotels• Retail Stores• Member Branches
Public-facility initiatives• Buildings / vehicles for police
and fire departments
Social-service initiatives• Office space for nonprofits• Day-care Centers• Hospitals • Nursing Homes
Infrastructure projects• Roads• Sidewalks• Utilities