The Federal Home Loan Banks, Community Investment, and Affordable Housing

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1 The Federal Home Loan Banks, Community Investment, and Affordable Housing John Stocchetti Executive Vice President Federal Home Loan Bank of Chicago March 26, 2012

2 Today s Presentation Introduction to the Federal Home Loan Banks (FHLBs) and the Federal Home Loan Bank of Chicago (FHLBC) Background and Mission Products and Services Community Investment and Affordable Housing Federal Home Loan Banks Housing and Community Investment Mission Product available for homeowners 2

3 Forward-Looking Statement Certain information included in this presentation speaks only as of the particular date or dates included herein, and the information in the presentation may have become out of date. We do not undertake an obligation, and disclaim any duty, to update any of the information in this presentation. The data and valuations provided in this presentation are for information purposes only and are provided as an accommodation and without charge. This presentation is not intended to constitute legal, investment, or financial advice or the rendering of legal, consulting, or other professional services of any kind. Mortgage Partnership Finance, MPF, MPF Xtra, Downpayment Plus, and DPP are registered trademarks of the Federal Home Loan Bank of Chicago. 3

4 FHLB Background Chartered by Congress in 1932 The 12 FHLBs are housing GSEs (Government-Sponsored Enterprises) Regulated by the Federal Housing Finance Agency, which also regulates Fannie Mae and Freddie Mac Each FHLB is a private entity, cooperatively owned by in-district member financial institutions Members include banks, thrifts, insurance companies, credit unions, and community development financial institutions 4

5 FHLB Background FHLBs support more than 7,800 member financial institutions Membership to specific FHLBs is based on where member charter is located 12 cooperatives with joint and several liability for each others debt 12 boards of directors with 12 presidents and 12 management teams Common regulation under the Federal Housing Finance Agency 5

6 Primary FHLB Mission: Wall Street to Main Street FHLBs support mortgage lending and economic and community investment by channeling low-cost funds from the global capital markets (Wall Street) through member lenders to homebuyers and local businesses (Main Street) We are member-owned and member-focused 6

7 The Federal Home Loan Banks Also Offer liquidity through Mortgage Partnership Finance Program Assist members with asset/liability management Provide letters of credit to support member activities Provide operating services Provide significant contributions towards affordable housing and economic development in communities across the nation 7

8 12 FHLB Districts SEA SF TOP DAL DSM CHI IND CIN ATL PGH NY BOS 8

9 System Membership Snapshot 7,781 FHLB members (as of 9/30/11) 9

10 FHLB System Selected Financial Data As of 9/30/11, in billions Assets $778 Advances 415 Mortgage Loans, Net 55 Total Investments 308 Consolidated Obligations Outstanding 703 Capital 40 Net Income (Nine Months Ended 9/30/11, in millions) $1,078 10

11 FHLBC Community Investment and Affordable Housing 11

12 FHLBC Earnings and Community Investment Grants In 20 years, the FHLB System has invested $4.3 billion in more than 742,000 affordable units FHLBC has invested over $300 million to build approximately 74,000 affordable units 12

13 Partnership between FHLBC, the Member and the Community Community Funds are invested in community based transactions generating successful economic growth Community dividends Community Links Growing community creates economic activity Member Benefits New Housing Growing Local Taxes Job Creation FHLBC partners with Member to provide grants/funding Earnings Community Links FHLBC 13

14 FHLBC Community Investment Products Homebuyer Assistance Program (DPP) Downpayment Plus Program (DPP ) grants are offered for down payment assistance for low and moderate income homebuyers FHLBC Affordable Housing Program (AHP) Competitive Affordable Housing Program (AHP) grants for the purchase, construction, or rehabilitation of affordable owner occupied or rental units Community Economic Development Advances (CEDA) Community Investment Program (CIP) CIP offers discounted advances and letters of credit to support affordable housing projects for owner occupied and rental housing lending CEDA offers discounted advances and letters of credit to support economic development projects 14

15 FHLBC Community Investment Grant Products 15

16 Downpayment Plus (DPP ) Program Forgivable grants to assist with down payment and closing costs for households with incomes at or below 80% of Area Median Income (AMI) 2012 Allocation: $10 million 2012 Maximum grant/homebuyer: $8, Member limit: $400,000 Minimum Homebuyer Contribution: $1,000 Member originates or funds first mortgage Non-competitive awarding process; first-come, first-served Grant is forgiven on a monthly schedule over five years 16

17 DPP Benefits Facilitates home ownership for customers REO properties in member s portfolio are eligible Improves loan-to-value ratio of mortgage assets originated under this program Not limited to first-time homebuyers May be combined with FHLBC MPF Xtra Program 17

18 Types of First Mortgages Rural Development Veterans Administration (VA) IHDA or WHEDA or other federal, state and local housing assistance programs Federal Housing Administration (FHA) insured DPP grants may be used with first mortgages sold to MPF Xtra, Fannie Mae, Freddie Mac HUD Section

19 Participating DPP Lenders in Illinois For an up-to-date list of participating Illinois lenders in DPP, contact: Illinois League of Financial Institutions

20 Competitive Affordable Housing Program (AHP) Forgivable grants for purchase, construction, or rehabilitation of affordable owner-occupied and rental housing units Member partners with community organizations, developers, or public entities to submit an application FHLBC district-wide competition (IL and WI) Evaluated based on project eligibility, feasibility and scoring Highest scoring projects determined eligible under FHLBC guidelines are recommended for approval until funds are exhausted 20

21 AHP Benefits Helps our members expand and maintain community relationships Flexibility to support projects responsive to market conditions and housing sector needs May assist with the purchase of properties at risk of or in foreclosure Provides critical gap financing to developers of affordable housing and helps to leverage other sources of funding Supports housing stability through lower rents or mortgages 21

22 2012 Competitive AHP 22

23 FHLBC Community Investment Lending Products 23

24 Community Investment Cash Advances (CICA) Discounted funding and letters of credit to support members who finance affordable housing and economic development projects Discounts of 5 to 15 bps Continuously available No minimum or maximum; no member limit Portfolio funding and match-funding opportunities All member institutions eligible to obtain advances through the FHLBC may fund eligible projects with CICA 24

25 CICA Program Benefits Liquidity to fund eligible mortgage and commercial lending business Opportunities match fund multifamily and/or commercial loans Flexible CICA advance structures mirror regular advances, both of which provide opportunities to enhance net interest margins Option to retain or pass through interest rate savings May assist in meeting CRA, lending, or investment goals 25

26 CICA Letters of Credit (LOC) LOC provides credit enhancement for housing and economic development bond issues: FHLBC credit rating is attached to bonds, resulting in favorable interest rate and security to the bondholders LOC provides performance guarantees: Working capital Construction completion 26

27 For More Information To determine whether a financial institution in Illinois or Wisconsin is a member of the Federal Home Loan Bank of Chicago, please visit our website at and click on Members. For more information on Community Investment programs, visit our website at and click on Community Investment. Contact FHLBC s Community Investment Department at