[Federal Register Volume 66, Number 91 (Thursday, May 10, 2001)]
[Proposed Rules]
[Pages 23864-23868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-11706]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 66, No. 91 / Thursday, May 10, 2001 / 
Proposed Rules  

[[Page 23864]]



FEDERAL HOUSING FINANCE BOARD

12 CFR Part 951

[No. 2001-08]
RIN 3069-AB04


Affordable Housing Program Amendments

AGENCY: Federal Housing Finance Board.

ACTION: Proposed rule.

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SUMMARY: The Federal Housing Finance Board (Finance Board) is proposing 
to amend its regulation governing the operation of the Affordable 
Housing Program (AHP) to improve the operation and effectiveness of the 
AHP. The proposed changes include: increasing the maximum amount of 
money that may be set aside annually, in the aggregate, under a Federal 
Home Loan Bank's (Bank) homeownership set-aside programs to the greater 
of $3.0 million or 25 percent of the Bank's annual required AHP 
contribution; removing one of the criteria for use of homeownership 
set-aside funds to pay for counseling costs in order to equalize the 
criteria with that of the competitive AHP application program; 
permitting members drawn from community and not-for-profit 
organizations actively involved in providing or promoting community 
lending in a Bank's District to serve on the Bank's Advisory Council; 
making the reconciliation of AHP fund requirements applicable to any 
reduction or increase in the amount of AHP subsidy approved for a 
project, regardless of whether a direct subsidy writedown is involved; 
removing the requirement for annual project sponsor certifications on 
household income eligibility for owner-occupied projects; and removing 
the requirement for member certifications on habitability and tenant 
income and rent targeting commitments within the first year of 
completion of a rental project.

DATES: The Finance Board will accept written comments on the proposed 
rule that are received on or before June 11, 2001.

ADDRESSES: Send written comments to: Elaine L. Baker, Secretary to the 
Board, at the Federal Housing Finance Board, 1777 F Street, NW., 
Washington, DC 20006. Comments will be available for inspection at this 
address.

FOR FURTHER INFORMATION CONTACT: Charles E. McLean, Deputy Director, 
(202) 408-2537, Melissa L. Allen, Program Analyst, (202) 408-2524, 
Office of Policy, Research and Analysis; or Sharon B. Like, Senior 
Attorney-Advisor, (202) 408-2930, Office of General Counsel, Federal 
Housing Finance Board, 1777 F Street, NW., Washington, DC 20006.

SUPPLEMENTARY INFORMATION:

I. Statutory and Regulatory Background

    Section 10(j)(1) of the Federal Home Loan Bank Act (Bank Act) 
requires each Bank to establish a program to subsidize the interest 
rate on advances to members of the Bank System engaged in lending for 
long-term, low- and moderate-income, owner-occupied and affordable 
rental housing at subsidized interest rates. See 12 U.S.C. 1430(j)(1). 
The Finance Board is required to promulgate regulations governing the 
AHP. See id. The Finance Board's existing regulation governing the 
operation of the AHP, which made comprehensive revisions to the AHP, 
was adopted in August 1997 and became effective January 1, 1998. See 62 
FR 41812 (Aug. 4, 1997) (now codified at 12 CFR part 951).
    Various amendments have been made to the AHP regulation since 1998 
in order to clarify AHP requirements and improve the operation and 
effectiveness of the AHP. The Banks and Finance Board staff have, over 
the course of implementation of the AHP, identified additional 
amendments that it is believed would improve the operation and 
effectiveness of the AHP. The proposed amendments are discussed further 
below. The Finance Board welcomes written comments on all aspects of 
the proposed rule.

II. Analysis of Proposed Rule

A. Homeownership Set-Aside Programs--Secs. 951.3(a), 951.5(a)(7)(iii)

1. Increase in Maximum Allowable Annual Homeownership Set-Aside 
Amount--Sec. 951.3(a)
    Section 951.3(a)(1) of the existing AHP regulation provides that 
each Bank, after consultation with its Advisory Council, may set aside 
annually, in the aggregate, up to the greater of $1.5 million or 15 
percent of its annual required AHP contribution to provide funds to 
members participating in the Bank's homeownership set-aside programs. 
12 CFR 951.3(a)(1). In cases where the amount of homeownership set-
aside funds applied for by members in a given year exceeds the amount 
available for that year, a Bank may allocate up to the greater of $1.5 
million or 15 percent of its annual required AHP contribution for the 
subsequent year to the current year's homeownership set-aside programs. 
Id.
    The AHP homeownership set-aside programs have proven to be an 
efficient and effective means for the Banks and their members to 
provide homeownership opportunities for low- and moderate-income 
households, consistent with the goals of the Bank System and the AHP. 
Ten Banks currently offer homeownership set-aside programs, eight of 
which set aside the maximum amount allowable under the current AHP 
regulation.
    Experience with the homeownership set-aside programs over the past 
two years has shown that the demand for homeownership set-aside funds 
for low-and moderate-income families is such that an increase in the 
maximum allowable annual homeownership set-aside amount is warranted. 
The Banks have demonstrated that there is market demand and member 
demand for financing for low- and moderate-income homeownership, with 
most homeownership set-aside programs being oversubscribed within the 
first three to seven months of the year. In 2000, the Finance Board 
approved a waiver request from one Bank to increase its maximum 
allowable homeownership set-aside amount to 25 percent of its total 
annual AHP contribution, a similar waiver request for 2001 is pending, 
and additional waiver requests of a similar nature from other Banks are 
anticipated.

[[Page 23865]]

    The homeownership set-aside programs also are consistent with the 
cooperative structure of the Bank System, by involving members in 
financing the mortgages of low- and moderate-income households 
receiving downpayment assistance with homeownership set-aside funds. 
The homeownership set-aside programs can provide an important Bank 
service for members by enabling a greater number of members to become 
involved in the AHP, by helping members to establish banking 
relationships with new customers, and by exposing more members to 
opportunities to help meet low- and moderate-income housing needs in 
their markets.
    The homeownership set-aside programs also are consistent with the 
goals of the Bank System and the AHP to help finance affordable housing 
in underserved areas and for underserved households. Homeownership set-
aside funds often are the only way to effectively meet scattered-site, 
affordable housing needs in rural areas or tribal areas, which have 
difficulty scoring well under the competitive AHP application program 
and where rental projects are not feasible. In addition, homeownership 
set-aside funds often are the only way to meet the need for 
homeownership opportunities for very low-income families, which require 
larger per-unit subsidies and, therefore, may not score well under the 
competitive AHP application program. Homeownership set-aside programs 
also allow a member to use AHP funds to finance housing for individual 
eligible households on an as-needed basis, even if it is only for one 
household in the member's market area. These are households that the 
competitive AHP application program might not otherwise reach.
    The decision whether or not to establish homeownership set-aside 
programs is within the discretion of each Bank. Thus, a Bank, in 
consultation with its Advisory Council, may decide not to establish 
homeownership set-aside programs if it determines that such programs 
are inappropriate for its district, or, if a Bank decides to establish 
such programs, it need not allocate to the programs the maximum amount 
allowable under the regulation.
    Accordingly, for the reasons discussed above, the proposed rule 
would revise Sec. 951.3(a)(1) to allow a Bank, after consultation with 
its Advisory Council, to set aside annually, in the aggregate, up to 
the greater of $3.0 million or 25 percent of its annual required AHP 
contribution for its homeownership set-aside programs. In addition, in 
cases where the amount of homeownership set-aside funds applied for by 
members in a given year exceeds the amount available for that year, the 
proposed rule would allow a Bank to allocate up to the greater of $3.0 
million or 25 percent of its annual required AHP contribution for the 
subsequent year to the current year's homeownership set-aside programs.
    A higher allowable annual homeownership set-aside amount increases 
the possibility that demand for such funds may not exhaust the 
available funds by the end of the year. Under section 10(j)(7) of the 
Bank Act, 90 percent of such uncommitted or unused AHP funds generally 
would be required to be deposited by the Bank in an Affordable Housing 
Reserve Fund established and administered by the Finance Board. See 12 
U.S.C. 1430(j)(7); 12 CFR 951.15(a). No such Reserve Fund has been 
established to date. In order to minimize the possibility of having to 
create such a Reserve Fund, the proposed rule would provide in 
Sec. 951.3(a) that any homeownership set-aside funds that are not 
committed or used by the end of the year in which they were set aside 
shall be committed or used by the end of such year to fund project 
modifications or the next highest scoring AHP applications in the 
Bank's final funding period of the year for its competitive AHP 
application program.
    The proposed rule also would provide that, beginning in 2002 and 
for subsequent years, the maximum homeownership set-aside dollar limits 
shall be adjusted annually by the Finance Board to reflect any 
percentage increase in the preceding year's Consumer Price Index (CPI) 
for all urban consumers, as published by the Department of Labor. Each 
year, as soon as practicable after the publication of the previous 
year's CPI, the Finance Board would be required to publish notice by 
Federal Register, distribution of a memorandum, or otherwise, of the 
CPI-adjusted limits on the maximum set-aside dollar amount.
2. Removal of Criterion For Funding of Counseling Costs--
Sec. 951.5(a)(7)(iii)
    Section 951.5(a)(7) of the existing AHP regulation provides that 
homeownership set-aside funds may be used to pay for counseling costs 
only where:
    (i) Such costs are incurred in connection with counseling of 
homebuyers who actually purchase an AHP-assisted unit;
    (ii) The cost of the counseling has not been covered by another 
funding source, including the member; and
    (iii) The homeownership set-aside funds are used to pay only for 
the amount of such reasonable and customary costs that exceeds the 
highest amount the member has spent annually on homebuyer counseling 
costs within the preceding three years. 12 CFR 951.5(a)(7).
    By contrast, Sec. 951.5(b)(5) of the existing AHP regulation 
requires satisfaction of only the first two of the above three criteria 
in authorizing the use of AHP subsidies to pay for counseling costs 
under the competitive AHP application program. 12 CFR 951.5(b)(5). The 
Banks maintain that the criterion in paragraph (a)(7)(iii) above should 
be removed so that the criteria applicable to the use of AHP funds for 
counseling costs are the same under both the homeownership set-aside 
and competitive AHP application programs.
    The criterion in paragraph (a)(7)(iii) was intended to prevent 
homeownership set-aside funds from being used to pay for counseling 
costs that, in the absence of such funds, customarily would be funded 
by members participating in a homeownership set-aside program. In this 
way, AHP funds would be used to expand the pool of resources available 
to pay for counseling costs, rather than simply replace existing 
sources of funding for counseling costs.
    The Banks maintain that this requirement is difficult and costly to 
enforce. Moreover, the requirement may actually reduce potential 
participation by members in homeownership set-aside programs because of 
members' concerns about liability if the accounting for costs is not 
accurate. In addition, since the competitive AHP application program 
does not have a comparable requirement, it is possible that AHP 
subsidies are already being used under that program to pay for 
counseling costs that the member, sponsor or another funding source 
would otherwise have funded.
    The Finance Board recognizes that homebuyer counseling is vital to 
ensuring that AHP subsidies are used successfully to provide 
homeownership opportunities for low- and moderate-income households. 
The Finance Board is persuaded that assurance that homebuyers will get 
such counseling, regardless of how it is funded, outweighs concerns 
that AHP subsidies may be funding counseling costs that would otherwise 
be paid for by another funding source. Accordingly, for the reasons 
discussed above, the proposed rule would remove the additional 
homeownership set-aside counseling criterion contained in 
Sec. 951.5(a)(7)(iii).

[[Page 23866]]

B. Advisory Council Membership--Sec. 951.4

    Section 951.4(f) of the existing AHP regulation uses two terms--
``community investment'' and ``community development''--in describing 
the role of the Advisory Councils in this area. Specifically, 
Sec. 951.4(f)(1) provides that representatives of the board of 
directors of each Bank shall meet with the Advisory Council at least 
quarterly to obtain the Advisory Council's advice on ways in which the 
Bank can better carry out its housing finance and community investment 
mission, including advice on the low- and moderate-income housing and 
community investment programs and needs in the Bank's District. Section 
951.4(f)(3) provides that each Advisory Council shall submit to the 
Finance Board annually by March 1 its analysis of the low- and 
moderate-income housing and community development activity of the Bank 
by which it is appointed.
    The proposed rule would replace the terms community investment and 
community development, wherever they appear, with the term community 
lending, which encompasses both terms and is the term used in the 
Finance Board's recently adopted mission statement for the Banks. See 
12 CFR 940.2.\1\ Community lending is defined in part 900 of the 
Finance Board's existing regulations as ``providing financing for 
economic development projects for targeted beneficiaries, and, for 
community financial institutions, purchasing or funding small business 
loans, small farm loans or small agri-business loans, as defined in 
Sec. 950.1 of this chapter.'' 12 CFR 900.1.
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    \1\ Section 940.2 states that ``[t]he mission of the Banks is to 
provide to their members and associates financial products and 
services, including but not limited to advances, that assist and 
enhance such members' and associates' financing of:
    (a) Housing, including single-family and multi-family housing 
serving consumers at all income levels; and
    (b) Community lending.''
    12 CFR 940.2 (emphasis added).
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    In addition, since the Advisory Councils are required to give 
advice on community lending, as well as housing finance, matters, the 
proposed rule would revise Sec. 951.4(a) to provide that members may be 
drawn from community and not-for-profit organizations actively involved 
in providing or promoting community lending in the Bank's District, and 
would revise Sec. 951.4(b) to provide that, in appointing Advisory 
Council members, a Bank may give consideration to the diversity of 
community lending needs and activities within the Bank's District.

C. Reconciliation of AHP Fund--Sec. 951.8(c)(3)(ii)

    Section 951.8(c)(3)(ii) of the existing AHP regulation provides 
that if a Bank reduces the amount of AHP subsidy approved for a 
project, the amount of such reduction shall be returned to the Bank's 
AHP fund. 12 CFR 951.8(c)(3)(ii). Section 951.8(c)(3)(ii) further 
provides that if a Bank increases the amount of AHP subsidy approved 
for a project, the amount of such increase shall be drawn first from 
any currently uncommitted or repaid AHP subsidies and then from the 
Bank's required AHP contribution for the next year. Id. This section is 
included under the overall heading for paragraph (c)(3), which 
addresses changes in the approved AHP subsidy amount where a direct 
subsidy is used to write down prior to closing the principal amount or 
interest rate on a loan. Therefore, the requirements in paragraph 
(c)(3)(ii) would appear to apply only in cases where a direct subsidy 
is used to write down prior to closing the principal amount or interest 
rate on a loan.
    In practice, the Banks have returned to the AHP fund the amount of 
any reduction in AHP subsidy approved for a project under the 
competitive AHP application program, regardless of the reason for the 
reduction, such as a project modification or a change in a project's 
sources and uses of funds. The question has arisen whether the 
provision in paragraph (c)(3)(ii) regarding the funding of a subsidy 
increase should apply to an increase in approved AHP subsidy for a 
project modification that does not involve a direct subsidy writedown. 
A Bank has indicated that, in its district, demand for increases in 
approved AHP subsidies for project modifications not involving direct 
subsidy writedowns is now exceeding the amount of repaid or de-
committed AHP subsidies available to fund such modifications. 
Therefore, the Bank would like to be able to fund such subsidy 
increases from the Bank's required AHP contribution for the next year.
    If a Bank is permitted to use uncommitted AHP funds from the 
following year, before such funds are made available under the 
competitive AHP application program for that year, there will be fewer 
AHP funds available for new projects to be approved under the 
competitive AHP application program for that year. However, the overall 
effect on the amount of AHP funds available for the following year is 
not likely to be significant. Moreover, funding a new project in the 
next year, as opposed to funding a modification of an existing project 
from a prior year, would not necessarily result in producing more 
affordable housing, as there is no assurance that the new project 
ultimately will go forward. It is important that AHP funding be made 
available for modifications of existing projects that are meeting the 
goals of the AHP. The ability of an approved project to continue 
arguably should not be jeopardized simply because uncommitted AHP funds 
are not available for modifications in the current year. Since the 
existing AHP regulation already allows the Banks to commit funds from 
the following year's homeownership set-aside allocation to fund current 
year needs under the Banks' homeownership set-aside programs, the Banks 
arguably should have similar flexibility in funding subsidy increases 
for project modifications approved under the competitive AHP 
application program. Finally, the decision whether to approve an 
increase in AHP subsidy for a project modification is within the 
discretion of each Bank. See 12 CFR 951.7. If a Bank does not want to 
fund project modifications with subsidies from the next year's AHP 
allocation, it does not have to approve the project modifications.
    Accordingly, for the reasons discussed above, the proposed rule 
would make Sec. 951.8(c)(3)(ii) applicable to any reduction or increase 
in the amount of AHP subsidy approved for a project, regardless of 
whether a direct subsidy writedown is involved, by redesignating this 
paragraph as Sec. 951.8(c)(4). The Banks, therefore, would be able to 
fund subsidy increases for project modifications using subsidies drawn 
first from any currently uncommitted or repaid AHP subsidies, and then 
from the Bank's required AHP contribution for the next year.

D. Initial Monitoring Requirements--Sec. 951.10

1. Owner-Occupied Project Sponsor Annual Certifications--
Sec. 951.10(a)(1)(ii)
    Section 951.10(a)(1)(ii) of the existing AHP regulation provides 
that where AHP subsidies are used to finance the purchase of owner-
occupied units, the project sponsor must certify annually to the member 
and the Bank, until all approved AHP subsidies are provided to eligible 
households in the project, that those households receiving AHP 
subsidies during the year were eligible households, and such 
certifications shall be supported by household income verification 
documentation maintained by the project sponsor and available for

[[Page 23867]]

review by the member or the Bank. 12 CFR 951.10(a)(1)(ii).
    The Banks maintain that this project sponsor certification 
requirement is not necessary because the certification merely 
reiterates more extensive documentation of income eligibility 
previously provided by the project sponsor to the Bank and member at 
the time of each request for disbursement of AHP funds from the Bank. 
Under the existing AHP regulation, a Bank is required to verify prior 
to each disbursement of AHP subsidies for an approved project that the 
project meets the eligibility requirements of Sec. 951.5(b) and all 
obligations committed to in the approved AHP application. See 12 CFR 
951.5(b), 951.8(c)(2). Because the project sponsor's annual 
certification is based on the information provided to the Bank at the 
time of disbursement requests, the certification requirement in 
Sec. 951.10(a)(1)(ii) does not add any new information or independent 
verification to the monitoring process.
    Accordingly, for the reasons discussed above, the proposed rule 
would remove the project sponsor certification requirement from 
Sec. 951.10(a)(1)(ii).
    Section 951.10(b)(1)(ii) of the existing AHP regulation also 
requires the member, within one year after disbursement to a project of 
all approved AHP subsidies, to review the project documentation and 
make certifications to the Bank on the use of the AHP subsidies and the 
existence of deed restrictions or other legally enforceable retention 
agreements and mechanisms. See 12 CFR 951.10(b)(1)(ii). Section 
951.10(c)(1) of the existing AHP regulation requires each Bank to 
review the documentation for a sample of projects and units to 
determine income-eligibility, eligible uses, reasonable and customary 
costs, financial feasibility and the existence of deed restrictions or 
other legally enforceable retention agreements or mechanisms. See 12 
CFR 951.10(c)(1).
    Therefore, in order for the member and Bank to be able to continue 
reviewing project documentation pursuant to these sections, the 
proposed rule would retain the requirement in Sec. 951.10(a)(1)(ii) 
that the project sponsor maintain household income verification 
documentation available for review by the member or the Bank.
2. Member Certification Within the First Year of Rental Project 
Completion-- Sec. 951.10(b)(2)(ii)
    Section 951.10(b)(2)(ii) of the existing AHP regulation provides 
that within the first year after completion of an AHP-assisted rental 
project, the member must review the project documentation and make a 
certification to the Bank on project habitability, and tenant rents and 
income targeting commitments. See 12 CFR 951.10(b)(2)(ii). The Banks 
maintain that this member certification requirement is essentially 
redundant with the requirement in Sec. 951.10(a)(2)(ii) that the owners 
of rental projects make a certification to the member on the same 
items. See 12 CFR 951.10(a)(2)(ii).
    Since the member is essentially duplicating the certification 
already made by the project owner, and the project owner is also 
certifying to the Bank, it seems reasonable to eliminate the member 
certification requirement and simply retain the project owner 
certification to the Bank. Accordingly, the proposed rule would remove 
the member certification requirement of Sec. 951.10(b)(2)(ii), as well 
as the references to the member contained in Sec. 951.10(a)(2)(ii).

III. Paperwork Reduction Act

    The current information collection contained in the existing AHP 
regulation has been approved by the Office of Management and Budget 
(OMB) and assigned OMB control number 3069-0006, with an expiration 
date of January 31, 2003. The Finance Board has submitted to OMB for 
its approval an analysis of the proposed revisions to the collection of 
information contained in Secs. 951.3(a)(1), 951.10(a)(1)(ii), and 
951.10(b)(2)(ii) of the proposed rule, described more fully in part II 
of the SUPPLEMENTARY INFORMATION. The proposed increase in the maximum 
allowable annual homeownership set-aside amount under Sec. 951.3(a)(1) 
of the proposed rule is expected to result in an increase in 
applications for such funds. The proposed elimination of the project 
sponsor and member certification requirements in Secs. 951.10(a)(1)(ii) 
and 951.10(b)(2)(ii) of the proposed rule would reduce the information 
collection requirement for such parties. The Banks use the information 
collection in the AHP regulation to determine whether respondents 
satisfy statutory and regulatory requirements under the AHP. Responses 
are mandatory and are required to obtain or retain a benefit. See 12 
U.S.C. 1426.
    Likely respondents and/or record keepers are Banks, Bank members, 
project sponsors, and project owners. Potential respondents are not 
required to respond to the collection of information unless the 
regulation collecting the information displays a currently valid 
control number assigned by OMB. See 44 U.S.C. 3512(a).
    The estimated annual reporting and recordkeeping hour burden for 
the AHP regulation with the proposed changes is:

    a. Number of respondents--7,720
    b. Total annual responses--10,749
    Percentage of these responses collected electronically--0
    c. Total annual hours requested--65,461
    d. Current OMB inventory--64,274
    e. Difference--1,187

    The estimated annual reporting and recordkeeping cost burden for 
the AHP regulation with the proposed changes is:

    a. Total annualized capital/startup costs--0
    b. Total annual costs (O&M)--0
    c. Total annualized cost requested--$2,169,795
    d. Current OMB inventory--$2,118,170
    e. Difference--$51,625

    The Finance Board will accept written comments concerning the 
accuracy of the burden estimates and suggestions for reducing the 
burden at the address listed above.
    Comments regarding the proposed collection of information may be 
submitted in writing to the Office of Information and Regulatory 
Affairs of OMB, Attention: Desk Officer for Federal Housing Finance 
Board, Washington, DC 20503 by July 9, 2001.

IV. Regulatory Flexibility Act

    The proposed rule would apply only to the Banks, which do not come 
within the meaning of ``small entities,'' as defined in the Regulatory 
Flexibility Act (RFA). See 5 U.S.C. 601(6). Thus, in accordance with 
section 605(b) of the RFA, 5 U.S.C. 605(b), the Finance Board hereby 
certifies that the proposed rule, if promulgated as a final rule, will 
not have a significant economic impact on a substantial number of small 
entities.

List of Subjects in 12 CFR Part 951

    Community development, Credit, Federal home loan banks, Housing, 
Reporting and recordkeeping requirements.

    Accordingly, the Finance Board hereby proposes to amend part 951, 
title 12, chapter IX, Code of Federal Regulations, as follows:

PART 951--AFFORDABLE HOUSING PROGRAM

    1. The authority citation for part 951 continues to read as 
follows:

    Authority: 12 U.S.C. 1430(j).

    2. Amend Sec. 951.3(a)(1) to read as follows:


Sec. 951.3  Operation of Program and adoption of AHP implementation 
plan.

    (a) Allocation of AHP contributions--(1) Homeownership set-aside 
programs.

[[Page 23868]]

Each Bank, after consultation with its Advisory Council, may set aside 
annually, in the aggregate, up to the greater of $3.0 million or 25 
percent of its annual required AHP contribution to provide funds to 
members participating in the Bank's homeownership set-aside programs, 
pursuant to the requirements of this part. Any homeownership set-aside 
funds that are not committed or used by the end of the year in which 
they were set aside shall be committed or used by the end of such year 
to fund project modifications or the next highest scoring AHP 
applications in the Bank's final funding period of the year for its 
competitive application program. In cases where the amount of 
homeownership set-aside funds applied for by members in a given year 
exceeds the amount available for that year, a Bank may allocate up to 
the greater of $3.0 million or 25 percent of its annual required AHP 
contribution for the subsequent year to the current year's 
homeownership set-aside programs pursuant to written policies adopted 
by the Bank's board of directors. Beginning in 2002 and for subsequent 
years, the maximum dollar limits set forth in this paragraph shall be 
adjusted annually by the Finance Board to reflect any percentage 
increase in the preceding year's Consumer Price Index (CPI) for all 
urban consumers, as published by the Department of Labor. Each year, as 
soon as practicable after the publication of the previous year's CPI, 
the Finance Board shall publish notice by Federal Register, 
distribution of a memorandum, or otherwise, of the CPI-adjusted limits 
on the maximum set-aside dollar amount. A Bank may establish one or 
more homeownership set-aside programs pursuant to written policies 
adopted by the Bank's board of directors. A Bank's board of directors 
shall not delegate to Bank officers or other Bank employees the 
responsibility for adopting such policies.
* * * * *


Sec. 951.4  [Amended]

    3. Amend Sec. 951.4 by:
    a. In paragraph (a), adding ``and/or community lending'' after 
``housing'';
    b. In paragraph (b), adding ``and/or community lending'' after 
``housing'';
    c. In paragraph (f)(1), removing ``community investment'' wherever 
it appears and adding, in its place, ``community lending''; and
    d. In paragraph (f)(3), removing ``community development'' and 
adding, in its place, ``community lending''.


Sec. 951.5  [Amended]

    4. Amend Sec. 951.5 by removing paragraph (a)(7)(iii).


Sec. 951.8  [Amended]

    5. Amend Sec. 951.8(c)(3) by:
    a. Removing the heading for paragraph (c)(3)(i);
    b. Removing paragraph designation (c)(3)(i); and
    c. Redesignating paragraph (c)(3)(ii) as paragraph (c)(4).
    6. Amend Sec. 951.10 by:
    a. Revising paragraph (a)(1)(ii);
    b. In paragraph (a)(2)(ii), removing ``the member and'' and ``the 
member or'' wherever they appear; and
    c. In paragraph (b)(2), removing paragraph (b)(2)(ii), and removing 
paragraph designation (b)(2)(i).
    The revision reads as follows:


Sec. 951.10  Initial monitoring requirements.

    (a) * * *
    (1) * * *
    (ii) Where AHP subsidies are used to finance the purchase of owner-
occupied units, the project sponsor must maintain household income 
verification documentation available for review by the member or the 
Bank.
* * * * *

    Dated: May 2, 2001.

    By the Board of Directors of the Federal Housing Finance Board.
Allan I. Mendelowitz,
Chairman.
[FR Doc. 01-11706 Filed 5-9-01; 8:45 am]
BILLING CODE 6725-01-P