Housing Finance: Improving the Federal Home Loan Bank System's Affordable
Housing Program (Chapter Report, 06/09/95, GAO/RCED-95-82).
Decent and affordable housing for every American family has been a goal
of national housing policy since 1949. A shortage of affordable housing
has prompted Congress to expand the capital available to finance such
housing. The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 required that the Federal Home Loan Bank System establish an
Affordable Housing Program to help finance housing for households with
very low, low, and moderate incomes and directed GAO to evaluate this
program. This report examines (1) how program funds have been used to
support affordable housing initiatives, (2) how the program has been
run, and (3) whether opportunities exist to improve the program as a
source of housing finance.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-95-82
TITLE: Housing Finance: Improving the Federal Home Loan Bank
System's Affordable Housing Program
DATE: 06/09/95
SUBJECT: Housing programs
Low income housing
Lending institutions
Rent subsidies
Banking regulation
Insured commercial banks
Federal aid for housing
Financial management
Reporting requirements
IDENTIFIER: RTC Affordable Housing Program
North Amityville (NY)
San Francisco (CA)
West Hollywood (CA)
RTC Affordable Housing Disposition Program
HUD Low Income Housing Tax Credit Program
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Cover
================================================================ COVER
Report to Congressional Requesters
June 1995
HOUSING FINANCE - IMPROVING THE
FEDERAL HOME LOAN BANK SYSTEM'S
AFFORDABLE HOUSING PROGRAM
GAO/RCED-95-82
Affordable Housing Program
(385389)
Abbreviations
=============================================================== ABBREV
AHP - Affordable Housing Program
AIDS - acquired immune deficiency syndrome
CIO - community investment officer
CRA - Community Reinvestment Act
FHLBank - Federal Home Loan Bank
FHLBanks -
FIRREA - Financial Institutions Reform, Recovery, and Enforcement
Act
GAO - General Accounting Office
HOME -
HFA - Housing Finance Agency
HUD - Department of Housing and Urban Development
OHF - Office of Housing Finance
Letter
=============================================================== LETTER
B-260026
June 9, 1995
Congressional Recipients
This report, mandated by the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, assesses the Federal Home Loan Bank
System's implementation of the Affordable Housing Program by
addressing (1) how the program's funds have been used to support
affordable housing initiatives, (2) how the program has been
administered, and (3) what opportunities exist for improvement. The
report contains recommendations aimed at improving the program's
administration and assistance to the intended beneficiaries.
We are sending copies of this report to congressional committees and
subcommittees interested in affordable housing; the Secretary of
Housing and Urban Development; the Chairman, Federal Housing Finance
Board; the Director, Office of Management and Budget; and other
interested parties. We will also make copies available to others on
request.
If you or your staff have any questions about this work, please call
me at (202) 512-7631. Major contributors to this report are listed
in appendix VIII.
Judy A. England-Joseph
Director, Housing and Community
Development Issues
List of Recipients
The Honorable Connie Mack
Chairman
The Honorable John F. Kerry
Ranking Minority Member
Subcommittee on Housing Opportunity
and Community Development
Committee on Banking, Housing,
and Urban Affairs
United States Senate
The Honorable Rick A. Lazio
Chairman
The Honorable Joseph P. Kennedy II
Ranking Minority Member
Subcommittee on Housing and
Community Opportunity
Committee on Banking and
Financial Services
House of Representatives
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
Decent and affordable housing for every American family has been a
goal of national housing policy since 1949. A shortage of affordable
housing has prompted the Congress to expand the capital available to
finance such housing. The Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 required, among other things, that the
Federal Home Loan Bank System establish an Affordable Housing Program
to help finance housing for households with very low, low, and
moderate incomes and directed that GAO evaluate this program.
This report examines (1) how the program's funds have been used to
support affordable housing initiatives, (2) how the program has been
administered, and (3) whether there are opportunities to improve the
program as a source of housing finance.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
The primary function of the Federal Home Loan Banks (banks) is to
make loans to their members for use in financing housing and economic
development. In addition, the law requires the banks to provide
subsidies, assessed annually from their net income, to support
affordable housing. The federally chartered, privately owned Federal
Home Loan Bank System comprises 12 regional banks and over 5,300
member institutions, including savings and loan associations, savings
banks, commercial banks, credit unions, and insurance companies. To
regulate the System, the 1989 act created the Federal Housing Finance
Board (Finance Board), whose five directors are responsible for
making policy decisions and enforcing the program's regulations.
Within the Finance Board, the Office of Housing Finance is
responsible for day-to-day oversight and administration of the
program, and the Office of Examination and Regulatory Oversight is
responsible for reviewing the banks' compliance with the program's
policies and regulations. In each bank, a community investment
officer and staff manage the program and an advisory council provides
information on the diverse needs for affordable housing within the
bank's jurisdiction.
Member institutions compete for program funds by submitting
applications to their bank semiannually on behalf of housing
projects' developers/sponsors. Banks evaluate and rank applications
on the basis of systemwide and bank-specific criteria and the
program's objectives. The highest-ranked projects are then submitted
to the Finance Board for final approval.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
Through 1993, the Federal Home Loan Bank System provided nearly $234
million for the program. These funds were used to help leverage an
additional $3 billion from other sources to finance over 1,600
projects containing over 62,000 units of affordable housing in urban,
suburban, and rural communities. Aside from its direct impact on the
beneficiaries, the program has also encouraged more lenders and
sponsors to finance and develop affordable housing.
The administration of the program by the banks and the Finance Board
has continued to improve. In response to problems identified by the
Board's examiners, the banks have significantly improved their
documentation of critical decisions on how they select and fund
projects and of their compliance with the program's requirements.
Likewise, the Office of Housing Finance has increased its oversight
of applications and its responsiveness to requests from the banks
concerning applications and clarification of the program's
regulations.
However, the Finance Board's examiners continue to cite several banks
for deficiencies in selecting projects and in calculating the amount
of their Affordable Housing Program subsidies. Also, reporting and
monitoring responsibilities are not well defined for the
participating banks, members, and project sponsors or well
coordinated with those of other housing programs. The goals of the
Affordable Housing Program may also be weakened because many Federal
Home Loan Banks currently do not have adequate procedures for
documenting and verifying that the projects' beneficiaries are
eligible for such benefits on the basis of their income and for
ensuring that projects comply with any unique commitments made in the
original applications. Finally, the Board of Directors of the
Finance Board lacked a quorum from January 1994 to May 1995. While
the absence of a quorum may not have impeded the enforcement of some
of the Affordable Housing Program's existing regulations, it delayed
the Finance Board's action on compliance issues requiring policy
determinations in cases in which existing regulations are silent or
unclear.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
PROGRAM HAS INCREASED SUPPLY
OF AFFORDABLE HOUSING AND
FINANCING CAPACITY OF
HOUSING PROVIDERS
-------------------------------------------------------- Chapter 0:4.1
The program has generally met the Congress's intention that it be
used as a flexible source of funding to increase the supply of
affordable housing. In the program's first 4 years, the 12 Federal
Home Loan Banks committed about $234 million in subsidies, and these
funds helped leverage an additional $3 billion from public and
private sources. Nationwide, over 1,600 projects, encompassing over
62,000 housing units, were financed. For 1993, the average subsidy
was $3,800 per unit, or about 7 percent of the average cost of
developing a unit.
The program has served a diverse group of beneficiaries. For
single-family housing, subsidies have been used to reduce a
property's purchase price, lower mortgage interest rates, and help
prospective home buyers with down payments and closing costs. For
multifamily housing, the program has been used as both a source of
equity and a way to reduce the costs of financing projects'
construction or rehabilitation. Of the approximately 1,600 projects,
31 percent include units for the handicapped, 28 percent include
units for the homeless, 16 percent include units for the elderly, and
7 percent include single-room-occupancy units.
The program has also been a key resource in helping lenders and
sponsors broaden their capacity to finance affordable housing. In a
GAO survey of lenders participating in the program, 58 percent said
the program was a "very" or an "extremely" important factor in giving
them the additional experience they needed to increase their
financial commitment to affordable housing. In the same survey, 87
percent of the projects' sponsors called their participation in the
program "very" or "extremely" important in developing affordable
housing. These sponsors said that without funding from the program,
the costs of the projects would have been higher and about half the
projects may not have been developed.
PROGRAM'S ADMINISTRATION HAS
IMPROVED, BUT SOME PROBLEMS
REMAIN
-------------------------------------------------------- Chapter 0:4.2
The banks' administration of the program has progressively improved
in response to examinations conducted by the Finance Board's Office
of Examination and Regulatory Oversight and as a result of increased
oversight and guidance by the Office of Housing Finance.
Furthermore, the boards of directors and affordable housing advisory
councils of all the banks have helped strengthen the program's
administration. Initial examinations in 1992 disclosed a pervasive
lack of documentation to substantiate decisions on how they select
projects and calculate the funding as well as their compliance with
the program's requirements. The examiners were thus hampered in
evaluating how well the program was meeting its statutory and
regulatory objectives. Most of the banks responded to these findings
by significantly improving their internal controls and adequately
documenting their actions. These improvements have contributed to a
proposal to delegate greater administrative authority to the banks,
including the final approval of applications. In addition, an
increase in staff in the Office of Housing Finance has enabled it to
more effectively review applications and provide more timely
responses to requests from the banks for modifications to approved
applications and clarifications of the program's regulations.
Finally, while some sponsors of subsidized projects may not have
received the entire amount of the subsidies provided by the banks
through their member financial institutions, partly because an
inefficient procedure was used to calculate some subsidies, this
procedure has been corrected. In GAO's opinion, this change ensures
compliance with the statutory requirement that subsidies provided by
the banks to their members are passed on to the ultimate borrower
(the project's sponsor).
Despite this progress, problems persist. First, some banks continue
to be cited by the Finance Board's examiners for not following
regulations requiring them to make clear distinctions among
applications. Unless such distinctions are made, less deserving
applicants may be funded at the expense of more deserving ones.
Second, the program's regulations implementing the act do not
adequately define or link the responsibilities of the banks, members,
and projects' sponsors for reporting and monitoring. As a
consequence, the Board's examiners and GAO found a lack of (1)
documentation and verification that the beneficiaries of projects
assisted by the program were eligible for such assistance and (2)
information about the success of a project in meeting its unique
commitments to communities and residents. These features are a large
part of the reason the projects were approved. If left uncorrected,
the problems resulting from inadequate monitoring could worsen.
According to the Office of Housing Finance's estimates, the number of
projects in need of monitoring will grow to about 5,000 in 10 years.
Such growth increases the importance of better coordinating the
monitoring of these projects with that of other housing programs that
also subsidize the same projects.
The resolution of these problems has been hampered because the
Finance Board's Board of Directors did not have a quorum between
January 1994 and May 1995. In May 1995, the Congress confirmed two
new Board members. This congressional action established a quorum
and restored full authority to the Finance Board to clarify existing
policy, formulate new policy, and consider proposed changes in the
program's regulations.
OPPORTUNITIES EXIST FOR
IMPROVING THE PROGRAM
-------------------------------------------------------- Chapter 0:4.3
The Affordable Housing Program could be more effective if, among
other things,
-- the Board of Directors resolved those cases in which the
subsidies provided under the program may not have fully
benefited the projects' sponsors or the subsidies may have been
used for ineligible purposes and
-- the reporting and monitoring responsibilities of all
participants in the program were better defined and integrated,
as well as better coordinated with the efforts of other housing
agencies monitoring the same projects.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5
To ensure that the Federal Home Loan Banks continue to meet their
statutory and regulatory obligations under the Affordable Housing
Program and to improve the program's utility in developing affordable
housing, GAO is recommending that the Board of Directors of the
Federal Housing Finance Board (1) ensure that the banks'
contributions to the program are used for eligible purposes and that
the full amount of these contributions is passed on to the projects'
sponsors; (2) resolve both current and future cases in which the
above conditions may not be met; (3) ensure that any revised
regulations for the program clearly define and integrate the
monitoring and reporting responsibilities of all participants in the
program; (4) direct the Federal Home Loan Banks to improve, as
necessary, their procedures for documenting and verifying that the
beneficiaries of the program are eligible on the basis of their
income and that any unique commitments made in applications are
fulfilled; and (5) encourage the banks to improve their monitoring
and reporting of projects through closer coordination with
experienced agencies monitoring housing programs that also provide
funds for these projects.
AGENCY COMMENTS AND GAO'S
EVALUATION
---------------------------------------------------------- Chapter 0:6
In commenting on a draft of this report, the Federal Housing Finance
Board stated that it agreed with GAO's findings that the Affordable
Housing Program has successfully increased the supply of affordable
housing and that there has been significant improvement in the
Federal Home Loan Banks' administration of the program. While
generally agreeing with the report's conclusions, the Finance Board
did not believe that the report adequately communicated the technical
complexities involved in calculating the amount of subsidies. Nor
did the Board believe that the lack of a quorum on its Board of
Directors for nearly a year and a half has delayed the enforcement of
existing regulations. GAO continues to believe that the report
accurately addresses both of these issues. Specifically, this report
acknowledges the technical complexities of calculations and offers an
alternative for minimizing the technical problems associated with
projects funded under the program. GAO also points out that the
Finance Board could not make clarifying policy decisions without a
quorum in cases in which existing regulations are silent or unclear.
The Finance Board's comments on a draft of the report did not address
the report's proposed recommendations. The full text of the Finance
Board's comments and GAO's response appears in appendix VII.
INTRODUCTION
============================================================ Chapter 1
Decent and affordable housing for every American has been a goal of
national policy since 1949. In recent years, however, the shortage
of affordable rental and owner-occupied housing, particularly for
households with low and very low incomes, has been growing.\1 As a
partial response, the Congress expanded the role of the Federal Home
Loan Bank (FHLBank) System in lending for affordable housing through
the passage of the Financial Institutions Reform, Recovery, and
Enforcement Act (FIRREA) of 1989. This act, among other things,
created the Affordable Housing Program (AHP) for the purpose of
increasing the FHLBank System's support for affordable housing.
--------------------
\1 Under this program, low-income households are defined as those
with incomes of 80 percent or less of an area's median income
adjusted for family size, while very low-income households are those
with incomes of 50 percent or less of an area's median income
adjusted for family size.
BACKGROUND
---------------------------------------------------------- Chapter 1:1
The Congress created the FHLBank System in 1932. The System's
purpose is to support housing finance through a nationwide structure
of 12 regional FHLBanks\2
and over 5,300 member institutions. These financial institutions,
which become members by purchasing stock in their regional FHLBank,
include savings and loan associations, savings banks, credit unions,
commercial banks, and insurance companies.\3
The primary function of the 12 regional FHLBanks is to make loans,
known as credit advances, to their members. These loans provide
members with additional financial liquidity and can be used to help
finance housing and economic development projects. The FHLBanks'
sources of funds for making advances are (1) consolidated
obligations, which are debt securities issued in the capital markets
jointly by the 12 FHLBanks; (2) stock purchased by member
institutions; and (3) members' deposits at the FHLBanks.
In addition to creating the AHP, FIRREA abolished the FHLBank
System's old regulator (the Federal Home Loan Bank Board) and created
a new regulator, the Federal Housing Finance Board (Finance Board).
The Finance Board is governed by a five-member Board of Directors
consisting of a chairperson and four board members. The Finance
Board is required to ensure the financial safety and soundness of the
12 FHLBanks. It also ensures that the FHLBank System accomplishes
its broad public policy mission of supporting housing finance and
fulfilling statutory requirements under the AHP.
--------------------
\2 See app. I for a list of the states served by each FHLBank.
\3 FIRREA expanded voluntary membership in the System to include
commercial banks and credit unions that had at least 10 percent of
their assets invested in residential home mortgage loans. In the
past 5 years, the number of commercial institutions has increased
substantially and now exceeds the number of thrifts that are members.
HOW THE AFFORDABLE HOUSING
PROGRAM WORKS
---------------------------------------------------------- Chapter 1:2
Under the AHP, the 12 district FHLBanks provide subsidies to members
engaged in long-term lending for owner-occupied and rental housing
targeted to households with very low, low or moderate incomes.
Subsidized loans (advances) are provided to members who lend the
funds at reduced interest rates for specific projects. Direct
subsidies (grants) are provided to members who pass the subsidies
directly to specific projects or who use the subsidies to reduce the
interest rate on loans that the members themselves provide to
specific AHP projects. These subsidies--awarded semiannually through
a competitive process among members within each FHLBank's
district--are designed to encourage the FHLBanks' members to increase
their overall support for affordable housing. FIRREA allows AHP
subsidies to finance
-- owner-occupied housing for households whose income does not
exceed 80 percent of the area's median income, or
-- rental housing, in which at least 20 percent of the units are
occupied by and affordable to very-low-income households for the
building's remaining useful life or the term of the mortgage.
When the AHP was established, its supporters envisioned that it would
help stimulate and expand the System's overall involvement in
community lending and thus help develop much-needed housing for
lower-income households. Given the costs and complexities of
developing housing for these households, the AHP was intended to
encourage new and creative relationships among member institutions
and local developers that would help attract other private and public
sources of development capital. The AHP was also intended to help
meet the housing needs of diverse populations and encourage the
development of affordable housing projects in underserved areas, such
as rural communities.
To finance the AHP, the Congress required each FHLBank to annually
designate a specified percentage of its previous year's net income to
finance subsidized advances to the member institutions. For 1995 and
beyond, the contributions are 10 percent of the System's annual net
income in the preceding year or $100 million, whichever is greater.\4
FIRREA mandates that if the income-based contributions do not meet
these requirements, each of the FHLBanks must contribute additional
funds on a pro rata basis so that the minimum annual contribution is
attained.
--------------------
\4 FIRREA mandated that the systemwide contribution would be 5
percent of net income, or $50 million, through 1993, increasing to 6
percent of net income, or $75 million, whichever was greater, in
1994.
THE PROGRAM'S ADMINISTRATION
-------------------------------------------------------- Chapter 1:2.1
The Finance Board oversees and helps administer the AHP. Its Board
of Directors is responsible for issuing the program's regulations and
establishing and interpreting the program's policies. Also, the
Board of Directors decided that in the program's formative years it
would take an active role in helping to ensure implementation of the
program and operational consistency among the 12 FHLBanks.
The Board of Directors has to a large extent delegated oversight of
the program's day-to-day activities to the Office of Housing Finance
(OHF), which is aided in its responsibilities by the Finance Board's
Office of General Counsel and the Office of Examination and
Regulatory Oversight. In fiscal year 1993, about five
full-time-equivalent staff administered the program from the Finance
Board's headquarters in Washington, D.C. Key activities of this
office include publishing and interpreting regulations, making
recommendations to the Finance Board about which projects should be
approved for funding, advising the FHLBanks of revised or recommended
policies and procedures, and ensuring that the FHLBanks comply with
these policies and procedures. Additional responsibilities include
providing policy guidance and technical support to the examination
staff and maintaining a computerized data base containing information
on all approved AHP projects.
Within each of the 12 FHLBanks, a designated community investment
officer (CIO) and staff administer the AHP program. Their
administrative activities include (1) marketing the program to member
institutions and project sponsors; (2) providing technical assistance
to members and project sponsors that are preparing applications; (3)
evaluating, scoring, and ranking all applications within the FHLBank
district and making recommendations to the Finance Board; (4)
monitoring the projects; and (5) enforcing the program's
requirements.
Each FHLBank is also required to appoint a 7- to 15-member advisory
council charged with providing information on affordable housing
needs throughout its region. These councils must offer suggestions
on how the program's funds should be used. Each council is required
to prepare an annual report for the Finance Board that assesses the
operation and the results of its FHLBank's activities in the AHP.
These councils, which are required to meet at least quarterly with
FHLBank representatives, must draw their membership from among
developers of low-income housing, housing advocates, and nonprofit
and community-based organizations. The council also can include
representatives of state and local government agencies. Figure 1.1
shows the participants in the program.
Figure 1.1: The Affordable
Housing Program of the Federal
Home Loan Bank System
(See figure in printed
edition.)
Source: Based on information
from the Federal Housing
Finance Board.
(See figure in printed
edition.)
THE APPLICATION AND
EVALUATION PROCESS
-------------------------------------------------------- Chapter 1:2.2
Applications for AHP funding are submitted semiannually by member
institutions, on behalf of project sponsors, to their respective
regional FHLBank. FHLBanks evaluate, score, and rank the
applications on the basis of systemwide and bank-specific criteria
and the program's objectives, using a 100-point scoring system
outlined in the program's regulations. These regulations require
FHLBanks to give the maximum point score available to the project or
projects that best achieve each criterion; the remaining projects are
scored on a declining scale.
Projects must meet four threshold tests to qualify for
consideration.\5
After satisfying the threshold tests, projects may earn up to 75
points depending upon the extent to which the (1) homeownership
projects target low-income households below the statutory maximum
income level of 80 percent of an area's median income, or rental
projects target more than 20 percent of the units for very-low-income
households--those with incomes 50 percent or below of an areas'
median income; (2) sponsors of proposed projects plan to retain the
housing as affordable for the beneficiaries of the project; (3)
projects maximize the number of units built per AHP subsidy dollar;
(4) projects involve local support by community organizations other
than project sponsors; (5) projects maximize community stability and
minimize the displacement of other moderate- to very-low-income
households; and (6) projects use innovative and experimental
financial and nonfinancial approaches for providing affordable
housing.
The remaining 25 points may be awarded to projects depending upon the
extent to which they meet seven specific funding priorities.\6
Projects that meet three or more of these funding priorities are
considered for funding ahead of those that do not. The relative
importance of all scoring categories is depicted in figure 1.2.
Figure 1.2: Categories for
Scoring Applications
(See figure in printed
edition.)
Source: GAO's depiction of information in the AHP's regulations.
Although each FHLBank operates under these general funding
priorities, each has some flexibility to refine the national
guidelines to ensure that they appropriately reflect bank-specific
funding priorities.\7 For example, in 1993 several FHLBanks
established as their priority the funding of rural projects. Another
FHLBank established as its priority applications received from
members that had not previously obtained an AHP subsidy, while
another had a priority for a state in which no AHP application was
approved in the prior round of funding.
Once the FHLBanks develop lists of their highest-scored applications
and several alternates, they submit these applications to the Finance
Board for final review and approval. After the Finance Board reviews
and approves the applications, the FHLBanks and their members enter
into formal financial agreements that detail how the funds will be
used and how members will report on the status of their projects,
among other things. Monitoring and reporting activities for both
FHLBanks and members are based on statutory and regulatory
provisions.
--------------------
\5 The four threshold tests are (1) compliance with fair housing laws
and regulations, (2) the feasibility of the project, (3) the ability
of the member to qualify for an advance to fund the project, and (4)
the ability to begin the project within 12 months.
\6 These priorities are (1) provide financing for owner-occupied
housing for households with very low, low, and moderate incomes, in
that order; (2) provide financing for rental housing in which at
least 20 percent of the units are occupied by and affordable to
very-low-income households; (3) finance housing projects that are
currently held by a U.S. government agency or instrumentality; (4)
finance projects that are sponsored by nonprofit organizations,
states, or local and state housing authorities; (5) finance projects
that empower the urban or rural poor through resident management,
homesteading, self-help housing, or similar programs that meet
critical housing needs in urban or rural areas; (6) finance projects
that provide permanent housing for the homeless; and (7) finance
housing developments that meet specific housing objectives within the
FHLBank's district.
\7 See app. II for the FHLBanks' priorities for the districts in
1993.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:3
As required by section 721 of FIRREA, this report assesses the
FHLBank System's implementation of the AHP by addressing (1) how AHP
funds have been used to support affordable housing, (2) how the AHP
has been administered, and (3) what opportunities exist to improve
the program as a source of housing finance.
To examine how the program's funds have been used to support
affordable housing initiatives, we reviewed nationwide and
district-specific data on funding from 1990 through 1993. These data
identify all participants in the projects, the types of projects, the
terms of the subsidies, the extent to which other funds were used in
addition to those from the AHP, and the types of beneficiaries of
each project. In addition, we (1) reviewed annual reports from AHP
advisory councils that provide data on regional housing priorities
and how the AHP has helped meet these priorities, (2) surveyed by
questionnaire the community investment officers responsible for
administering the program at each of the FHLBanks and the
chairpersons of each district's AHP advisory council, and (3)
surveyed by telephone a random sample of FHLBank System members and
project sponsors\8 and conducted focus groups with various members
and sponsors to discuss their experiences with the AHP on selected
projects. Additionally, we visited AHP-assisted projects in
California, New York, New Jersey, Maryland, and the District of
Columbia to gain a first-hand perspective on the use and results of
AHP funding on various projects.
To determine how the AHP has been administered and whether there are
opportunities for improvement, we assessed how the FHLBank System (1)
markets the AHP, including providing technical assistance to members
and project sponsors; (2) calculates project subsidies and evaluates,
scores, and selects projects; and (3) monitors approved projects and
enforces the program's requirements. As part of this assessment, we
reviewed the program's regulations, the Finance Board's and FHLBanks'
operating guidelines, all Finance Board examination reports between
1992 and the first half of 1994, various FHLBank audit reports, and
Finance Board staff memorandums and reports. We also interviewed a
current and a former member of the Board of Directors of the Finance
Board, key senior managers and staff of the Finance Board, and the
AHP staff affiliated with the FHLBanks of New York and San Francisco.
We also held discussions with the national chair of the 12 AHP
district advisory councils and other council members.
To obtain additional perspectives on members' and sponsors'
experiences with the AHP, we held six focus group sessions in New
York and California. For these sessions, we judgmentally selected
members and sponsors that had received at least one AHP subsidy. In
New York, we also convened a focus group comprising housing sponsors
that had applied for funding but whose projects had not been
approved. We also held a panel discussion with representatives of
the Federal Home Loan Bank of New York's AHP District Advisory
Council. To obtain additional perspectives on how the AHP has been
administered to date, we sent surveys to the community investment
officers affiliated with each of the 12 FHLBanks and to the
chairpersons of each of the AHP district advisory councils. We also
conducted telephone surveys of randomly selected FHLBank members and
project sponsors that had participated in the program to obtain their
perspective on the program's administration.
Our work was conducted at the Federal Housing Finance Board's
headquarters in Washington, D.C.; the FHLBanks located in New York
City and San Francisco, California; the offices of various housing
developers in San Francisco and Los Angeles, California, New Jersey,
and New York; and several judgmentally selected housing developments
supported by the program. Housing developments we visited were
judgmentally selected on the basis of various factors, including
housing type (i.e., single-family homeownership and multifamily
rentals), target groups served (i.e., people with low and moderate
incomes and special needs, including the elderly), and stage of
development. For our telephone surveys, we randomly selected member
institutions and sponsors that had completed one or more AHP-assisted
projects.
We contracted with James D. Vitarello to provide advice on various
aspects of job design, execution, and reporting. Mr. Vitarello has
extensive experience in community development financing and has
provided advice to a wide variety of commercial banks; nonprofit
organizations; pension funds; and federal, state and local
governments. He is the principal author of over 20 articles in this
area.
Written comments from the Finance Board on a draft of this report are
included in appendix VII. We have incorporated these comments and
our evaluation of them where appropriate. Finance Board officials
also offered a number of technical suggestions and clarifications,
which have also been included where appropriate. We conducted our
review between November 1993 and December 1994 in accordance with
generally accepted government auditing standards, except that we did
not verify or validate the reliability of information on the program
generated by the Finance Board's computerized data base for the AHP
program. However, through discussions with FHLBank program
officials, members, and sponsors and information obtained from them,
we determined that the Finance Board's data were generally reliable
and usable for our purposes.
--------------------
\8 We randomly selected projects completed as of December 31, 1992,
and contacted the members and sponsors associated with these
projects. See app. III for a detailed description of our survey
methodologies.
AHP HAS EXPANDED LENDING FOR
AFFORDABLE HOUSING
============================================================ Chapter 2
Through 1993, the FHLBank System's Affordable Housing Program helped
finance over 62,000 affordable rental and owner-occupied housing
units in central city, suburban, and rural communities. These units
serve a variety of beneficiaries, including households with very low
incomes, elderly households, and households with special needs.
Subsidies provided through the AHP have helped to reduce down
payments and closing costs for first-time homeowners as well as the
financing costs of developing multifamily rental housing.
The AHP is viewed by members of the FHLBank System and project
sponsors as a flexible source of funding, which is often needed in
developing affordable housing projects. The AHP has helped members
expand their interest and experience in financing affordable housing
while helping them meet their statutory requirements on community
lending. The AHP has been particularly useful to sponsors by helping
them leverage the additional sources of capital necessary in
developing their individual projects.
Although individuals involved with the AHP are very supportive of the
program, suggestions have been made to enhance the program's
usefulness. Specific suggestions include increasing the number of
members participating in the AHP to help improve sponsors' access to
the program's benefits. Also, some program participants have
suggested changing the scoring criteria to achieve a better
competitive balance between rental projects and homeownership
projects. Finally, some lenders, sponsors, AHP district council
representatives, and FHLBank program officials suggest expanding the
purposes for which AHP subsidies can be used--to include, for
example, the predevelopment costs associated with determining the
feasibility of undertaking an affordable housing project, social
services such as on-site child care for working parents, and
homeownership counseling for first-time homebuyers. The Finance
Board and the FHLBanks are aware that there are advantages and
disadvantages to the various suggested changes and plan to consider
them in future revisions to the program's regulations.
A NATIONWIDE OVERVIEW OF AHP
PROJECTS
---------------------------------------------------------- Chapter 2:1
Since the AHP's inception in 1990, the program has become a valuable
new source of housing finance that has been used in conjunction with
other funding sources to help finance owner-occupied and rental
housing designed to meet the diverse needs of households with very
low, low, and moderate incomes.
TYPE AND LOCATION OF
PROJECTS
-------------------------------------------------------- Chapter 2:1.1
According to the Finance Board's data, through 1993 the FHLBank
System made approximately $234 million in subsidies available through
the AHP.\9
Together with an additional $3 billion from other sources, these
funds helped finance about 1,600 projects with over 62,000 units
nationwide, according to the Finance Board's data. Almost two-thirds
of these were multifamily projects in which AHP subsidies were
targeted to households with very low and low incomes. Most of the
remaining projects tended to support homeownership initiatives, many
for first-time homebuyers with low incomes. Figure 2.1 shows the
distribution of projects supported by the AHP by type.
Figure 2.1: Percentage of
Approved Projects by Type,
1990-93
(See figure in printed
edition.)
Source: Based on data from the Federal Housing Finance Board.
AHP-assisted projects are located throughout the nation; however,
they tend to be concentrated in the more populated Mid-Atlantic and
midwestern states, and in California, Texas, Colorado, and Georgia.
(See fig. 2.2.)
Figure 2.2: Geographic
Distribution of AHP Units by
State
(See figure in printed
edition.)
Source: Based on data from the
Federal Housing Finance Board.
(See figure in printed
edition.)
--------------------
\9 The FHLBank System was required by law to contribute at least $50
million annually over the period 1990-93. Therefore, the $234
million total contribution is the sum of funding over 4 separate
years, not adjusted for changes in inflation.
USES OF AHP FUNDS
-------------------------------------------------------- Chapter 2:1.2
The Congress intended the AHP to be a flexible source of funding that
could be used in various creative ways to develop affordable housing.
The AHP has generally met this expectation. For example, in the
development of affordable single-family housing, AHP subsidies have
been used to (1) reduce a property's purchase price, (2) lower
interest rates on mortgages, (3) provide homebuyers with assistance
with down payments, and (4) provide homebuyers with assistance with
closing costs. In the case of multifamily housing, the AHP has been
used, for example, as both a source of equity and a means to reduce
interest rates on debt financing for constructing a project.
AHP funds have thus served to benefit a diverse constituency,
including the homeless, the elderly, single working parents, people
with physical and mental disabilities, and people living with AIDS
and suffering from substance abuse. As reported by the Finance
Board, of the approximately 1,600 projects subsidized by the program
through 1993, about 31 percent include units for the handicapped,
about 28 percent include units for the homeless, about 16 percent
include units for the elderly, and about 7 percent include
single-room-occupancy units.
The following examples show how the AHP has been used with other
funding sources to serve the diverse population of lower-income
households:
-- A $125,104 AHP subsidy was used in North Amityville, New York,
to help low-income families, including single working parents,
purchase their first home. The subsidy was used in connection
with a 72-unit 2-bedroom townhouse complex, in an area with a
predominately minority population where there was a serious lack
of affordable housing. The complex cost approximately $6
million to develop. With the help of a $1.8 million grant from
the state of New York, the purchase price per unit was reduced
from about $84,000 to about $59,000, making the entire complex
more affordable to lower-income households. The AHP subsidy was
used to further reduce the purchase price for 23 of the
complex's 72 units by up to $13,500. This enabled households
with incomes between $21,000 and $39,700 to qualify for
mortgages that they otherwise may not have qualified for.
-- A $2.6 million AHP subsidy was used to help finance the
construction of a $36 million 175-unit multifamily rental
housing project in San Francisco, California. This subsidy is
the largest awarded to date in the program. The project, which
is located in one of the more rundown neighborhoods in the city,
benefits both large families and senior citizens with very low
incomes. It is unusually costly because, in addition to the
residential units, it contains a child care center, retail
shops, an underground parking garage, and a large interior
courtyard. In addition to the AHP subsidy, the project received
other subsidized financing, including $15 million in low-income
housing tax credits and several million dollars in grants and
loans from the city of San Francisco and the state of
California. As a result of all the subsidized financing,
including that from the AHP, rents at the project reportedly
were at least 50 percent below comparable market rents.
-- A $74,660 AHP subsidy was used in West Hollywood, California, to
help finance the construction of a new 22-unit multifamily
rental project accessible to the disabled whose total
development cost was about $3.7 million. Nineteen units were
targeted to households with incomes no higher than 50 percent of
the area's median income, two units were targeted to households
with incomes between 51 and 60 percent of the median, and one
unit was targeted to households with incomes at 25 percent or
less of the median. In addition to considering these
eligibility requirements based on income, the project gives a
preference for the units to persons living with AIDS. The AHP
subsidy was used in conjunction with approximately $2.6 million
from the state of California and the city of West Hollywood,
along with $1.1 million in low-income housing tax credits.
Without the early commitment of the AHP subsidy, the project may
not have been developed since the award of the tax credits was
reportedly dependent on obtaining the AHP funding.
AHP HAS EXPANDED PARTICIPATION
BY LENDERS AND SPONSORS IN
DEVELOPING AFFORDABLE HOUSING
---------------------------------------------------------- Chapter 2:2
We found a broad consensus among members of the FHLBank System and
housing sponsors that the AHP has provided them with additional
opportunities to expand their involvement in developing affordable
housing.\10 For members, the AHP has been a valuable resource in
helping them gain experience in lending for affordable housing and in
meeting their obligations to invest in the community. For project
sponsors, the AHP has reportedly often been a critical financial
component to their development of affordable housing.
--------------------
\10 We surveyed members and sponsors on the basis of a random sample
of AHP projects completed by December 31, 1992. Sampling errors for
the response estimates discussed in this chapter are contained in
app. IV.
LENDERS REQUEST AHP
SUBSIDIES TO EXPAND THEIR
AFFORDABLE HOUSING
ACTIVITIES
-------------------------------------------------------- Chapter 2:2.1
Demand for AHP funds by FHLBank System members has consistently
surpassed the amount of funding available. Specifically, over the
AHP's first 4 years, approximately 50 to 60 percent of applications
were not approved in the funding round in which they were submitted.
Moreover, as figure 2.3 shows, this gap between the number of
applications submitted and those approved remained relatively
constant between 1990 and 1993.\11
Figure 2.3: Summary of AHP
Applications Nationwide,
1990-93
(See figure in printed
edition.)
Source: Based on data from the Federal Housing Finance Board.
The high demand for AHP funds results from, among other things, the
(1) positive experiences of the members using the program; (2)
statutory requirements that banks meet community investment needs,
which the AHP helps them fund; and (3) outreach efforts of the
FHLBanks. Our nationwide survey of the members that have obtained
AHP subsidies and our focus group discussions in New York and
California disclosed that most members generally have had positive
experiences with the program. For example, the members surveyed
reported that the program's administrative costs for most projects
were not burdensome. Furthermore, of the members who plan to
increase their AHP participation, about half would cite the projects'
profitability and relatively low risk among the reasons for doing so.
Also, we estimate that about 58 percent of the members would say that
their participation in AHP was a "very" to "extremely" important
factor in giving them the additional experience they needed to
increase their financial commitment to affordable housing. This
response is particularly noteworthy because our survey showed that
before becoming involved with the AHP, many members had only limited
experience in this type of lending.
Another key reason for members' increased demand for AHP subsidies is
a reaction to growing regulatory pressure that members meet their
obligations under the Community Reinvestment Act (CRA).\12 This act
mandates that federally regulated financial institutions have "a
continuing and affirmative obligation to help meet the credit needs
of the local communities in which they are chartered." Supporting the
development of affordable housing can help members meet their
obligations under the CRA. We estimate that 82 percent of the
members would cite the CRA as a factor in their decision to become
involved with the AHP. Also, we estimate that among members planning
to expand their AHP activity, about 34 percent of the members would
cite the CRA as the most important reason in their decision.
A third major reason for members' involvement in the AHP stems from
the marketing and outreach efforts of the 12 FHLBanks. Because they
recognize the importance of marketing and outreach to the success of
the program, the FHLBanks have used a variety of strategies to inform
their members and others about the availability and the benefits of
the AHP to their financial institutions. Our survey of CIOs
disclosed that most of the FHLBanks have used site visits, mass
mailings, personal correspondence, and presentations to a "great" or
"very great" extent to publicize the availability of the program to
members and project sponsors. In fact, the FHLBanks reported to us
that in 1993 alone, they had made almost 1,100 site visits and were
involved in about 180 presentations about the program.
Although the nature and extent of the FHLBanks' efforts have varied,
our focus groups and our nationwide survey of the FHLBanks' members
disclosed that the FHLBanks' marketing and outreach activities have
indeed contributed to members' decisions to participate in the
program. Based on our nationwide survey, we estimate that 78 percent
of the members would say that among the reasons they became involved
in the program was the encouragement they received from FHLBank
staff. Furthermore, this survey indicates that the FHLBanks' efforts
to educate members have helped to lessen some members' concerns about
the riskiness of making loans for affordable housing lending. We
estimate that 53 percent of the members involved in AHP who planned
to increase their participation--including those having little or no
previous experience with developing low- or moderate-income housing--
would cite the relatively low risk of these types of projects as a
contributing factor in their decision to remain involved in the
program.
--------------------
\11 See app. V for members' AHP application history by FHLBank
district.
\12 Enacted as part of the Housing and Community Development Act of
1977.
AHP BENEFITS SPONSORS OF
AFFORDABLE HOUSING
-------------------------------------------------------- Chapter 2:2.2
Project sponsors are largely satisfied with the AHP. Specifically,
we estimate that 87 percent of sponsors believe that their
participation in the AHP was "very" to "extremely" important in
giving them valuable experience in developing affordable housing.
Also, the program is particularly beneficial because its flexibility
helps sponsors achieve the kind of creative financing that is often
needed in developing affordable housing. Reportedly, this
flexibility is particularly beneficial in the early stages of project
development.
Sponsors often must secure subsidized financing from multiple sources
in order to make their projects affordable to households with lower
incomes. However, a key problem for many sponsors is finding public
and private capital that can be committed early in a project's
development so that capital can be leveraged from other sources.
Many of the sponsors we contacted said they have been successful in
leveraging other capital by getting an initial commitment from the
AHP. Project sponsors we interviewed, as well as FHLBank officials,
cited the availability of an early AHP commitment as particularly
beneficial for multifamily projects whose developers seek to use
low-income housing tax credits\13 because some states place a higher
priority on approving projects for tax credits if other funds are
already committed.
Furthermore, based on our nationwide survey, most sponsors believe
that without the AHP their projects would have experienced
difficulties. Although sponsors for most projects would cite
multiple impacts, we estimate that sponsors for about 70 percent of
projects would say that (1) additional funding sources would have
been harder to find and (2) financing would have been more costly.
On the basis of our survey, we also estimate that sponsors for 52
percent of the completed projects would say that without AHP
subsidies their projects would likely not have been developed.
Figure 2.4 summarizes the views of sponsors on the likely impact on
projects if they had not received AHP subsidies.
Figure 2.4: Impact on Projects
If AHP Subsidy Were Not
Received
(See figure in printed
edition.)
Note: Sponsors could indicate one or more potential impacts on the
project.
Source: GAO's analysis of its telephone survey of housing sponsors
based on a random sample of projects.
The positive experiences that sponsors had with the AHP were also
reflected in their responses to a question in our survey asking
whether they planned to increase, maintain, or decrease their
involvement with the program in 1995. We estimate that 60 percent of
sponsors currently plan to increase their level of participation, 37
percent plan to maintain their present level of involvement, and only
3 percent plan to decrease their participation. For those sponsors
we estimate would increase their participation, their reasons for
doing so are summarized in figure 2.5.
Figure 2.5: Reasons Sponsors
Plan to Increase Participation
(See figure in printed
edition.)
Note: Sponsors could indicate one or more reasons to increase
participation.
Source: GAO's analysis of its telephone survey of a random sample of
AHP project sponsors.
--------------------
\13 The Low-Income Housing Tax Credit Program was authorized in the
Tax Reform Act of 1986 to provide an incentive for investors to
construct or rehabilitate low-income housing.
AHP COULD BE MORE RESPONSIVE TO
PROJECT SPONSORS
---------------------------------------------------------- Chapter 2:3
We identified three areas in which the AHP could be more responsive
to the needs of project sponsors. The first, expanding members'
participation in the program, would afford sponsors more options for
financing affordable housing projects. The second, revising the
scoring criteria for applications, would allow sponsors interested in
developing homeownership projects to compete more effectively with
sponsors proposing to develop rental projects. Finally, expanding
the purposes for which sponsors can use AHP subsidies would add to
the program's present flexibility, thereby making it even more
attractive to sponsors. However, expanding the use of AHP subsidies
has potential drawbacks, such as funding certain predevelopment costs
for an affordable housing project that ultimately is not constructed.
OPPORTUNITIES FOR EXPANDING
MEMBERS' PARTICIPATION IN
AHP
-------------------------------------------------------- Chapter 2:3.1
Our review of the FHLBank System's data on project applications
submitted by members from the program's inception through 1993 showed
that each FHLBank is making progress in getting the members who
previously had not participated in the AHP to submit applications.
However, the FHLBanks' degree of success has varied, as has the
overall participation rate of members among the 12 FHLBanks. The
participation rate is the number of members that have submitted at
least one AHP application compared with the total number of members
in the district. This rate averages 27 percent across the System and
ranges from a high of 42 percent to a low of 18 percent in the 12
FHLBank districts.\14
It is reasonable to expect fluctuations in participation rates among
the FHLBanks since there is considerable variation among FHLBank
districts in the number of members and the amount of AHP funding
available. Consequently, a FHLBank with a comparatively large number
of members in relation to its level of AHP funds would find it more
difficult to increase its participation rate than a FHLBank with
fewer members and a greater share of AHP funding. Also,
participation rates among FHLBanks are influenced by the varying
numbers of sponsors in their districts and their capacity to develop
affordable housing. Regardless of the number of members, the level
of program funding, and the number and capabilities of sponsors, all
the FHLBanks have developed strategies to further expand members'
participation in the AHP.
As we discussed earlier, the FHLBanks have used a variety of
marketing strategies to stimulate members' interest in the AHP, and,
after 4 years' experience with the program, are beginning to
strategically target their marketing efforts to further increase
members' involvement. For example, eight FHLBanks we surveyed stated
that they planned to increase their marketing efforts among their
members that had not submitted any applications. Furthermore, five
FHLBanks stated that they were going to target their marketing
activities to a "great" or "very great" extent to those members
located in rural areas--where smaller member institutions are
frequently located. Most of the AHP advisory council chairpersons
believe there is a continued need for additional marketing and they
therefore support these strategies.
Finance Board and FHLBank officials are equally supportive of
expanding marketing strategies to increase participation in the
program. In fact, the Board has encouraged the FHLBanks to market
the program to areas that are underserved by the AHP, including
geographic areas where members' participation is low. Nonetheless,
some FHLBank officials have expressed some concern about the impact
these expanded marketing efforts could have on the AHP. They pointed
out that because the program is already oversubscribed (see fig.
2.3), encouraging more members to submit AHP applications could
frustrate those members and sponsors that are unsuccessful in
obtaining subsidies because of the limited funds that are available
in each funding round. While this concern is valid, it should be
weighed against the benefits that could be gained by increasing
members' involvement. These benefits include (1) better assurance
that all geographic areas are served by the AHP, (2) more members
developing the capacity to make affordable housing loans, and (3)
sponsors having a larger pool of experienced members to draw on in
financing their projects.
--------------------
\14 Appendix VI presents additional information on (1) the growth in
membership in each FHLBank between 1992 and 1993, (2) the
relationship between members submitting applications for the first
time in 1993 and those members that had previously submitted
applications, and (3) the relationship between the total number of
members in each FHLBank district and the number that have applied for
AHP funding.
CHANGING AHP'S SCORING
CRITERIA SO THAT RENTAL
PROJECTS ARE NOT FAVORED
OVER HOMEOWNERSHIP PROJECTS
-------------------------------------------------------- Chapter 2:3.2
The program's current regulations on scoring can discourage some
sponsors and members from participating in the AHP. These
regulations favor rental projects over homeownership projects by
including criteria that rental projects can more readily meet.
Specifically, multifamily rental projects generally can obtain more
points in the scoring process because (1) their development costs per
unit are generally lower than those for single-family housing, (2)
their financial structure typically enables them to more effectively
target very-low-income households, and (3) they generally are
required to remain affordable for low-income families for longer
periods than homeownership projects.
A regulatory review committee established in 1993 by the presidents
of the FHLBanks cited this issue as one to be considered in making
needed changes to the program's regulations. This committee noted
that modifying the selection criteria could help provide more equal
treatment between homeownership and rental projects. In January
1994, the Finance Board published for comment revised program
regulations that proposed separate scoring in certain categories for
rental projects and homeownership projects. Those who specifically
commented on this proposed change supported it. However, these
revised regulations require approval by the Board of Directors of the
Finance Board and, from January 1, 1994, until May 25, 1995, the
Board of Directors has been without a quorum. On May 25, 1995, the
Congress added two members to the Board of Directors, thereby
establishing a quorum. As a result, these and other proposed
revisions to the program's regulations can now be decided.
EXPANDING PURPOSES THAT ARE
ELIGIBLE FOR AHP SUBSIDIES
-------------------------------------------------------- Chapter 2:3.3
Despite the AHP's flexibility, a majority of community investment
officers and AHP Advisory Council chairpersons, along with some
FHLBank members and housing sponsors, believe that the AHP's utility
could be enhanced if the program's funds could be used for various
additional purposes--which often are integral components of an
affordable housing project. For example, some supported the use of
AHP subsidies to help finance (1) the predevelopment costs associated
with conducting studies to determine the feasibility of undertaking
an affordable housing project; (2) social services, such as on-site
child-care facilities; and (3) counseling on homeownership.
Some concerns have been raised, however, about expanding the uses of
the AHP, including funding the costs of the predevelopment studies
designed to determine the feasibility of developing a proposed
affordable housing project. For example, several community
investment officers were opposed to allowing sponsors to use AHP
funds for certain predevelopment activities. They pointed out that
AHP funds could be lost entirely if such feasibility studies were
funded but the project was not undertaken.
The Finance Board and the FHLBanks are aware that some members and
sponsors would like to see the program's regulations revised to allow
for a broader use of AHP subsidies. Accordingly, they plan to
consider such revisions in future changes to the program's
regulations.
CONCLUSIONS
---------------------------------------------------------- Chapter 2:4
In the 4 years since AHP funding first became available, the program
has become an important financial mechanism, helping lenders and
housing sponsors across the nation provide opportunities for
households with very low, low, and moderate incomes to own or rent
affordable homes. Members and sponsors are also very satisfied with
the program, and the demand for program funding consistently exceeds
the available supply. Nevertheless, the AHP could be made more
responsive to project sponsors by expanding members' participation,
making applicants for homeownership projects more competitive with
rental projects, and increasing the options for using AHP funding.
The Finance Board is aware of these and other proposed options for
expanding the use of AHP funding. It plans to consider them, along
with any negative consequences that could result from implementing
them, in future revisions to the program's regulations.
AHP CAN BE IMPROVED BY ADDRESSING
SEVERAL ISSUES IN THE PROGRAM'S
ADMINISTRATION
============================================================ Chapter 3
The administration of the AHP has improved during the program's first
4 years of operation. While there were problems in getting the
program started, examiners from the Finance Board's Office of
Examination and Regulatory Oversight agree that many of these
problems have been addressed, including how AHP subsidies are
calculated and subsequently awarded to applicants. Also, the Finance
Board has developed and proposed comprehensive revisions to existing
regulations to further improve the program.
Despite these actions and the overall positive impact this program
has had on the development of affordable housing, several compliance
issues remain unresolved. Some of these issues apply to the FHLBank
System; others pertain only to the practices of individual FHLBanks.
Systemwide compliance issues concern the way projects are selected
for funding and the need for improvements in the monitoring and
reporting of program results to better ensure that projects are
complying with commitments made in applications and that the
program's overall requirements are being met. The Finance Board's
examiners have also identified specific compliance issues in three
FHLBanks. In one case, the parties disagree over whether the FHLBank
had made its full contribution to the AHP. In two other cases, the
examiners raised questions about whether FHLBanks had used AHP
subsidies appropriately. In all three cases, the Finance Board must
determine whether these findings are valid and, if so, whether each
FHLBank needs to fully or partially reimburse the pool of funds used
to support the program.
It is important that compliance issues both throughout the System and
in individual FHLBanks be addressed promptly, since the program's
funding will increase from 5 percent of the FHLBanks' profits in 1990
to 10 percent of the FHLBanks' profits in 1995, or a minimum of $100
million. With these additional resources, the number of projects
will grow substantially over the coming years.
Part of the solution to addressing these outstanding issues rests
with the Board of Directors of the Finance Board, which has the
statutory authority to enforce the program's policies and
regulations. However, from January 1, 1994, through May 25, 1995, a
period of nearly a year and a half, the Board of Directors did not
have a quorum--the minimum number of members necessary to use its
full statutory authority.
Not having a quorum complicated program administration and
enforcement during this time period. Compliance issues identified by
the Finance Board's examiners pertaining to individual FHLBanks could
have been resolved only if they were found to involve clear
violations of law, regulations, or existing policies because, without
a quorum, the Board could not clarify current policy or craft new
policy as a remedy. No determinations were ever made by the Board of
Directors on these issues during this time. Similarly, without a
quorum, the Board could not interpret or formulate policies to
resolve systemwide compliance issues involving the way projects are
selected for funding and the program's results are monitored.
Finally, proposed regulations covering such changes as expanding the
FHLBanks' authority to approve applications could not move forward
without a quorum.
ADMINISTRATION OF AHP HAS
IMPROVED, AND MORE AUTHORITY IS
ENVISIONED FOR FHLBANKS
---------------------------------------------------------- Chapter 3:1
We reviewed examination results covering a period of 2-1/2 years and
found a clear pattern of continued improvement throughout the
administration of the program. Our assessment of program management
and supervision of the FHLBanks by the Office of Housing Finance
(OHF) has also been positive. This progressive improvement, together
with the FHLBanks' increasing experience in administering the AHP,
has led the FHLBanks to request greater autonomy in administering the
program. Consistent with this request, regulations have been
proposed by the Finance Board that would give the FHLBanks
considerably more administrative discretion, including the authority
to approve applications. Along with this increased authority, the
proposed regulations would require that the FHLBanks develop
comprehensive plans for implementing the program that address the
unique housing needs in their districts while also conforming to
national program requirements.
ADMINISTRATION OF THE AHP
HAS IMPROVED
-------------------------------------------------------- Chapter 3:1.1
Most of the serious compliance problems found in the first round of
AHP examinations conducted in 1992 have been satisfactorily addressed
by a large majority of the FHLBanks. Among the most serious problems
found by the Finance Board's examiners was a pervasive lack of
documentation to substantiate the decisions made on virtually every
issue of program administration, including the selection of projects,
funding, and compliance with program requirements. This lack of
documentation made the initial compliance reviews very difficult for
the examiners.
Most of the FHLBanks responded positively to the initial examination
reports by significantly improving their internal controls and
providing adequate documentation of the actions they took. By 1994,
the Finance Board's examiners found that most of the FHLBanks' files
contained sufficient documentation on the selection and funding of
projects. However, as discussed later in this chapter, the examiners
found that FHLBanks still needed to improve their monitoring and
reporting on the program's results to provide reasonable assurances
that AHP funds were being used in a manner consistent with the
program's policies and regulations.
Aside from improvements made by the FHLBanks, OHF has also increased
its oversight of AHP applications. During most of the first 2 years
of the program, 1990-91, OHF had a small staff and no permanent
director. These conditions hindered oversight of applications. As a
result, some applications that were approved were later criticized by
the Finance Board's examiners. However, by 1992, with the addition
of a permanent director and other staff, the office improved its
review of applications. In contrast to the first 2 years, when there
were no conditional approvals or denials of applications, during 1992
the Finance Board conditionally approved 20 applications and denied
4. The FHLBanks took positive steps to correct problems noted in
1992 because the following year, despite a large increase in the
number of applications approved, the Finance Board conditionally
approved only five applications and denied none.
OHF has also improved its responsiveness to the FHLBanks' requests
for modifications to their applications and clarification of program
regulations. Specifically, during the program's first 2 years, the
FHLBanks were critical of OHF's limited responsiveness to their
requests to modify pending or previously approved applications.
Delays of over 3 months occurred, largely because OHF had a policy of
approving all changes to previously approved applications but did not
have the staff to do so in a timely manner.
In response to the FHLBanks' criticism of these delays, OHF issued
revised procedures\15 that allowed the FHLBanks to make minor
modifications to their applications without the Finance Board's
approval. This procedural change reportedly has helped reduce the
number of requests for modifications sent to OHF as well as the time
required to process such requests. Specifically, in 1993 the number
of requests for modifications declined by about one-third from the
previous year, and these requests were processed in an average of 55
days, compared with 100 days in 1992. In 1994, the Finance Board
issued a blanket approval for the FHLBanks to make all modifications
except those that require additional funding as long as the project,
as modified, would continue to score high enough to be funded in its
original scoring round. Requests for increases in AHP awards
continue to be reviewed and approved by either OHF or the Finance
Board. Finally, according to the Chief Examiner of the Finance
Board, the FHLBanks are increasingly satisfied with OHF's
responsiveness to questions concerning interpretations of the
program's policies and regulations.
--------------------
\15 Special Notice Number 1, issued March 10, 1992, provided guidance
to the FHLBanks' staff on making minor modifications to previously
approved projects as long as these modifications would not materially
affect the basis on which the project was approved.
PROPOSED REGULATIONS ARE
INTENDED TO DELEGATE
INCREASED RESPONSIBILITY TO
FHLBANKS
-------------------------------------------------------- Chapter 3:1.2
As a result of the FHLBanks' improved administration of the program,
the Finance Board has proposed regulations that would delegate
considerably more administrative control to them. Among the most
fundamental changes proposed are (1) devolving authority for the
final approval of applications to each FHLBank and (2) requiring each
FHLBank to develop a comprehensive implementation plan for
administering the program in its district. Proposed implementation
plans must address nine specific elements, such as scoring criteria
and income verification procedures, and must be approved by the
Finance Board.
Devolving the authority to approve applications to individual
FHLBanks has several potential advantages. First, the processing
time and associated administrative costs would likely be reduced
because the Finance Board would not be involved in the approval
process. Second, because the FHLBanks are more familiar with the
housing needs in their respective districts, they are in a better
position than the Finance Board to make final funding decisions.
Finally, removing the responsibility for reviewing applications from
OHF would enable it to spend more time providing technical assistance
to the FHLBanks and facilitate greater coordination between the banks
and other agencies that administer housing programs.
Requiring the FHLBanks to develop comprehensive plans for
implementing the AHP also has advantages. First, it requires each
FHLBank to take a holistic approach in implementing the program by
outlining how it will meet national program goals while also
addressing those housing needs unique to its district. Second, it
requires the FHLBanks to articulate how they will administer a
growing program within the constraints of their staff and resources.
Third, it provides the Finance Board with a measure of accountability
for evaluating each FHLBank's performance in administering the
program. Finally, by requiring that each bank's implementation plan
be approved by the Finance Board, OHF is in a position to request
modifications to any of the specific elements that these plans are to
include.
The proposed regulations were published for public comment in early
1994. Most of the comments supported devolving approval authority to
the FHLBanks to gain the perceived advantages cited above. However,
several concerns were also raised--among them, that devolving the
authority to approve applications could hamper the ability of the
Finance Board and the Congress to exercise effective centralized
oversight of the AHP and that placing greater authority in the hands
of each FHLBank could set back the progress that the Finance Board
has made in creating a single nationwide AHP. Other comments on the
proposed regulations were that (1) approval authority should be
granted on a case-by-case basis to individual FHLBanks, presumably on
the basis of their past performance in administering the program and
(2) the Finance Board should rescind this delegated authority if the
FHLBanks do not administer the AHP to its satisfaction. Final action
on the proposed regulations can now be decided by the Board of
Directors of the Finance Board.
PROBLEMS IN SCORING
APPLICATIONS, CALCULATING
SUBSIDIES, AND MONITORING
PROJECTS HAVE NOT BEEN RESOLVED
---------------------------------------------------------- Chapter 3:2
Despite the overall improvements in the FHLBanks' administration of
the program, the Finance Board's examiners have repeatedly cited some
FHLBanks for compliance issues in three areas. These areas pertain
to the methodology used by some FHLBanks to (1) score applications
and select projects for funding, (2) calculate the amount of subsidy
actually provided to individual projects, and (3) monitor and report
on the use of AHP funds. Once these issues concerning subsidy
calculation were brought to the attention of the FHLBanks by the
examiners, the FHLbanks were generally very responsive to changing
their practices and policies. However, the FHLBanks' responsiveness
to issues of scoring and monitoring compliance has been mixed. While
certain FHLBanks have improved their scoring and monitoring
procedures, the Finance Board's examinations and our assessment found
that problems remain in other FHLBanks.
PROBLEMS PERSIST IN SCORING
APPLICATIONS
-------------------------------------------------------- Chapter 3:2.1
The FHLBanks continue to be cited by the Finance Board's examiners
for the methodology they use to score applications for AHP funding.
The principal problem that the FHLBanks have been cited for is not
following the program's regulations, which require them to make
adequate distinctions among projects applying for funding. Because
the AHP is highly competitive, it is critical that the scoring
methodology clearly differentiate among applications.
The program's regulations identify 13 categories in which
applications are scored relative to each other. Some of these
categories are easily quantifiable and therefore very objective, such
as the percentage of very-low-income households targeted for a
proposed project or how long a project is to be retained as very-
low-income housing. For these categories, it is relatively easy to
make scoring distinctions among applications. Other categories,
however, are more subjective. For instance, weighing the relative
value of one community's involvement in a project compared with
another's can be particularly difficult, partly because such
involvement can take many different forms, such as granting zoning
variances, donating land, or providing financing below the market
rate. It can also be difficult to quantify the relative differences
among applicants regarding goals for "empowering" residents, such as
forming residents' councils or providing counseling services for
tenants.
Regardless of whether a scoring category is essentially objective or
subjective, the AHP regulations used to rank applications state that
the maximum point score available for each category must be awarded
to the applicant(s) that achieves the best result for that category
(known as the maximum point rule). However, examination reports on
nearly half the FHLBanks have identified deficiencies in applying
this rule. Such results show that many FHLBanks have not clearly
distinguished among projects in various scoring categories.
In 1993, the Finance Board's examiners cited 5 of the 12 FHLBanks for
deficiencies in applying the maximum point rule. At one of these
banks, all approved projects in one of the two 1993 funding rounds
received the maximum point score for three categories. These
categories represent 40 of the 100 points available to a project.
The examination report states that without greater delineation in
scoring each criterion, the ability to effectively differentiate
between applications is diminished. On the other hand, the same
FHLBank was cited in the same funding round for not assigning to any
project the maximum point score available for two other criteria.
Again, not ensuring that a maximum point score is assigned for a
criterion lessens its value in comparison with the other criteria.
This problem continued in the first half of 1994: three of the six
FHLBanks examined during this period were cited for problems with the
maximum point rule. Furthermore, our review of all the FHLBanks'
scoring guidelines indicated that four did not effectively implement
the maximum point rule for several categories. For example, in the
scoring category known as "targeting," we noted that one FHLBank's
procedures specify that all applications for homeownership projects
will receive the maximum points available if no application targets
very-low-income households. This policy does not differentiate
between those applicants that may have targeted families with incomes
between 50 and 60 percent of an area's median income from those that
target families with incomes between 70 and 80 percent of the median.
Such a policy appears inconsistent with the maximum point rule.
Deficiencies in applying the maximum point rule were also noted by
two banks' advisory councils in their 1993 annual reports. The
advisory council for one FHLBank reported that 32 out of 33
successful applications received the maximum number of points for
empowerment goals for residents. In another FHLBank, the advisory
council reported a concern that the scoring system was not
distinguishing outstanding projects from mediocre ones.
The proposed regulations offer a partial solution to the problems
identified in scoring. Specifically, each FHLBank would be required
to submit its scoring criteria to the Finance Board for approval as
part of its proposed implementation plan. The existing regulations
for scoring have no such requirement. The advantage of the proposed
approach is that the Finance Board and OHF would be able to review
the FHLBanks' scoring criteria and require changes in cases, like
those we noted, in which there were inconsistencies with the maximum
point rule.
However, the proposed regulations will not by themselves provide a
solution to the problem of the FHLBanks' not applying the maximum
point rule effectively. While the proposed changes to the current
regulations for scoring have added and removed scoring categories and
adjusted maximum point awards within the categories, the maximum
point rule as applied in current regulations would still apply in the
proposed regulations. Therefore, the problem of effectively
differentiating among applications will still exist if not addressed
by individual FHLBanks.
PROBLEMS IN CALCULATING
SUBSIDIES REDUCE AVAILABLE
FUNDING
-------------------------------------------------------- Chapter 3:2.2
Despite the statutory requirement that FHLBanks make specific annual
contributions to the AHP to be passed on to the ultimate borrowers,
ambiguities in the regulations and the inherent complexities of
calculating subsidies have been barriers to achieving these goals.
The two major compliance issues cited in the Finance Board's
examinations involve (1) FHLBanks not recalculating the subsidy at
the time the program funds are disbursed and (2) sponsors not
receiving the entire subsidy because of differences in the FHLBanks'
and the members' loan amortization schedules. The impact of these
problems has been to reduce the amount of funding available to
AHP-supported projects. The FHLBanks have worked with the Finance
Board's examiners and OHF staff to address both these issues.
TIMING OF SUBSIDY
CALCULATIONS OVERSTATES
BANKS' CONTRIBUTIONS TO
AHP
------------------------------------------------------ Chapter 3:2.2.1
According to regulations, the baseline for establishing the value of
the FHLBanks' contributions to individual AHP projects is the present
value of the lost cash flow between the market rate cost of funds to
the FHLBank and the interest rate of the subsidized advance to the
member. These regulations, however, do not specify when an FHLBank
should calculate its market rate cost of funds; that is, at the time
the bank commits to the loan or at the time the bank disburses the
funds. As a result of this ambiguity, there was considerable
confusion among the FHLBanks concerning the timing for calculating
their cost of funds.
During the first round of FHLBank examinations in 1992, the examiners
found that most FHLBanks calculated their AHP subsidies when they
committed to the loan rather than when they disbursed the funds.
Because 2 or more years may pass between the time a project is
approved and the time the funds are actually disbursed, interest rate
fluctuations can significantly affect the FHLBanks' actual cost of
funds and, accordingly, their contributions to the AHP.
Consequently, the Office of Examination and Regulatory Oversight
interpreted the regulations to require that FHLBanks calculate the
AHP subsidy on the basis of their cost of funds when they disburse
the subsidized advance in addition to a calculation based on their
cost of funds when they commit the advance. The former reflects a
FHLBank's cost of funds when the advance is issued, while the latter
represents an estimate at the time the applicant applies for a
subsidized advance.
A hypothetical example illustrates the impact of this timing issue in
an environment of declining interest rates. Assume that the cost of
funds to a FHLBank is 10 percent at the time it makes a commitment to
an AHP-supported project. Also, assume that a member needs a
5-percent advance. In this example, the amount of the AHP subsidy
would be based on the difference between the 10-percent cost of funds
to the FHLBank and the 5-percent rate charged to the member for the
advance. If the amount of the FHLBank's advance was $500,000, then
the AHP subsidy for the first year would be $25,000.\16 If, however,
the FHLBank's cost of funds decreased to 7.5 percent at the time the
advance was actually disbursed, then the amount of the subsidy for
this project in the first year would decrease to $12,500.\17 An
exception to this example, would occur if a FHLBank guaranteed the
5-percent rate by "hedging"\18 its commitment. In this case, its
funding contribution would still be $25,000.
During the early years of AHP, interest rates generally declined. As
a result, the FHLBanks claimed greater contributions to the program
on the basis of the higher rates prevailing at the time they
committed to the loan rather than the lower rates at the time the
funds were disbursed.
The Finance Board was unaware of this timing problem until the first
round of AHP examinations in 1992 documented that it was occurring in
most of the FHLBanks. In response, OHF issued policy guidance on
this matter to all FHLBanks, including those that had not been
examined. This guidance, known as Special Notice Number 3, was
issued in May 1992 and clarified how FHLBanks are to calculate their
cost of funds. Special Notice Number 3 states that
"If the indicated subsidy decreases in response to a change in
interest rates, the Bank should allocate subsidy funds at the
lower level, and the excess amount of subsidy shall be credited
to the AHP fund at the Bank. Increases in interest rates should
be funded out of any unused AHP funds, and if necessary, may be
borrowed against the funds that will be available in the next
AHP round."
The FHLBanks have generally followed this guidance in calculating
their AHP contributions for those projects for which the funds had
not yet been disbursed and generally have agreed to voluntarily
recalculate their subsidies for projects that were funded before this
notice.
--------------------
\16 The amount of the advance ($500,000) times the 5-percent
difference in the FHLBank's estimated cost of funds and the
subsidized advance rate.
\17 The amount of the advance ($500,000) times the 2.5-percent
difference in the FHLBank's estimated cost of funds and the
subsidized advance rate.
\18 Hedging is a practice used by FHLBanks to negate their interest-
rate risk when the subsidized AHP advance is not immediately drawn
down by the member. A bank generally does this by purchasing an
option to lock in the prevailing market interest rate at the time the
AHP funds are committed.
CASH FLOW DIFFERENCES RESULT
IN SPONSORS' RECEIVING LESS
THAN FHLBANKS' CONTRIBUTIONS
-------------------------------------------------------- Chapter 3:2.3
During their 1993 examinations, the Finance Board's examiners found a
problem with subsidy calculations at 8 of the 12 FHLBanks. Most of
the banks were providing interest-only advances to their members, in
which the principal is repaid at the end of the term of the advance.
These FHLBanks also calculated their AHP subsidies on the basis of
such advances.
However, when the members loaned these advances to the projects'
sponsors, they generally did so as amortized loans. Unlike
interest-only advances, amortized loans include repayment of
principal throughout the term of the loan. Since the member retains
the principal payments for the subsidized loan until the end of the
advance term (up to 30 years), a portion of the subsidy may not be
passed on to the ultimate borrower but instead may benefit the
member. This result would be inconsistent with the statute requiring
that AHP subsidies be passed on to the ultimate borrower. Without
adjusting for differences in the cash flows for an interest-only
advance and an amortizing loan, the amount of subsidy the ultimate
borrower actually receives will be less than the amount the FHLBank
credits against its contribution to the program.
A memorandum sent by Finance Board staff to the FHLBank presidents in
December 1993 refers to this problem. It points out that for
individual projects, and for such advances in the aggregate, the
amount of this difference can be significant. The memorandum cites a
case in which a $395,000 AHP subsidy was used to reduce the cost of
an interest-only, 20-year FHLBank advance from 7.17 percent to 2
percent. Because the member reloaned the advance to an AHP project
sponsor as a 20-year amortizing mortgage, the actual subsidy received
by the sponsor was only $256,400. If the FHLBank had used an
amortizing subsidized advance, it could have used $138,600 less in
AHP funds to subsidize the advance over its 20-year term.
The general purpose of the December 1993 memorandum was to alert the
FHLBanks of this problem so that subsidies for future projects could
be allocated more efficiently. The memorandum also asked the
FHLBanks to estimate the impact of this problem by recalculating the
subsidies for cases in their AHP portfolios in which nonamortizing
advances are used to fund amortizing loans. However, FHLBanks
responded that they were unable to accurately do so because cash flow
differences between nonamortizing advances and amortizing loans would
be extremely complicated to reconstruct.
The Finance Board's examiners have concluded, on the basis of the
information received from the FHLBanks and subsequent discussions
with FHLBank officials, that there is no way to precisely resolve
this issue when interest-only advances have already been disbursed.
The problems posed include the technical complexities of trying to
reconcile cash flow differences between an amortizing and a
nonamortizing loan. Moreover, because the funding has already been
disbursed and the contract between the FHLBank and the member has
been executed, legal concerns have been raised about whether the
terms and conditions of the AHP subsidy can be modified. Given these
problems, the examination staff focused on resolving this issue for
those projects that have not yet been approved. As the examination
office correctly concluded, the most effective way to prevent this
problem from recurring is to require the FHLBanks to issue amortizing
advances to members when the member is issuing an amortizing loan to
the project.
Once the examiners identified this problem, the FHLBanks worked with
Finance Board staff to develop a solution. In this case, within one
year of the problem's being identified, FHLBanks had developed and
put into use a new financing product, an AHP amortizing advance or
its equivalent. We believe the use of this product has resulted in a
more efficient use of AHP funds.
While this change addresses prospective problems, it does not resolve
whether the FHLBanks should attempt to convert their funded as well
as unfunded commitments for interest-only advances to amortizing
advances, particularly if technical and legal problems could be
minimized. One alternative for minimizing the technical problems
associated with funded projects would be to renegotiate, on an
amortizing basis, the terms of the contract between the FHLBank and
the member for the remaining period of the advance. This approach,
along with relieving the member of any obligation to reimburse its
FHLBank for subsidies not passed through to the sponsor before the
contact is renegotiated, should minimize the technical problems
discussed earlier concerning the difficulty in reconciling past
discrepancies in cash flows between amortizing and nonamortizing
advances. Legal issues could be minimized to the extent members that
recognize that the full amount of the AHP subsidies are not being
passed on to sponsors and are therefore willing to renegotiate their
prior contracts with their FHLBank. In the case of unfunded
commitments, because the FHLBanks have not yet issued these advances
to their members, the cash flow problems associated with funded
projects could be avoided. Any legal issues concerning committed
advances for unfunded projects could also be minimized with the
members' cooperation. These issues require resolution by the Board
of Directors of the Finance Board.
Problems with calculating subsidies in general were reflected in our
survey of community investment officers. Specifically, half of the
officers we surveyed expressed either "strong" or "general"
dissatisfaction with the training and technical assistance they have
received from the Finance Board in determining methods for
calculating subsidies. This was the highest dissatisfaction ranking
the officers expressed in choosing from seven categories on the
adequacy of training and technical assistance. Similarly, when we
asked the officers how much more training and technical assistance
they would like to receive from the Finance Board, they again ranked
assistance in calculating subsidies highest.
MONITORING AND REPORTING
REQUIREMENTS ARE VAGUE
-------------------------------------------------------- Chapter 3:2.4
The reporting and monitoring responsibilities of participants in the
AHP are neither well defined nor integrated. This vagueness
undermines the statutory requirement to ensure that each project
maintain long-term affordability for program beneficiaries and also
makes it difficult to determine whether the commitments made in the
original applications are being satisfied. Unless corrected, the
effects of this situation will be magnified as the program's funding
grows.
Because funds from the AHP are typically combined with funds from
other federal and state housing subsidy programs, the law requires
the Finance Board and the FHLBanks to coordinate AHP activities to
the maximum extent possible with those of other sources for funding
affordable housing. Improved coordination and cooperation among
these funding sources could ease the monitoring and reporting burden
facing all participants in the program. However, several
programmatic obstacles would have to be overcome to implement these
improvements.
FHLBANK SYSTEM LACKS
COMPREHENSIVE REPORTING
AND MONITORING STRATEGY
------------------------------------------------------ Chapter 3:2.4.1
Reporting and monitoring are two elements critical to determining how
well any program is satisfying its statutory and regulatory
requirements. These two elements are also interdependent, since
accurate reporting of the program's results depends on effective
monitoring to ensure that the reported data are reliable. Yet AHP
regulations do not adequately define or link the responsibilities of
the FHLBanks, members, and project sponsors for reporting on and
monitoring the program, or the interdependency of these two
functions.
The law requires that AHP subsidies be used only to assist projects
for which adequate, long-term monitoring is available. According to
the statute, such monitoring is intended to guarantee that standards
for the affordability of the housing and other AHP requirements are
satisfied. Similarly, the statute requires members to report
annually to their FHLBank on how they used their AHP subsidy but does
not specify the reporting requirements of FHLBanks and sponsors.
The program's regulations only partly clarify the reporting and
monitoring responsibilities of participants in the program.
According to the regulations, FHLBanks must provide reports and
documentation to the Finance Board as requested, and the members are
required to provide reports to their FHLBanks at least annually.
These latter reports are to be supported by appropriate
documentation, which must at least state the way the member used the
subsidy, that it was passed through to the borrower, and that it
continues to be used for the approved purposes. However, the
regulations omit any reference to the reporting and monitoring
responsibilities of the projects' sponsors.
Regarding monitoring, the program's regulations state that the
Finance Board shall have the responsibility and authority to monitor,
audit, and review the FHLBanks' and members' compliance with these
regulations. The regulations also set out explicit monitoring
responsibilities of the FHLBanks in 11 areas, ranging from such
technical areas as subsidy calculations and loan pricing to more
subjective areas such as the extent of community involvement in a
proposed project. However, the regulations do not specify how
frequently the FHLBanks should monitor their projects. This omission
has led each FHLBank to implement its own distinct monitoring and
reporting procedures. For example, some FHLBanks have established
detailed procedures for on-site project visits, including their
frequency, while others have not.
The omission from the regulations of any reference to the
responsibilities of the projects' sponsors for reporting and
monitoring the results of the program is significant because the
members, FHLBanks, and Finance Board largely depend on the accuracy
of the information provided by the sponsors to substantiate a
project's compliance with the program's overall requirements and with
the provisions of the application on which the project was approved.
If data generated by the projects' sponsor and reported by the
members to the FHLBank are inaccurate or incomplete, the FHLBank's
ability to efficiently monitor the project's compliance with these
requirements is severely restricted.
The implications of not having a comprehensive reporting and
monitoring strategy were evident during the 1992 examinations.
Specifically, the Finance Board's examiners noted many problems with
the way the FHLBanks were monitoring their members' use of AHP funds
and the lack of documentation substantiating the projects' compliance
with both the regulations and the terms of the applications.
Generally, while FHLBanks have improved their monitoring of members'
use of AHP funds, recent examinations have also shown that some
FHLBanks still need to strengthen their monitoring procedures.
Our review of AHP examinations through mid-1994 and the FHLBanks'
monitoring procedures confirm that improvements are still needed in
monitoring and reporting for the majority of the FHLBanks. The most
significant problems we found were (1) the lack of adequate
documentation and verification that the beneficiaries of AHP-assisted
projects had income levels that made them eligible for such
assistance and (2) inadequate information requested from members by
the FHLBanks about the success of a project in meeting its unique
commitments concerning the community and residents.
Examination reports have consistently cited the FHLBanks for the lack
of sufficient documentation and verification procedures to
substantiate the eligibility of beneficiaries of AHP-assisted
projects. For example, in the first half of 1994, applying each
FHLBank's monitoring procedures, the examiners found incomplete
documentation on the income of the beneficiaries and inadequate
verification of these incomes by FHLBank staff in five of the six
FHLBanks examined. Given the statute's overall emphasis on providing
assistance to lower-income households, it is important that the
incomes of beneficiaries be adequately documented and verified.
Documenting and verifying that projects satisfy the unique
commitments made in the applications is the second monitoring and
reporting issue needing attention. This issue is significant because
over 30 percent of the points available in scoring applications can
be awarded for these commitments. Our survey of members and sponsors
disclosed problems in both how this information is monitored and how
it is reported. On the basis of our survey of sponsors, we estimate
that 46 percent of completed projects (133 out of 288) included
unique commitments to communities and residents. Sponsors for an
estimated 109 of these 133 projects had documented their projects'
compliance with these commitments, but sponsors for only an estimated
79 of these 109 projects reported this information to their member
lending institutions. Such incomplete reporting could be anticipated
because members had required sponsors to submit information on these
unique commitments for only an estimated 20 percent of the projects.
We believe that these information gaps are partly due to
inconsistencies among the FHLBanks in the information they require
their members to provide to substantiate these commitments. In
reviewing the monitoring procedures of the 12 FHLBanks, we found that
only 2 specifically requested documentation from members to validate
a project's compliance with the unique commitments described in the
application. Two FHLBanks requested only general information from
members on these commitments, while the monitoring procedures of
eight FHLBanks made no reference to necessary documentation.
Although community investment officers receive compliance letters
that outline specific procedural problems found by the Finance
Board's examiners during all AHP examinations, these officers
indicated dissatisfaction with the level of training and technical
assistance they received from the Finance Board on developing
policies and procedures for monitoring projects. Of the 12 community
investment officers, 5 were either "generally dissatisfied" or "very
dissatisfied." They ranked this category second among seven
categories when asked to indicate whether they could use more
training and technical assistance from the Finance Board in
developing such policies and procedures. The only category they
ranked higher in terms of needed training was calculating AHP
subsidies.
GROWTH IN AHP WILL INCREASE
BURDEN AND COSTS OF
MONITORING, PRINCIPALLY FOR
FHLBANKS
-------------------------------------------------------- Chapter 3:2.5
Nearly all the FHLBanks and some members are concerned about AHP
monitoring requirements. The FHLBanks have expressed concerns that
their cost to monitor AHP-supported projects is disproportionate to
the program's relatively small size. The AHP subsidy averaged about
7 percent of the total costs of developing projects through 1993. In
addition, FHLBanks and members alike point to the number of different
agencies frequently involved in monitoring an AHP-supported project,
leading them to question whether their role is duplicative and
largely unnecessary.
The FHLBanks will increase their annual AHP funding to at least $100
million in 1995. On the basis of the 1993 average per-unit subsidy
of $3,800, this would add approximately 26,000 low-income housing
units annually to the program. According to estimates made by OHF,
approximately 1,800 projects will be in need of monitoring and
reporting in 1995. OHF estimates that given the program's future
funding level, about 5,000 projects will need to be monitored by the
year 2000 and about 10,000 projects by 2010. This projected growth
has led one FHLBank to approach the Congress for statutory relief on
AHP monitoring. This FHLBank maintains that if future monitoring
costs are not contained and rationalized according to costs and
benefits, members' and sponsors' participation in the program will
diminish.
While this FHLBank and others anticipate significant increases in
monitoring costs as a result of the future growth in AHP-supported
projects, precise estimates of these costs have been difficult to
determine. One critical problem is that some FHLBanks lack specific
monitoring strategies, such as determining the frequency and scope of
visits to projects. Also, the wide variety and complexity of
AHP-supported projects complicates estimates of each FHLBank's
overall monitoring costs. Moreover, these costs are likely to vary
significantly among the FHLBanks, depending on, among other things,
the number of projects each FHLBank has to monitor, the monitoring
period for each project, and the geographic distribution of the
projects in a FHLBank's district.
Project monitoring does not appear to present as great a problem for
the member financial institutions participating in the AHP as it does
for the FHLBanks. We estimate that the members associated with 64
percent of completed projects believe that the costs of monitoring
the program were either "reasonable" or "very reasonable." Members
associated with an estimated 16 percent of completed projects believe
that the monitoring costs were "unreasonable" or "very unreasonable."
We estimate that the annual costs to members for monitoring completed
projects were (1) no more than $500 per project for 50 percent of the
completed projects, (2) between $501 and $1,000 per project for 19
percent of the completed projects, and (3) over $1,000 per project
for another 19 percent of the completed projects. However, because
individual members have generally funded only one or two AHP
projects, their monitoring costs have been limited. According to
data from OHF, for the 1,354 active and completed AHP projects
through mid-1993, 61 percent of participating members had only one
project to report on, 81 percent had two or fewer, and only 4 percent
had more than six projects.
AHP MONITORING COULD BE
IMPROVED THROUGH CLOSER
COORDINATION WITH OTHER
HOUSING PROGRAMS
-------------------------------------------------------- Chapter 3:2.6
The statute that established the AHP requires that the program be
coordinated with other federal or federally subsidized programs on
affordable housing to the maximum extent possible. Since AHP
subsidies are usually combined with subsidies from other housing
programs that have their own reporting and monitoring requirements,
opportunities exist for closer coordination of monitoring activities
between these programs and the AHP.
The low-income housing tax credit program offers perhaps the greatest
opportunity for coordinating monitoring activities with the AHP.
Through 1993, 43 percent of the rental units assisted by AHP
subsidies also received low-income housing tax credits. Since 1992,
state housing finance agencies have been monitoring projects that use
tax credits on behalf of the Internal Revenue Service.
Aside from tax credits, the AHP has been used in conjunction with
several programs of the Department of Housing and Urban Development
(HUD), including HOME,\19 community development block grants, and
Section 8 rental subsidies. In addition, the AHP has been used with
mortgage revenue bonds, the Resolution Trust Corporation's Affordable
Housing Disposition Program, and a variety of state and local housing
subsidy programs, all of which have monitoring requirements to ensure
compliance with their programs' respective goals and objectives.
Given these requirements, OHF has encouraged FHLBanks to use the
experienced agencies responsible for monitoring these other programs
to assist them in monitoring projects for compliance with AHP
requirements.
There are, however, several barriers to closer cooperation between
these agencies and the FHLBanks. One barrier is the difference in
income eligibility requirements among housing programs. For example,
one state's affordable housing program uses a different definition
for an area's median income than federal housing programs do.
Specifically, while federal housing programs use the metropolitan
area's median household income for nonrural communities, this state's
housing program uses the county's household median income for all
rural and nonrural communities throughout the state. Moreover, some
jurisdictions do not adjust household incomes on the basis of
household size. In contrast, federal housing programs--including
rental housing programs subsidized by the AHP--adjust household
income to reflect household size.
Finally, the AHP also differs from other programs because of the
commitments to community involvement and the empowerment of residents
contained in some AHP applications. Because these applications are
approved competitively, it is important that any unique commitments
made by applicants be validated through monitoring. Because no other
affordable housing programs that we know of monitor for these
features, they would present an obstacle to other agencies that would
have to monitor for them on behalf of the FHLBanks.
Despite these impediments, the value of closer coordination in
improving the effectiveness of the AHP was reflected in the responses
we received from the community investment officers. In response to a
question asking these officers to rank the importance of 11 different
factors in increasing the AHP's effectiveness, closer coordination of
monitoring requirements with those of other housing programs was most
important. They considered this factor more important than, for
example, increased flexibility in the scoring system or giving
FHLBanks final authority to approve AHP applications.
--------------------
\19 HUD's HOME program was enacted under title II of the
Cranston-Gonzalez National Affordable Housing Act of 1990. Using
formulas, this program provides assistance to state and local
governments to help them address the housing needs of low-income
households.
UNRESOLVED ENFORCEMENT ISSUES
AT THREE SELECTED FHLBANKS
---------------------------------------------------------- Chapter 3:3
Aside from the issues that affect the entire FHLBank System, several
key examination findings concerned three FHLBanks. These issues have
not been resolved voluntarily and will likely need to be addressed by
the Finance Board's Board of Directors. These findings concern
whether (1) a FHLBank made its full contribution to the AHP, (2) a
FHLBank should be required to replenish the AHP fund for subsidies
provided to a project whose beneficiaries were ineligible, and (3) a
negotiated settlement reached between a FHLBank and a member to
recapture that portion of an AHP subsidy used for ineligible purposes
is sufficient.
EXAMINERS QUESTION ONE
FHLBANK'S CALCULATION OF
GUARANTEED RATE ADVANCES
-------------------------------------------------------- Chapter 3:3.1
Officials at one FHLBank have been unable to resolve a compliance
issue with the Finance Board's examiners regarding the calculation of
AHP subsidies on advances with guaranteed interest rates. This
FHLBank's policy was to establish an estimated subsidy based on the
member's requested interest rate and the FHLBank's cost of funds as
of the date the funds were committed. This policy affected 22
subsidized guaranteed-rate commitments made by the FHLBank in 1990
and 1991, before Special Notice Number 3, which, as mentioned
earlier, states that AHP subsidies are to be recalculated on the date
a project is actually funded. This FHLBank has stated that because
it accomplishes this guaranteed rate lock by "hedging" its cost of
funds at the time of commitment, it has incurred an actual cost in
doing so. The FHLBank claimed that as a result of its hedging
policy, it would incur a significant loss if it were required to
reprice these guaranteed-rate commitments at the time of funding.
The Finance Board's examiners have not questioned the use of
guaranteed-rate lock by individual FHLBanks as a means of protecting
against interest rate risk. However, they have identified two
problems with the manner in which this FHLBank implemented this
policy. First, the examiners have been unable to document that the
FHLBank actually hedged its AHP commitments in accordance with
generally accepted accounting principles. The FHLBank, however,
maintains that no generally accepted accounting principles apply and
that it hedged all its guaranteed-rate advances, including its
advances under AHP, rather than making such a decision for individual
transactions.
The Finance Board's examiners also said that they found no evidence
of an appropriate contract guaranteeing the interest rate between the
FHLBank and its members. The examiners found that unlike regular
advances, which always have a specific drawdown date, guaranteed-rate
advances under AHP do not. As further noted by the examiners, it is
not a usual business practice to commit to a guaranteed rate without
a specific term or expiration date. The FHLBank claims that it did
not require a specific funding date for these advances, and that it
took on additional interest rate risk in so doing, in order to
accommodate the development of affordable housing. Notwithstanding
this bank's position on these issues, the Finance Board's examiners
said that without sufficient evidence of hedging that meets generally
accepted accounting principles or a contract guaranteeing an interest
rate for a specific duration or date, the FHLBank should have
recalculated its AHP subsidy when it disbursed the funds rather than
when it committed them.
Following an August 1993 examination, the examiners estimated that
out of the AHP subsidy claimed by this bank of $8.3 million, only $4
million would have actually benefited the AHP projects on the basis
of the cost of funds as of the funding date for funded projects or
August 10, 1993, for unfunded projects. For one funded project
alone, the examiners estimated that the FHLBank had overstated its
contribution to the AHP by almost $1 million. Since the FHLBank has
not accepted these examination findings, the issue of whether this
FHLBank has actually funded the AHP program according to its
statutory requirement will need to be determined by the Board of
Directors of the Finance Board.
ONE FHLBANK FUNDED A PROJECT
WHOSE BENEFICIARIES WERE
INELIGIBLE
-------------------------------------------------------- Chapter 3:3.2
AHP regulations require that FHLBanks use the area's median income,
as determined and published by HUD, in calculating the eligibility on
the basis of income of those who benefit from AHP-funded projects.
However, one particular FHLBank was cited by Finance Board examiners
for improperly considering a project's residents qualified on the
basis of the median income of the county in which the project was
located instead of the median income in the metropolitan area, under
HUD's criterion. Because the county's median income was
substantially higher than the metropolitan area's median income, all
16 households benefiting from the AHP project were cited by the
Finance Board's examiners as ineligible because of their income.
Although this FHLBank agrees that AHP funds were used for ineligible
purposes, it has nonetheless requested that the Finance Board not
require that it replenish the $266,000 of AHP subsidy. The FHLBank
noted that the Finance Board originally approved the project's
application, which clearly specified that the county's median income
would be used as the basis for determining income eligibility. The
FHLBank also noted in its request that it has implemented new
procedures that will prevent a recurrence of this problem. This
issue will likely require resolution by the Finance Board's Board of
Directors.
FINANCE BOARD'S EXAMINERS
QUESTION WHETHER ONE FHLBANK
MISUSED AN AHP SUBSIDY
-------------------------------------------------------- Chapter 3:3.3
One FHLBank disbursed a $250,000 direct subsidy to a member in
support of a low-income multifamily housing project. The subsidy was
intended to reduce the project's debt servicing by reducing the
mortgage amount from $750,000 to $500,000. Although the member did
reduce the mortgage amount to $500,000, the member charged an
interest rate of 15.75 percent on this mortgage. The Finance Board's
examiners considered the rate excessive, noting that it effectively
offset much of the $250,000 direct subsidy. Consequently, because in
the opinion of the examiners the subsidy did not fully benefit the
ultimate borrower, the examiners found that this transaction may
constitute an ineligible use of AHP funds.
Once the FHLBank was informed of this matter, it negotiated a
settlement with the member wherein the member agreed to restore about
$66,000 to the AHP pool. Both the member and the FHLBank asserted
that this was the full amount due. But the Finance Board's
examination office disagreed. According to the examiners, the amount
used for the ineligible purposes totaled between $156,000 and
$195,000. The issues for possible consideration by the Finance
Board's Board of Directors are (1) determining whether a violation
occurred and, if so, how much was used for ineligible purposes; (2)
deciding whether a portion or the full amount of any subsidy used in
a way determined to be ineligible should be restored to the AHP pool,
assuming it exceeds $66,000; and (3) deciding whether the FHLBank or
the member should be responsible for replenishing any shortfall to
the AHP pool.
LACK OF A QUORUM IMPEDED
ADOPTION OF PROPOSED AHP
REGULATIONS AND SOME
ENFORCEMENT ACTIONS
---------------------------------------------------------- Chapter 3:4
The Board of Directors of the Finance Board has the authority to
enforce all laws and regulations governing the operation of the
FHLBank System, including the AHP. To change the FHLBank System's
policies or rules, a quorum consisting of at least three of the
Board's five seats must be filled. While two new members of the
Board of Directors were confirmed on May 25, 1995, the Board had
operated without a quorum since January 1, 1994. During this period,
only two Board members remained following the resignations of three
members at the end of 1993.\20 Absent a quorum, the Board of
Directors was not able to adopt or amend rules, regulations, or
policies, including changes in the scoring procedures for
applications and the proposed delegation to the FHLBanks of the
authority to approve applications.
Whether open examination findings could have been resolved by less
than a quorum of the Board of Directors is not certain. Our
discussions with the Finance Board's senior attorney indicate that
the Board of Directors may have been able to enforce the program's
existing regulations or policies without a quorum. Nevertheless,
this issue is no longer applicable with the confirmation of two new
Board members. This newly constituted Board of Directors can now use
its full authority to resolve the three outstanding cases in which
individual FHLBanks may have violated AHP regulations and those
systemwide problems pertaining to subsidy calculations and reporting
and monitoring responsibilities of all of the program's participants.
--------------------
\20 These three members resigned during the last two months of 1993
following passage of a law requiring that all Board members convert
from part-time to full-time status effective January 1, 1994.
CONCLUSIONS
---------------------------------------------------------- Chapter 3:5
The Administration of the Affordable Housing Program by the FHLBanks
and the Finance Board has shown consistent improvement since the
program was created. This improvement should allow the FHLBanks to
assume greater authority in the administration of the program, as
included in proposed regulations, as long as the Finance Board
recognizes that it may need to rescind this authority if necessary.
Regardless of how AHP is administered in the future, two issues
require attention. First, because of compliance issues raised by the
examiners about subsidy calculations and the use of AHP funds for
potentially ineligible purposes, some FHLBanks may not have always
met their statutory funding obligations for the program, and
subsidies provided by the FHLBanks may not have always been passed
through to the projects' sponsors. Thus, some FHLBanks may not have
initially been held accountable for these two fundamental
responsibilities under the program's regulations. Because most
FHLBanks have responded positively to examination findings concerning
subsidy calculations, this should no longer be an issue for future
projects. However, the Board of Directors of the Finance Board still
needs to resolve whether FHLBanks should attempt to renegotiate the
terms of contracts between the FHLBanks and their members in those
cases in which nonamortizing advances were used by members to fund
amortizing loans to sponsors. In these cases, sponsors are not
receiving the full amount of their AHP subsidy. To the extent that
members recognize that the full amount of the AHP subsidies are not
being passed on to sponsors and are therefore willing to renegotiate
their prior contracts with their FHLBank, legal issues would be
minimized.
In the case of unfunded commitments, because the FHLBanks have not
yet issued these advances to their members, the cash flow problems
associated with funded projects could be avoided. Any legal issues
concerning already committed advances for unfunded projects could
also be minimized with the members' cooperation. Should the Board of
Directors decide to require the banks to convert to amortizing
advances for existing AHP commitments, it should do so expeditiously
to maximize the amount of AHP subsidy passed through to the sponsors.
Furthermore, the Board of Directors of the Finance Board needs to
determine whether to hold FHLBanks accountable in cases in which it
determines that AHP subsidies are being used for ineligible purposes.
Second, while the statute requires that funds be used to assist only
those projects for which adequate long-term monitoring is available,
the current regulations do not clearly define or integrate the
reporting and monitoring responsibilities of the projects' sponsors,
the member financial institutions, and the FHLBanks. An accurate
assessment of the program depends on a flow of information from
participants at every level, and the lack of a comprehensive
reporting and monitoring strategy may hinder achievement of the
program's long-term aims.
The program's aims may also be undermined because some FHLBanks need
to improve their procedures for documenting and verifying the income
eligibility of beneficiaries of the projects and for ensuring that
the projects comply with any unique commitments made in the original
application. Although there are impediments to coordinating more
closely the reporting and monitoring requirements of the AHP and
other affordable housing programs, such coordination offers
opportunities to share the reporting and monitoring capabilities of
experienced housing agencies while helping to contain monitoring
costs in the AHP.
Finally, in a draft of this report, we had a proposed recommendation
that a quorum of the Finance Board's Board of Directors be
established as soon as possible. We did this because we found that
not having a quorum since January 1, 1994, had complicated the AHP's
administration and enforcement. However, on May 25, 1995, prior to
the publication of this report, the Congress confirmed two new Board
members, thereby establishing a quorum. With a quorum, the Board of
Directors will clearly be able to exercise its full authority in all
matters pertaining to the administration and enforcement of the AHP.
RECOMMENDATIONS TO THE BOARD OF
DIRECTORS OF THE FEDERAL
HOUSING FINANCE BOARD
---------------------------------------------------------- Chapter 3:6
To ensure that the FHLBanks continue to meet their statutory and
regulatory obligations under the Affordable Housing Program, we
recommend that the Board of Directors of the Finance Board
-- require the FHLBanks to reimburse their AHP funds in future
cases in which the Finance Board determines that (1) the subsidy
calculations resulted in an overstatement of a FHLBank's
contribution to AHP, (2) the subsidies were used for ineligible
purposes, or (3) a project's sponsor did not receive the full
AHP subsidy;
-- where the conditions mentioned above exist for projects already
funded, determine, on a case-by-case basis, whether to require
the FHLBanks to reimburse their AHP funds on the basis of the
estimated amount of the shortfall;
-- encourage the FHLBanks to work with their members to convert all
outstanding nonamortizing advances to amortizing advances that
match the terms of the amortizing loan provided to the projects'
sponsors;
-- ensure that any revised regulations for the program clearly
define and integrate the monitoring and reporting
responsibilities of the projects' sponsors, the members, and the
FHLBanks;
-- direct the FHLBanks to improve, as necessary, their procedures
for documenting and verifying that the beneficiaries of the
program meet the requirements for income eligibility and that
any unique commitments made in applications are met; and
-- encourage the FHLBanks to improve their monitoring and reporting
of the results of the program through closer coordination with
experienced agencies that are also responsible for monitoring
housing programs.
AGENCY COMMENTS AND OUR
EVALUATION
---------------------------------------------------------- Chapter 3:7
The Federal Housing Finance Board, in commenting on a draft of this
report, generally agreed with our conclusions but believed that the
report could have better explained the technical complexities
involved in determining the appropriate amount of subsidy required
for an AHP subsidized advance. The Finance Board also commented that
it does not believe that the lack of a quorum on its Board of
Directors has caused a delay in the enforcement of the program's
regulations. We believe that the report acknowledges the technical
complexities as testified to by the FHLBanks and the Finance Board's
examiners in calculating AHP subsidies and offers alternatives for
minimizing the technical problems associated with calculating AHP
subsidies. The report also clearly points out the circumstances
under which the lack of a quorum constrained the authority of the
Board of Directors to make decisions regarding administration and
enforcement issues. The comments provided by the Finance Board did
not address the recommendations made in this report.
THE FEDERAL HOME LOAN BANK SYSTEM
=========================================================== Appendix I
The Federal Home Loan Bank System is composed of 12 Federal Home Loan
Bank (FHLBank) districts. Table I.1 shows the geographic area of
each of these districts.
Table I.1
Composition of FHLBank Districts
FHLBank district States and territories
---------------------------------- ----------------------------------
Boston Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island,
Vermont
New York New Jersey, New York, Puerto Rico,
Virgin Islands
Pittsburgh Delaware, Pennsylvania, West
Virginia
Atlanta Alabama, District of Columbia,
Florida, Georgia, Maryland, North
Carolina, South Carolina, Virginia
Cincinnati Kentucky, Ohio, Tennessee
Indianapolis Indiana, Michigan
Chicago Illinois, Wisconsin
Des Moines Iowa, Minnesota, Missouri, North
Dakota, South Dakota
Dallas Arkansas, Louisiana, Mississippi,
New Mexico, Texas
Topeka Colorado, Kansas, Nebraska,
Oklahoma
San Francisco Arizona, California, Nevada
Seattle Alaska, Guam, Hawaii, Idaho,
Montana, Oregon, Pacific Islands,
Utah, Washington, Wyoming
----------------------------------------------------------------------
Source: Federal Housing Finance Board.
1993 PROGRAM PRIORITIES FOR
FHLBANKS
========================================================== Appendix II
Each year the FHLBanks, in conjunction with Affordable Housing
Program (AHP) district advisory councils, identify AHP funding
priorities within their districts on the basis of the program's
results and continuing affordable housing needs. Table II.1 shows
that while program priorities differed among the 12 FHLBanks, many of
the banks' priorities in 1993 generally emphasized rural projects,
projects that would increase homeownership opportunities for
low-income households, and projects that would use AHP funds to
leverage funds from other funding sources.
Table II.1
AHP Funding Priorities for 1993, by
FHLBank District
FHLBank 1993 program priority
---------------------------------- ----------------------------------
Boston Finance projects in a state within
its district where no applications
had been approved in the previous
funding round.
New York Develop projects that are financed
through
a loan consortium or that include
FHLBank Community Investment
Funds.
Pittsburgh Finance projects targeted to
assist rural areas or encourage
homeownership.
Atlanta Finance projects targeted to
assist rural areas.
Cincinnati Finance projects targeted to
assist rural areas and projects
that support the preservation of
housing in urban centers through
rehabilitation or new
construction.
Indianapolis Finance projects that meet
documented critical needs for
housing that are part of a planned
community revitalization strategy
that will lead to homeownership
and leverage funds from the AHP
with those from other funding
sources, including those from the
Community Investment Program.
Chicago Finance projects that use funds
from the AHP to leverage those
from other funding sources by
demonstrating a reasonable effort
to secure other sources.
Des Moines In the first funding round,
finance projects submitted by
members making their first AHP
applications, by members whose
prior applications were not
approved, or by a consortia of
members that include a member
participating in the AHP for the
first time. In the second funding
round, finance projects that
provide housing to households
located in federally declared
disaster areas.
Dallas Finance projects that include
additional sources of funding to
leverage AHP funds and projects
located outside of entitlement
cities designated by the
Department of Housing and Urban
Development (HUD).
Topeka Finance projects located outside
of urban areas or that provide
homeownership opportunities.
San Francisco Finance projects that target very-
low-and low-income households
beyond the level required by the
program's regulations.
Seattle Finance projects located in Hawaii
or Guam.
----------------------------------------------------------------------
Source: Federal Housing Finance Board.
OBJECTIVES, AND METHODOLOGY FOR
GAO'S DATA COLLECTION INSTRUMENTS
========================================================= Appendix III
Section 721 of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) directed GAO to assess the Federal
Home Loan Bank System's implementation of the Affordable Housing
Program (AHP). Consequently, this report addresses (1) how program
funds have been used to support affordable housing, (2) how the
program has been administered, and (3) what opportunities exist for
improvement. We used a variety of methods to collect data supporting
these objectives, including mail-in questionnaires and telephone
surveys. Copies of the mail-in questionnaires and telephone surveys
with the aggregated responses and confidence levels are available on
request by calling Judy A. England-Joseph, Director of Housing and
Community Development Issues Area, at (202) 512-7631.
MAIL-IN QUESTIONNAIRES
----------------------------------------------------- Appendix III:0.1
To obtain consistent information on the administration of the AHP in
all 12 FHLBanks, we sent mail-in questionnaires to the designated
community investment officers in the banks. We received responses
from all these officers.
To obtain information from the FHLBanks' legislatively mandated
district advisory councils, we sent a mail-in questionnaire to each
council's designated chairperson. We received 11 usable
questionnaires in return. The only nonrespondent was the chairperson
of the advisory council in Dallas, Texas.
We called and sent one or more follow-up questionnaires to those who
did not respond to our initial mailings. These surveys were
conducted concurrently in March through August 1994.
TELEPHONE SURVEYS OF AHP
SUBSIDY RECIPIENTS
----------------------------------------------------- Appendix III:0.2
To obtain information on member financial institutions' and project
sponsors' interest in and experience with the AHP, we designed and
conducted telephone surveys of random samples of those who received
AHP subsidies and had completed one or more single-family or
multifamily projects using program funds by December 31, 1992. We
selected this completion date because a large proportion of our
questions addressed monitoring of and reporting on the project.
Therefore, we wanted to select projects that had been completed for a
year or more and would have been subject to the program's monitoring
and reporting requirements. We designed two surveys, one for members
and one for sponsors. The telephone surveys were conducted
concurrently from August through October 1994.
METHODOLOGY
----------------------------------------------------- Appendix III:0.3
The surveys of members and sponsors were designed to elicit
information related to a specific project, as well as information
about the members' or sponsors' general experiences with the program.
We designed our sample to obtain both types of information. Because
some of the questions were related to specific projects, we based our
design on an initial sample of projects. However, this sample was
also designed to be the basis for the questions not related to
specific projects.
First, we separately enumerated all single-family and multifamily
projects completed by December 31, 1992. For both lists, we
determined the member and sponsor associated with each project. We
then took a simple random sample of single-family projects and a
simple random sample of multifamily projects. The sampling was done
with replacement so that it could also be the basis for the general
questions (the sampling of projects without replacement allowed us to
correctly weight the members' and sponsors' responses to our general
questions). However, for the project-specific questions, multiple
selections of a project were disregarded, which is equivalent to
sampling without replacement. We contacted the relevant members and
sponsors for information related to these specific sampled projects.
A member or sponsor could be associated with more than one project
and thus could be contacted more than once. We analyzed this
project-specific information as two stratified simple random samples
without replacement, one for members and one for sponsors.
In addition, we asked members and sponsors about their general
experiences with the program. Because this information was not
related to a specific project, we only questioned the member or
sponsor once but recorded the number of times they were selected for
the project-specific questions. Again, we treated this as two
stratified samples, one of members and one of sponsors. However,
because we contacted the member or sponsor on the basis of the lists
of projects, the members' or sponsors' chance of selection depended
on the number of associated projects on the lists. Therefore, the
information obtained from these questions was analyzed as a
stratified probability proportional to size sample with replacement.
The probability of selection for each member and sponsor was
determined by the number of associated projects, separately for
single-family and multifamily projects. For example, a member with
three associated single-family projects would have three times the
probability of being selected as a member with only one associated
single-family project.
Our original listing of projects contained 106 single-family and 190
multifamily projects. The single-family projects were associated
with 98 sponsors and 89 members, and the multifamily projects were
associated with 173 sponsors and 131 members. For the
project-specific information to be obtained from a survey of
sponsors, we sampled 42 single-family projects and 60 multifamily
projects. We obtained usable responses for about 93 percent of these
single-family projects and 100 percent of these multifamily projects.
For the project-specific information to be obtained from a survey of
member financial institutions, we sampled 43 single-family projects
and 60 multifamily projects. We obtained usable responses for about
84 percent of these single-family projects and 93 percent of these
multifamily projects. To obtain information about sponsors' general
experiences with the AHP, we sampled 58 sponsors of single-family
projects and 92 sponsors of multifamily projects. We obtained usable
responses from about 91 percent and 98 percent of these sponsors,
respectively. To obtain information about members' general
experiences with the AHP, we sampled 61 members associated with
single-family projects and 94 members associated with multifamily
projects. We obtained usable responses from about 82 percent and
about 95 percent of these members, respectively.
Since we used probability samples of members and sponsors to develop
our estimates, each estimate has a measurable precision, or sampling
error, which may be expressed as a plus/minus figure. A sampling
error indicates how closely we can reproduce from a sample the
results that we would obtain if we were to take a complete count of
the universe using the same measurement methods. By adding the
sampling error to and subtracting it from the estimate, we can
develop upper and lower bounds for each estimate. This range is
called a confidence interval. Sampling errors and confidence
intervals are stated at a certain confidence level--in this case, 95
percent. For example, a confidence interval, at the 95-percent
confidence level, means that in 95 out of 100 instances, the sampling
procedure we used would produce a confidence interval containing the
universe value we are estimating.
ESTIMATES AND SAMPLING ERRORS FOR
RESPONSES TO SURVEYS
========================================================== Appendix IV
The tables in this appendix provide the estimates used in this report
and their sampling errors at the 95-percent confidence level. From
our survey of sponsors, table IV.1 provides estimates of the
projects' characteristics, and table IV.2 provides estimates of the
sponsors' general experiences with the AHP. From our survey of
members, table IV.3 provides estimates of the projects'
characteristics, and table II.4 provides estimates of the members'
general experiences with the AHP.
Table IV.1
Sampling Errors for Estimated
Characteristics of Projects From Survey
of Sponsors Based on Sample of Projects
Completed as of December 31, 1992
Sampling error
Estimated at 95-percent
Question asked of percentage of confidence
sponsor Response projects\a level\a
--------------------- --------------------- ---------------- ----------------
If your organization Entire project most 51.8 (149) 8.1 (24)
had not received AHP likely would not
funding for this have been done
project, to the best
of your knowledge
what would have
happened to the
project? (Check all
that apply)
Income levels of 53.5 (154) 8.1 (24)
beneficiaries would
have been higher
Would have been 70.6 (204) 7.2 (21)
harder to find
additional funding
sources
Project would have 62.7 (181) 7.6 (22)
been delayed
Project financing 69.7 (201) 7.5 (22)
would have been more
costly
Number of units 34.2 (99) 7.5 (22)
funded would have
been reduced
Other 8.3 (24) 4.6 (13)
Did the original AHP Yes 46.0 (133) 8.1 (24)
application include
any commitments
concerning
empowerment,
community
involvement, or
innovation?
No 38.8 (112) 7.9 (23)
Don't know/uncertain 15.1 (44) 5.8 (17)
Do you document the Yes 82.4 (109)\b 9.1 (23)\b
project's compliance
with these
commitments?\b
No 13.3 (18)\b 8.2 (11)\b
Don't know/uncertain 4.3 (6)\b 4.8 (6)\bc
Do you report on the Yes 72.3 (79)\d 11.4 (21)\d
project's compliance
with those
commitments to your
FHLBank that funded
this project?\d
No 22.5 (25)\d 10.5 (12)\d
Don't know/uncertain 5.2 (6)\d 5.8 (6)\cd
--------------------------------------------------------------------------------
Note: Unless otherwise noted, estimates apply to 288 plus or minus 6
of the 296 projects completed as of December 31, 1992, at the
95-percent confidence level.
\a The number in parentheses is the estimated number of projects.
\b At the 95-percent confidence level, estimates apply to between 109
and 156 of the 296 projects completed as of December 31, 1992 (those
projects whose sponsors reported that the original AHP application
included these commitments).
\c Sampling error computations are not exact because of the
characteristics of the sample results.
\d At the 95-percent confidence level, estimates apply to between 87
and 132 of the 296 projects completed as of December 31, 1992 (those
projects whose sponsors reported that they document the project's
compliance with commitments).
Source: GAO's analysis of its survey of AHP sponsors.
Table IV.2
Sampling Errors for Estimated
Experiences of Sponsors Based on Sample
of Sponsors for Projects Completed as of
December 31, 1992
Sampling error
at the 95-
Estimated percent
Question asked of percentage of confidence
sponsor Response sponsors\a level\a
--------------------- --------------------- ---------------- ----------------
How important has AHP Extremely or very 87.4 (119)\b 7.7 (23)\b
been in giving you important
the additional
experience you
believe that your
organization needed
to develop more
affordable housing
projects?\b
Somewhat important or 12.6 (17)\b 7.7 (11)\b
little or no
importance
What were the general Needed to obtain 78.5 (209) 7.0 (20)
reasons your funding from many
organization has sources
applied for AHP
funding? (Check all
that apply)
Early AHP commitment 44.4 (118) 8.3 (23)
helps obtain funds
from other sources
AHP was used to 3.2 (9) 2.8 (7)
replace other
funding not approved
Wanted more 51.8 (138) 8.4 (23)
experience in
affordable housing
development
Wanted to assist 92.7 (247) 4.3 (16)
lower income
households
Were encouraged to do 71.1 (189) 7.6 (22)
so by FHLBank staff
Were encouraged to do 55.2 (147) 8.3 (23)
so by a FHLBank
member
Other 36.4 (97) 8.0 (22)
Do you plan to Increase 59.8 (159) 8.2 (23)
increase, decrease
or maintain your
level of
participation in the
AHP in 1995?
Decrease 3.4 (9) 2.9 (8)
Maintain 36.8 (98) 8.1 (22)
Are you planning to AHP funding is 21.2 (34)\c 8.7 (15)\c
increase because...? scheduled to
(Check all that increase
apply)\c
Some funding sources 35.8 (57)\c 10.2 (18)\c
are no longer
available
Organization wants to 92.8 (148)\c 5.5 (23)\c
target assistance to
lower-income
households
AHP's funding 79.4 (126)\c 8.7 (23)\c
flexibility allows
for tailoring use to
meet unique needs
AHP has fewer 57.8 (92)\c 10.7 (21)\c
administrative
requirements than
other programs
Other 26.4 (42)\c 9.2 (16)\c
--------------------------------------------------------------------------------
Note:Unless otherwise noted, estimates apply to between 266 plus or
minus 12 of the 271 sponsors with projects completed as of December
31, 1992, at the 95-percent confidence level.
\a The number in parentheses is the estimated number of sponsors.
\b At the 95-percent confidence level, estimates apply to between 113
and 160 of the 271 sponsors with projects completed as of December
31, 1992 (those sponsors who reported that, prior to becoming
involved with AHP, they had developed affordable housing to little or
no, some, or a moderate extent).
\c At the 95-percent confidence level, estimates apply to between 136
and 182 of the 271 sponsors with projects completed as of December
31, 1992 (those sponsors who reported that they are planning to
increase their level of participation in the AHP in 1995).
Source: GAO's analysis of its survey of AHP sponsors.
Table IV.3
Sampling Errors for Estimated
Characteristics of Projects From Survey
of Members Based on Sample of Projects
Completed as of December 31, 1992
Sampling error
at the 95-
Estimated percent
Question asked of percentage of confidence
member Response projects\a level\a
--------------------- --------------------- ---------------- ----------------
Do you require the Income eligibility 69.4 (183) 7.5 (22)
sponsor for this
project to submit
information on . . .
? (Check all that
apply)
Maximum subsidy 53.4 (141) 8.4 (23)
limitation
Third-party 38.6 (102) 8.3 (22)
verification
Rent rolls by unit 55.7 (147) 8.1 (22)
size
Rent rolls by income 56.2 (148) 7.8 (22)
categories
Housing prices 15.9 (42) 6.0 (16)
Affirmative marketing 40.1 (106) 8.3 (23)
directives
Special needs (e.g., 29.0 (76) 7.6 (20)
homeless)
Commitments 19.5 (51) 6.7 (18)
Long-term retention 43.4 (114) 8.4 (23)
Not applicable\b 16.8 (44) 6.1 (16)
Since you have been < $100 to $500 49.9 (132) 8.4 (23)
monitoring this
project, about how
much has it cost
your bank each year
to monitor this AHP
project?
$501 to $1000 19.1 (50) 6.7 (18)
> $1000 18.8 (50) 6.7 (18)
Don't know/unsure 12.1 (32) 5.6 (15)
In your opinion, how Very reasonable or 64.2 (169) 8.1 (23)
reasonable or reasonable
unreasonable have
the costs been to
your bank to monitor
this particular
project?
Neither reasonable 19.5 (51) 6.7 (18)
nor unreasonable
Unreasonable or very 16.3 (43) 6.4 (17)
unreasonable
In your opinion, how Very reasonable 24.7 (65) 7.2 (19)
reasonable or
unreasonable have
the costs been to
your bank to report
the information you
have collected to
your FHLBank?
Reasonable 42.3 (112) 8.3 (23)
Neither reasonable 16.7 (44) 6.4 (17)
nor unreasonable
Unreasonable 16.3 (43) 6.4 (17)
Extremely 0 (0) \c
unreasonable
--------------------------------------------------------------------------------
Note: Unless otherwise noted, estimates apply to 264 plus or minus
14 of the 296 projects completed as of December 31, 1992, at the
95-percent confidence level.
\a The number in parentheses is the estimated number of projects.
\b These member financial institutions reported that they did not
submit an annual certification monitoring report to their FHLBank.
\c We were unable to compute a sampling error because we did not
observe any variation in our sample.
Source: GAO's analysis of its survey of FHLBank member financial
institutions.
Table IV.4
Sampling Errors for Estimated
Experiences of Members Based on Sample
of Members With Associated Projects
Completed as of December 31, 1992
Sampling error
at the 95-
Estimated percent
Question asked of percentage of confidence
member Response members\a level\a
--------------------- --------------------- ---------------- ----------------
Prior to your bank's All traditional 23.8 (33)\b 9.3 (14)\b
involvement in AHP, lending
how much of your
business was
affordable housing
lending as compared
to your traditional
housing lending
business?\b
Mostly traditional/ 67.6 (95)\b 10.1 (20)\b
some affordable
housing lending
About half 4.3 (6)\b 4.4 (6)\bc
traditional/half
affordable housing
lending
Mostly affordable 4.3 (6)\b 4.8 (7)\bc
housing/some
traditional housing
lending
What were the key AHP helps your bank 82.2 (157) 7.5 (20)
factors that meet its CRA
influenced your (Community
bank's decision to Reinvestment Act)
get involved with requirements
AHP? (Check all that
apply)
Large unmet need for 68.1 (130) 8.9 (20)
affordable housing
lending in your area
Your bank needs to 31.7 (61) 8.4 (16)
compete in AHP
lending with other
lenders
Your bank wants more 56.6 (108) 9.3 (20)
experience in AHP
lending
AHP enables your bank 79.1 (151) 7.8 (20)
to assist households
at lower income
levels
Your FHLBank 77.9 (149) 8.0 (20)
encouraged you to
become involved
Housing sponsors have 64.2 (123) 9.1 (20)
asked your bank to
participate
Marginally feasible 67.5 (129) 8.9 (20)
project became
feasible with AHP
Bank is part of 24.7 (47) 7.9 (16)
consortium helping
limit project's
finance risk
Other 17.9 (34) 7.0 (14)
How important is AHP Extremely or very 58.4 (112) 9.1 (21)
in giving you the important
additional
experience that you
believe you need to
do more affordable
housing lending?
Somewhat important or 41.6 (79) 9.1 (19)
of little or no
importance
Do you plan to Increase 41.3 (79) 9.2 (19)
increase, decrease
or maintain your
level of
participation in the
AHP in 1995?
Decrease 3.2 (6) 3.5 (7)\c
Maintain 55.5 (106) 9.3 (20)
Are you planning to AHP helps your bank 78.7 (62)\d 12.0 (18)\d
increase your meet its CRA
participation requirements
because . . . ?
(Check all that
apply)\d
AHP funding is 41.9 (33)\d 14.3 (14)\d
scheduled to
increase
AHP projects have 49.5 (39)\d 14.6 (15)\d
been profitable
AHP projects seem to 52.6 (42)\d 14.6 (16)\d
be relatively low
risk
Your bank is 44.9 (35)\d 14.4 (14)\d
allocating more
resources to AHP
lending
Your bank has gained 76.2 (60)\d 11.7 (18)\d
experience in AHP
lending
There is a growing 74.3 (59)\d 12.8 (18)\d
demand for AHP funds
Other 27.2 (22)\d 13.2 (12)\d
Which is the most AHP helps your bank 34.0 (27)\d 13.5 (12)\d
important reason? meet its CRA
(among those reasons requirements
for increasing
participation in AHP
in 1995)\d
AHP program funding 0 (0)\d \e
is scheduled to
increase
AHP projects have 9.5 (8)\d 8.9 (7)\d
been profitable
AHP projects seem to 0 (0)\d \e
be relatively low
risk
Your bank is 6.6 (5)\d 7.2 (6)\cd
allocating more
resources to AHP
lending
Your bank has gained 2.6 (2)\d 5.0 (4)\cd
experience in AHP
lending
There is a growing 27.7 (22)\d 13.1 (12)\d
demand for AHP funds
Other 19.6 (16)\d 11.9 (10)\d
--------------------------------------------------------------------------------
Note: Unless otherwise noted, estimates apply to 191 plus or minus 9
of the 220 member financial institutions with associated projects
completed as of December 31, 1992, at the 95-percent confidence
level.
\a The number in parentheses is the estimated number of member
financial institutions.
\b At the 95-percent confidence level, estimates apply to between 120
and 161 of the 220 member financial institutions with associated
projects completed as of December 31, 1992.
\c Sampling error computations are not exact due to characteristics
of the sample results.
\d At the 95-percent confidence level, estimates apply to between 60
and 98 of the 220 member financial institutions with associated
projects completed as of December 31, 1992 (those members who
reported that they are planning to increase their participation in
AHP in 1995).
\e We were unable to compute sampling errors because we did not
observe any variation in our sample.
Source: GAO's analysis of its survey of FHLBank member financial
institutions.
MEMBERS' AHP APPLICATION HISTORY
=========================================================== Appendix V
Member financial institutions in the FHLBank System submitted 4,585
applications for AHP subsidies from 1990 through 1993. Table V.1
shows the total number of applications from members over this time
period and the total number of such applications received each year
by the FHLBanks.
Table V.1
Applications for AHP Subsidies Received
by the FHLBanks, 1990-93
Tota
FHLBank l 1990 1991 1992 1993
---------------------------------------- ---- ---- ---- ---- ----
Boston 368 108 87 100 93
New York 306 77 70 77 82
Pittsburgh 367 127 103 50 87
Atlanta 352 89 68 88 107
Cincinnati 353 78 41 75 159
Indianapolis 257 43 53 63 98
Chicago 213 37 44 49 83
Des Moines 297 57 79 63 82
Dallas 411 82 76 99 174
Topeka 170 35 47 52 36
San Francisco 412 89 93 114 116
Seattle 314 63 66 93 90
Total 4,58 875 807 923 1,20
5 7
----------------------------------------------------------------------
Source: Federal Housing Finance Board.
GROWTH IN MEMBERSHIP WITHIN
FHLBANKS AND CHANGES IN MEMBERS'
PARTICIPATION IN AHP
========================================================== Appendix VI
FHLBanks have been successful both in attracting new members to the
FHLBank System and in increasing members' participation in the AHP.
Figure VI.1 shows the growth in membership in the System from 1992 to
1993. Although this growth has been uneven from bank to bank, the
membership in all but three FHLBanks grew by at least 10 percent.
Figure VI.1: Growth in
Membership in the FHLBank
System From 1992 to 1993
(See figure in printed
edition.)
Source: GAO's Survey of FHLbanks' community investment officers and
data from the Federal Housing Finance Board. Figure VI.2 compares
those members applying for AHP funding for the first time in 1993
with those members that had applied previously. As this figure
shows, a significant portion of AHP applications in all FHLBanks in
1993 came from first-time applicants.
Figure VI.2: Comparison of
First-Time Applicants With
Repeat Applicants for AHP
Subsidies in 1993, by FHLBank
(See figure in printed
edition.)
Source: GAO's Survey of FHLBanks' community investment officers.
Figure VI.3 shows the number of members that have applied for AHP
funding through December 31, 1993, relative to the total number of
members in each FHLBank district. As this figure illustrates, some
FHLBank districts have far more members than others. It is more
difficult for these FHLBanks to achieve high participation rates than
it is for those FHLBanks with fewer members.
Figure VI.3: Members That Had
Submitted at Least One AHP
Application Through December
31, 1993
(See figure in printed
edition.)
Source: GAO's Survey of FHLBanks' community investment officers.
(See figure in printed edition.)Appendix VII
COMMENTS FROM THE FEDERAL HOUSING
FINANCE BOARD
========================================================== Appendix VI
(See figure in printed edition.)
The following are GAO's comments on the Federal Housing Finance
Board's letter dated May 1, 1995.
GAO'S COMMENTS
-------------------------------------------------------- Appendix VI:1
1. We agree with the Finance Board that determining the appropriate
amount of the AHP subsidy is technically complex. Specifically, our
discussion in chapter 3 acknowledges the technical complexities by
referring to comments made by both the FHLBanks and the Finance
Board's examiners. The report further acknowledges certain legal
issues concerning whether the terms and conditions of an AHP contract
can be modified. Finally, our report offers an alternative for
minimizing the technical problems associated with funded projects.
2. We believe our discussion in chapter 3 addresses the constraints
placed upon the Board of Directors without full statutory authority
imposed by the lack of a quorum. Specifically, for both systemwide
and individual FHLBank compliance issues, we describe the limits of
the Board of Directors to clarify current policy, formulate new
policy, or finalize proposed changes to current regulations without a
quorum.
MAJOR CONTRIBUTORS TO THIS REPORT
======================================================== Appendix VIII
RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C.
Jim Wells, Associate Director
Dennis W. Fricke, Assistant Director
William F. Bley, Assignment Manager
Alice G. Feldesman, Assistant Director
Carolyn M. Boyce, Senior Social Science Analyst
Patrick B. Doerning, Senior Operations Research Analyst
Sara Ann Moessbauer, Senior Operations Research Analyst
NEW YORK FIELD OFFICE
Alice L. London, Senior Evaluator-in-Charge
LOS ANGELES FIELD OFFICE
Gary N. Hammond, Site Senior Evaluator
Marco F. Gomez, Staff Evaluator
James C. Geibel, Social Science Analyst
OFFICE OF THE GENERAL COUNSEL
John T. McGrail, Senior Attorney
*** End of document. ***