PART 1291—FEDERAL HOME LOAN BANKS' AFFORDABLE HOUSING PROGRAM Authority: 12 U.S.C. 1430(j). Source: 83 FR 61231, Nov. 28, 2018, unless otherwise noted. Subpart A—General § 1291.1 Definitions. As used in this part: Affordable (1) The rent charged to a household for a unit that is to be reserved for occupancy by a household with an income at or below 80 percent of the median income for the area, does not exceed 30 percent of the income of a household of the maximum income and size expected, under the commitment made in the AHP application, to occupy the unit (assuming occupancy of 1.5 persons per bedroom or 1.0 persons per unit without a separate bedroom); or (2) The rent charged to a household, for rental units subsidized with Section 8 assistance under 42 U.S.C. 1437f or subsidized under another assistance program where the rents are charged in the same way as under the Section 8 program, if the rent complied with this definition at the time of the household's initial occupancy and the household continues to be assisted through the Section 8 or another assistance program, respectively. AHP AHP project Cost of funds Direct subsidy Eligible household (1) In the case of owner-occupied housing, the household's income may not exceed 80 percent of the median income for the area; and (2) In the case of rental housing, the household's income in at least 20 percent of the units may not exceed 50 percent of the median income for the area. Eligible project Extremely low-income household Family member Funding round General Fund (i.e., Homeownership Set-Aside Program i.e., Household's investment (1) Reasonable and customary costs paid by the household in connection with the purchase of the unit (including real estate broker's commission, attorney's fees, and title search fees); (2) Any down payment paid in connection with the household's purchase of the unit; (3) The cost of any capital improvements made after the household's purchase of the unit until the time of the subsequent sale, transfer, assignment of title or deed, or refinancing; and (4) The amount of principal on any mortgage senior to the AHP subsidy lien or other legally enforceable AHP subsidy repayment obligation repaid by the household. LIHTC Loan pool Low- or moderate-income household Median income for the area (1) The median income for the area, as published annually by HUD; (2) The median income for the area obtained from the Federal Financial Institutions Examination Council; (3) The applicable median family income, as determined under 26 U.S.C. 143(f) (Mortgage Revenue Bonds) and published by a state agency or instrumentality; (4) The median income for the area, as published by the United States Department of Agriculture; or (5) The median income for an applicable definable geographic area, as published by a federal, state, or local government entity, and approved by FHFA, at the request of a Bank, for use under the AHP. Multifamily building Net earnings of a Bank Net proceeds (1) In the case of a sale, transfer, or assignment of title or deed of an AHP-assisted unit by a household during the AHP five-year retention period, the sales price minus reasonable and customary costs paid by the household in connection with the transaction (including real estate broker's commission, attorney's fees, and title search fees) and outstanding debt superior to the AHP subsidy lien or other legally enforceable AHP subsidy repayment obligation; (2) In the case of a refinancing of an AHP-assisted unit by a household during the AHP five-year retention period, the principal amount of the new mortgage minus reasonable and customary costs paid by the household in connection with the transaction (including attorney's fees and title search fees) and the principal amount of the refinanced mortgage. Owner-occupied project Owner-occupied unit Program Rental project Retention period (1) Five years from closing for an AHP-assisted owner-occupied unit where the AHP subsidy is used for purchase of the unit, for purchase in conjunction with rehabilitation of the unit, or for construction of the unit; and (2) Fifteen years from the date of completion for a rental project. Revolving loan fund Single-family building Sponsor (1) Has an ownership interest (including any partnership interest), as defined by the Bank in its AHP Implementation Plan, in a rental project; (2) Is integrally involved, as defined by the Bank in its AHP Implementation Plan, in an owner-occupied project, such as by exercising control over the planning, development, or management of the project, or by qualifying borrowers and providing or arranging financing for the owners of the units; (3) Operates a loan pool; or (4) Is a revolving loan fund. Subsidized advance Subsidy (1) A direct subsidy, provided that if a direct subsidy is used to write down the interest rate on a loan extended by a member, sponsor, or other party to a project, the subsidy must equal the net present value of the interest foregone from making the loan below the lender's market interest rate; or (2) The net present value of the interest revenue foregone from making a subsidized advance at a rate below the Bank's cost of funds. Targeted Fund i.e., Very low-income household Visitable [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.2 Compliance dates. (a) General January 1, 2021 compliance date. (b) January 1, 2020 compliance date for owner-occupied retention agreements; exception for adoption of proxies. Subpart B—Program Administration and Governance § 1291.10 Required annual AHP contribution. Each Bank shall contribute annually to its Program the greater of: (a) 10 percent of the Bank's net earnings for the previous year; or (b) That Bank's pro rata share of an aggregate of $100 million to be contributed in total by the Banks, such proration being made on the basis of the net earnings of the Banks for the previous year, except that the required annual AHP contribution for a Bank shall not exceed its net earnings in the previous year. § 1291.11 Temporary suspension of AHP contributions. (a) Request to FHFA. (b) Director review Financial instability. (i) Severely depressed Bank earnings; (ii) A substantial decline in Bank membership capital; and (iii) A substantial reduction in Bank advances outstanding. (2) Limitations on grounds for suspension. (i) A change in the terms of advances to members that is not justified by market conditions; (ii) Inordinate operating and administrative expenses; or (iii) Mismanagement. § 1291.12 Allocation of required annual AHP contribution. Each Bank, after consultation with its Advisory Council and pursuant to written policies adopted by the Bank's board of directors, shall meet the following requirements for allocation of its required annual AHP contribution. (a) General Fund. (b) Homeownership Set-Aside Programs. (c) Targeted Funds—phase-in requirements for funding allocations. (1) 20 percent, in the aggregate, of its required annual AHP contribution to any Targeted Funds; (2) 30 percent, in the aggregate, of its required annual AHP contribution to any Targeted Funds, provided that it allocated at least 20 percent, in the aggregate, of its required annual AHP contribution to one or more Targeted Funds in any preceding year; or (3) 40 percent, in the aggregate, of its required annual AHP contribution to any Targeted Funds, provided that it allocated at least 30 percent, in the aggregate, of its required annual AHP contribution to one or more Targeted Funds in any preceding year. (d) Acceleration of funding. (e) No delegation. § 1291.13 Targeted Community Lending Plan; AHP Implementation Plan. (a) Targeted Community Lending Plan Identification of housing needs. (2) Public access. (3) Notification of Plan amendments to FHFA. (b) AHP Implementation Plan. (1) The applicable median income standard or standards adopted by the Bank consistent with the definition of “median income for the area” in § 1291.1. (2) For the General Fund established by the Bank pursuant to § 1291.20(a), the Bank's requirements for the General Fund, including the Bank's scoring methodology, including its scoring tie-breaker policy adopted pursuant to §§ 1291.25(c) and 1291.28(c), and any policy on approving AHP application alternates for funding pursuant to §§ 1291.25(c)(6) and 1291.28(b). (3) For each Targeted Fund established by the Bank, if any, pursuant to § 1291.20(b), the Bank's requirements for the Targeted Fund, including the Bank's scoring methodology for each Fund, including its scoring tie-breaker policy adopted pursuant to §§ 1291.25(c) and 1291.28(c), and any policy on approving AHP application alternates for funding pursuant to §§ 1291.25(c)(6) and 1291.28(b), and the parameters adopted pursuant to § 1291.20(b)(2). (4) The Bank's policy on how it will determine under which Fund to approve an application for the same project that is submitted to more than one Fund at a Bank in a calendar year and scores high enough to be approved under each Fund, pursuant to § 1291.28(d). (5) For each Homeownership Set-Aside Program established by the Bank, if any, pursuant to § 1291.40, the Bank's requirements for the program, including the Bank's application and subsidy disbursement methodology. (6) The Bank's retention agreement requirements for projects and households under its General Fund, any Targeted Funds, and any Homeownership Set-Aside Programs, pursuant to § 1291.15(a)(7) and (8), including the proxy or proxies selected by the Bank for determining a subsequent purchaser's income pursuant to FHFA guidance under § 1291.15(a)(7)(ii)(B). (7) The Bank's standards for approving a relocation plan for current occupants of rental projects pursuant to § 1291.23(a)(2)(ii)(B). (8) Any optional Bank district eligibility requirements adopted by the Bank pursuant to § 1291.24(c). (9) The Bank's requirements for funding revolving loan funds, if adopted by the Bank pursuant to § 1291.31; (10) The Bank's requirements for funding loan pools, if adopted by the Bank pursuant to § 1291.32; (11) The Bank's requirements for monitoring under its General Fund and any Targeted Funds and Homeownership Set-Aside Programs pursuant to §§ 1291.50 and 1291.51. (12) The Bank's requirements, including time limits, for re-use of repaid AHP direct subsidy in the same project, if adopted by the Bank pursuant to § 1291.64(b). (c) Advisory Council review. (d) Notification of Plan amendments to FHFA. (e) Public access. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.14 Advisory Councils. (a) Appointment. (2) Each Bank shall solicit nominations for membership on the Advisory Council from community and not-for-profit organizations pursuant to a nomination process that is as broad and as participatory as possible, allowing sufficient time for responses. (3) The Bank's board of directors shall appoint Advisory Council members from a diverse range of organizations so that representatives of no one group constitute an undue proportion of the membership of the Advisory Council, giving consideration to the size of the Bank's district and the diversity of low- and moderate-income housing and community lending needs and activities within the district. (b) Terms of Advisory Council members. (c) Election of officers. (d) Duties Meetings with the Banks. (ii) The Advisory Council's advice shall include recommendations on: (A) The Bank's Targeted Community Lending Plan, and any amendments thereto, pursuant to 12 CFR 1290.6(a)(5)(iii); (B) The amount of AHP funds to be allocated to the Bank's General Fund and any Targeted Funds and Homeownership Set-Aside Programs, including how the set-aside funds should be apportioned under the one-third funding allocation requirement in § 1291.12(b); (C) The AHP Implementation Plan and any subsequent amendments thereto; (D) The Bank's scoring methodologies, related definitions, and any additional optional district eligibility requirements for the General Fund and any Targeted Funds; and (E) The eligibility requirements and any priority criteria for any Homeownership Set-Aside Programs. (2) Summary of AHP applications. (3) Annual analysis; public access. (ii) Within 30 days after the date the Advisory Council's annual analysis is submitted to FHFA, the Bank shall publish the analysis on its publicly available website. (e) Expenses. (f) No delegation. § 1291.15 Agreements. (a) Agreements between Banks and members. (1) Notification of member. (2) AHP subsidy pass-through. (3) Use of AHP subsidy Use of AHP subsidy by the member. (ii) Use of AHP subsidy by the project sponsor or owner. (4) Repayment of AHP subsidies in case of noncompliance Noncompliance by the member. (ii) Noncompliance by a project sponsor or owner Agreement. (B) Recovery of AHP subsidies. (5) Project monitoring Monitoring by the member. (ii) Agreement; LIHTC noncompliance notice. (6) Transfer of AHP obligations To another member. (ii) To a nonmember. (7) Owner-occupied units—required provisions for retention agreements. (i) Notice. (ii) Repayment of subsidy; exceptions. (A) The unit was assisted with a permanent mortgage loan funded by an AHP subsidized advance; (B) The subsequent purchaser, transferee, or assignee is a low- or moderate-income household, as determined by the Bank. For any sale, transfer, or assignment that occurs after the date established by FHFA in guidance on the use of proxies, the Bank or its designee shall determine the household's income using one or more proxies that are reliable indicators of the subsequent purchaser's income, which may be selected by the Bank pursuant to the FHFA guidance and shall be included in the Bank's AHP Implementation Plan, unless documentation demonstrating that household's actual income is available. The Bank or its designee is not required to request or obtain such documentation, but must use it in lieu of a proxy if available; (C) The amount of the AHP subsidy that would be required to be repaid in accordance with the calculation in paragraph (a)(7)(v) of this section is $2,500 or less; or (D) Following a refinancing, the unit continues to be subject to a deed restriction or other legally enforceable retention agreement or mechanism described in this paragraph (a)(7); (iii) Subsidy repayments to Bank, member, or project sponsor. (A) To the Bank. If the Bank has not authorized re-use of the repaid AHP subsidy or has authorized re-use of the repaid subsidy but not retention of such repaid subsidy by the member or project sponsor pursuant to § 1291.64(b) of this part, or has authorized retention and re-use of such repaid subsidy by the member or project sponsor pursuant to such section and the repaid subsidy is not re-used in accordance with the requirements of the Bank and such section; or (B) To the member or project sponsor. To the member or project sponsor for re-use by such member or project sponsor, if the Bank has authorized retention and re-use of such subsidy by the member or project sponsor pursuant to § 1291.64(b); (iv) Termination of subsidy repayment obligation. (v) Calculation of AHP subsidy repayment based on net proceeds and household's investment. (A) The AHP subsidy, reduced on a pro rata basis per month until the unit is sold, transferred, or its title or deed transferred, or is refinanced, during the AHP five-year retention period; or (B) Any net proceeds from the sale, transfer, or assignment of title or deed of the unit, or the refinancing, as applicable, minus the AHP-assisted household's investment. (8) Rental projects—required provisions for retention agreements. (i) Income and rent commitments. (ii) Notice. (iii) Repayment of subsidy; exceptions. (A) The project continues to be subject to a deed restriction or other legally enforceable retention agreement or mechanism incorporating the income-eligibility and affordability restrictions committed to in the approved AHP application for the duration of the AHP 15-year retention period; or (B) If authorized by the Bank, in its discretion, the households are relocated, due to the exercise of eminent domain, or for expansion of housing or services, to another property that is made subject to a deed restriction or other legally enforceable retention agreement or mechanism incorporating the income-eligibility and affordability restrictions committed to in the approved AHP application for the remainder of the AHP 15-year retention period; and (iv) Termination of income and rent restrictions. (9) Lending of AHP direct subsidies. (10) Special provisions where members obtain AHP subsidized advances Repayment schedule. (ii) Prepayment fees. (iii) Treatment of loan prepayment by project. (A) Repay to the Bank that portion of the advance used to make the loan or loans to the project, and be subject to a fee imposed by the Bank sufficient to compensate the Bank for any economic loss the Bank experiences in reinvesting the repaid amount at a rate of return below the cost of funds originally used by the Bank to calculate the interest rate subsidy incorporated in the advance; or (B) Continue to maintain the advance outstanding, subject to the Bank resetting the interest rate on that portion of the advance used to make the loan or loans to the project to a rate equal to the cost of funds originally used by the Bank to calculate the interest rate subsidy incorporated in the advance. (b) Agreements between Banks and project sponsors or owners Repayment of subsidies. (2) Project sponsor qualifications. (c) Application to existing AHP agreements. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.16 Conflicts of interest. (a) Bank directors and employees. (2) If a Bank director or employee, or such person's family member, has a financial interest in, or is a director, officer, or employee of an organization involved in, an AHP project such that he or she is subject to the requirements in paragraph (a)(1) of this section, such person shall not participate in or attempt to influence decisions by the Bank regarding the evaluation, approval, funding, monitoring, or any remedial process for such project. (b) Advisory Council members. (2) If an Advisory Council member, or such person's family member, has a financial interest in, or is a director, officer, or employee of an organization involved in, an AHP project such that he or she is subject to the requirements in paragraph (b)(1) of this section, such person shall not participate in or attempt to influence decisions by the Bank regarding the approval for such project. (c) No delegation. Subpart C—General Fund and Targeted Funds § 1291.20 Establishment of programs. (a) General Fund Establishment. (2) Eligibility requirements. (b) Targeted Funds Establishment; number of Targeted Funds and funding allocation amounts. (i) One Targeted Fund; (ii) Two Targeted Funds to be administered in the same calendar year, provided that the Bank administered at least one Targeted Fund in any preceding year; or (iii) Three Targeted Funds to be administered in the same calendar year, provided that the Bank administered at least two Targeted Funds in any preceding year. (2) Eligibility requirements. (ii) A Bank may not adopt eligibility requirements for its Targeted Funds except as specifically authorized in this part. § 1291.21 Eligible applicants. (a) Member applicants. (b) Project sponsor qualifications In general. (2) Revolving loan fund. (i) Provide audited financial statements that its operations are consistent with sound business practices; and (ii) Demonstrate the ability to re-lend AHP subsidy repayments on a timely basis and track the use of the AHP subsidy. (3) Loan pool. (i) Provide evidence of sound asset/liability management practices; (ii) Provide audited financial statements that its operations are consistent with sound business practices; and (iii) Demonstrate the ability to track the use of the AHP subsidy. § 1291.22 Funding rounds; application process. (a) Funding rounds. (b) Submission of applications. (1) Determine that the proposed AHP project meets the eligibility requirements of this part; and (2) Evaluate the application pursuant to the scoring methodology adopted by the Bank pursuant to §§ 1291.25, 1291.26, and 1291.27, as applicable. (c) Review of applications submitted. § 1291.23 Eligible projects. Projects receiving AHP subsidies pursuant to a Bank's General Fund and any Targeted Funds must meet the following eligibility requirements: (a) Owner-occupied or rental housing. (1) Owner-occupied housing. (2) Rental housing. (i) Projects that are not occupied. (ii) Projects that are occupied. (B) If the project has a relocation plan for current occupants that is approved by one of its federal, state, or local government funders, or a reasonable relocation plan for current occupants that is otherwise approved by the Bank according to standards included in the Bank's AHP Implementation Plan, a household may have an income meeting the income targeting commitments upon initial occupancy of the rental unit after completion of the purchase or rehabilitation. (b) Project feasibility Developmental feasibility. (2) Operational feasibility of rental projects. (c) Timing of AHP subsidy use. (d) Retention agreements Owner-occupied projects. (2) Rental projects. (e) Fair housing. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.24 Eligible uses. (a) Eligible uses of AHP subsidy. (1) Owner-occupied housing. (2) Rental housing. (3) Need for AHP subsidy Review of project development budget. (ii) Cash sources of funds. (iii) Cash uses. (4) Project costs In general. (B) For purposes of determining the reasonableness of a developer's fee for a project as a percentage of total development costs, a Bank may, in its discretion, include estimates of the market value of in-kind donations and volunteer professional labor or services (excluding the value of sweat equity) committed to the project as part of the total development costs. (ii) Cost of property and services provided by a member. (5) Financing costs. (6) Counseling costs. (i) Such costs are incurred in connection with counseling of homebuyers who actually purchase an AHP-assisted unit; and (ii) The cost of the counseling has not been covered by another funding source, including the member. (7) Refinancing. (8) Calculation of AHP subsidy. (ii) Where an AHP subsidized advance is provided to a project, the net present value of the interest revenue foregone from making a subsidized advance at a rate below the Bank's cost of funds shall be determined as of the earlier of the date of disbursement of the subsidized advance or the date prior to disbursement on which the Bank first manages the funding to support the subsidized advance through its asset/liability management system, or otherwise. (b) Prohibited uses of AHP subsidy. (1) Certain prepayment fees. (i) The project is in financial distress that cannot be remedied through a project modification pursuant to § 1291.29; (ii) The prepayment of the subsidized advance is necessary to retain the project's affordability and income targeting commitments; (iii) Subsequent to such prepayment, the project will continue to comply with the terms of the approved AHP application and the requirements of this part for the duration of the original retention period; (iv) Any unused AHP subsidy is returned to the Bank and made available for other AHP projects or households; and (v) The amount of AHP subsidy used for the prepayment fee may not exceed the amount of the member's prepayment fee to the Bank; (2) Cancellation fees. (3) Processing fees. (4) Reserves and certain expenses. (c) Optional Bank district eligibility requirements. (1) AHP subsidy limits. (2) Homebuyer or homeowner counseling. (d) Applications to multiple Funds—subsidy amount. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.25 Scoring methodologies. (a)(1) Written scoring methodologies. (2) Scoring points allocations General Fund. (ii) Targeted Funds. (3) Fixed-point and variable-point scoring criteria. (i) Fixed-point scoring criteria are those that cannot be satisfied in varying degrees and are either satisfied or not, with the total number of points allocated to the criterion awarded by the Bank to an application meeting the criterion; and (ii) Variable-point criteria are those where there are varying degrees to which an application can satisfy the criteria, with the number of points that may be awarded to an application for meeting the criterion varying, depending on the extent to which the application satisfies the criterion, based on a fixed scale or on a scale relative to the other applications being scored. A Bank shall designate the targeting scoring criterion in § 1291.26(d) as a variable-point criterion. (b) Satisfaction of scoring criteria. (c) Scoring tied applications. (1) The Bank shall consult with its Advisory Council prior to adoption of its policy; (2) The Bank shall adopt the policy in advance of an AHP funding round and include it in its AHP Implementation Plan; (3) The policy shall include the methodology used to break a scoring tie, which may differ for each Fund, and which shall be selected from the particular Fund's scoring criteria adopted in the Bank's AHP Implementation Plan; (4) The scoring tie-breaker methodology shall be reasonable, transparent, verifiable, and impartial; (5) The scoring tie-breaker methodology shall be used solely to break a scoring tie and may not affect the eligibility of the applications, including financial feasibility, or their scores and resultant rankings; (6) The Bank shall approve a tied application as an alternate pursuant to § 1291.28(b) if the application does not prevail under the scoring tie-breaker methodology, or if the application is tied with another application but requested more subsidy than the amount of AHP funds that remain to be awarded, if the Bank has a written policy to approve alternates for funding under the applicable Fund; and (7) The Bank shall document in writing its analysis and results for each use of the scoring tie-breaker methodology. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.26 Scoring criteria for the General Fund. A Bank shall adopt in its scoring methodology for its General Fund all of the following categories of scoring criteria, including at least one housing need under each of paragraphs (e), (f), and (g) of this section, except that a Bank is not required to adopt the scoring criterion for homeownership by low- or moderate-income households in paragraph (c) of this section if the Bank allocates at least 10 percent of its required annual AHP contribution to any Homeownership Set-Aside Programs, and a Bank is not required to adopt the scoring criterion for Bank district priorities in paragraph (h) of this section: (a) Use of donated or conveyed government-owned or other properties. (1) Land or units donated or conveyed by the federal government or any agency or instrumentality thereof; or (2) Land or units donated or conveyed by any other party for an amount significantly below the fair market value of the property, as defined by the Bank in its AHP Implementation Plan. (b) Sponsorship by a not-for-profit organization or government entity. (c) Home purchase by low- or moderate-income households. (d) Income targeting. (1) Rental projects. (2) Owner-occupied projects. (3) Separate scoring. (e) Underserved communities and populations. (1) Housing for homeless households. (2) Housing for special needs populations. (3) Housing for other targeted populations. (4) Housing in rural areas. (5) Rental housing for extremely low-income households. (6) Other. (f) Creating economic opportunity. (1) Promotion of empowerment. (2) Residential economic diversity. (3) Other. (g) Community stability, including affordable housing preservation. (h) Bank district priorities. § 1291.27 Scoring criteria for Targeted Funds. A Bank shall adopt in its scoring methodology for each Targeted Fund established by the Bank at least three different scoring criteria, as determined by the Bank in its discretion, that allow the Bank to select applications that meet the specific affordable housing need or needs being addressed by the Targeted Fund. § 1291.28 Approval of AHP applications under the General Fund and Targeted Funds. (a) Approval of AHP applications. (b) AHP application alternates. (c) Tied applications. (2) A tied application that does not prevail under the Bank's scoring tie-breaker methodology, or is tied with another application but requested more subsidy than the amount of AHP funds that remain to be awarded under the Fund, shall be approved as an alternate for funding if the Bank has a written policy to approve alternates for funding under the Fund. (d) Applications to multiple Funds—approval under one Fund. (e) No delegation. § 1291.29 Modifications of approved AHP applications. (a) Modification procedure. (1) The Bank first requests that the project sponsor or owner make a reasonable effort to cure any noncompliance within a reasonable period of time, and the noncompliance could not be cured within a reasonable period of time; (2) The project, incorporating any such changes, would meet the eligibility requirements of this part; (3) The application, as reflective of such changes, continues to score high enough to have been approved in the AHP funding round in which the application was originally scored and approved by the Bank, which is as high as the lowest ranking alternate approved for funding by the Bank if the Bank has a written policy to approve alternates for funding; and (4) There is good cause for the modification, which may not be solely remediation of noncompliance, and the analysis and justification for the modification, including why a cure of noncompliance was not successful or attempted, are documented by the Bank in writing. (b) AHP subsidy increases; no delegation AHP subsidy increases. (2) No delegation. § 1291.30 Procedures for funding. (a) Disbursement of AHP subsidies to members. (2) If an institution with an approved application for AHP subsidy loses its membership in a Bank, the Bank may disburse AHP subsidies to a member of such Bank to which the institution has transferred its obligations under the approved AHP application, or the Bank may disburse AHP subsidies through another Bank to a member of that Bank that has assumed the institution's obligations under the approved AHP application. (b) Progress towards use of AHP subsidy. (c) Compliance upon disbursement of AHP subsidies. (d) Changes in approved AHP subsidy amount where a direct subsidy is used to write down prior to closing the principal amount or interest rate on a loan. (e) AHP outlay adjustment. (f) Project sponsor notification of re-use of repaid AHP direct subsidy. § 1291.31 Lending and re-lending of AHP direct subsidy by revolving loan funds. Pursuant to written policies established by a Bank's board of directors after consultation with its Advisory Council, a Bank, in its discretion, may provide AHP direct subsidy under its General Fund or any Targeted Funds for eligible projects and households involving both the lending of the subsidy and subsequent lending of subsidy principal and interest repayments by a revolving loan fund, provided the following requirements are met: (a) Submission of application. (2) The information in the application shall be sufficient for the Bank to: ( i (ii) Evaluate the criteria for the initial lending of the subsidy, and the specific proposed project if applicable, pursuant to the scoring methodology established by the Bank pursuant to §§ 1291.25, 1291.26, and 1291.27, as applicable. (b) Review of application. (c) Initial lending of subsidy. (2) If an owner-occupied unit or project funded under this paragraph (c) is in noncompliance with the commitments in the approved AHP application, or is sold or refinanced prior to the end of the applicable AHP retention period, the required amount of AHP subsidy shall be repaid to the revolving loan fund in accordance with §§ 1291.15(a)(7), 1291.15(a)(8), and 1291.60, and the revolving loan fund shall re-lend such repaid subsidy, excluding the amounts of AHP subsidy principal already repaid to the revolving loan fund, to another owner-occupied unit or project meeting the initial lending requirements of this paragraph (c) for the remainder of the retention period. (d) Subsequent lending of AHP subsidy principal and interest repayments. (2) The revolving loan fund's subsequent lending of AHP subsidy principal and interest repayments shall be for the purchase, construction, or rehabilitation of owner-occupied projects for households with incomes at or below 80 percent of the median income for the area, or of rental projects where at least 20 percent of the units are occupied by and affordable for households with incomes at or below 50 percent of the median income for the area, and shall meet all other eligibility requirements of this paragraph (d). (3) A Bank may, in its discretion, require the revolving loan fund's subsequent lending of subsidy principal and interest repayments to be subject to retention period, monitoring, and recapture requirements, as defined by the Bank in its AHP Implementation Plan. (e) Return of unused AHP subsidy. § 1291.32 Use of AHP subsidy in loan pools. Pursuant to written policies established by a Bank's board of directors after consultation with its Advisory Council, a Bank, in its discretion, may provide AHP subsidy under its General Fund or any Targeted Funds for the origination of first mortgage or rehabilitation loans with subsidized interest rates to AHP-eligible households through a purchase commitment by an entity that will purchase and pool the loans, provided the following requirements are met: (a) Eligibility requirements. (b) Forward commitment. (2) As an alternative to using a forward commitment, the loan pool sponsor may purchase an initial round of loans that were not originated pursuant to an AHP-specific forward commitment, provided that the entities from which the loans were purchased are required to use the proceeds from the initial loan purchases within time limits on the use of the AHP subsidy as specified by the Bank in its AHP Implementation Plan and the Bank's agreement with the loan pool sponsor, which shall not exceed one year from the date of approval of the AHP application. The proceeds shall be used by such entities to assist households that are income-eligible under the approved AHP application during subsequent rounds of lending, and such assistance shall be provided in the form of a below-market AHP-subsidized interest rate as specified in the approved AHP application. (c) Each AHP-assisted owner-occupied unit and rental project receiving AHP direct subsidy or a subsidized advance shall be subject to the requirements of §§ 1291.15, 1291.50, and 1291.60, respectively. (d) Where AHP direct subsidy is being used to buy down the interest rate of a loan or loans from a member or other party, the loan pool sponsor shall use the full amount of the AHP direct subsidy to buy down the interest rate on a permanent basis at the time of closing on such loan or loans. Subpart D—Homeownership Set-Aside Programs § 1291.40 Establishment of programs. A Bank may establish, in its discretion, one or more Homeownership Set-Aside Programs pursuant to the requirements of this part. § 1291.41 Eligible applicants. A Bank shall accept applications for AHP direct subsidy under its Homeownership Set-Aside Programs only from institutions that are members of the Bank at the time the application is submitted to the Bank. § 1291.42 Eligibility requirements. A Bank's Homeownership Set-Aside Programs shall meet the eligibility requirements set forth in this section. A Bank may not adopt additional eligibility requirements for its Homeownership Set-Aside Programs except for eligible households pursuant to paragraph (b) of this section. (a) Member allocation criteria. (b) Eligible households. (1) Have incomes at or below 80 percent of the median income for the area at the time the household is accepted for enrollment by the member in the Bank's Homeownership Set-Aside Programs, with such time of enrollment by the member defined by the Bank in its AHP Implementation Plan; (2) Complete a homebuyer or homeowner counseling program provided by, or based on one provided by, an organization experienced in homebuyer or homeowner counseling, in the case of households that are first-time homebuyers; and (3) Are first-time homebuyers or households receiving AHP subsidy for owner-occupied rehabilitation, in the case of households receiving subsidy pursuant to the one-third set-aside funding allocation requirement in § 1291.12(b), and meet such other eligibility criteria that may be established by the Bank in its AHP Implementation Plan, such as a matching funds requirement, homebuyer or homeowner counseling requirement for households that are not first-time homebuyers, or criteria that give priority for the purchase or rehabilitation of housing in particular areas or as part of a disaster relief effort. (c) Maximum grant limit. (d) Eligible uses of AHP direct subsidy. (e) Retention agreement. (f) Financial or other concessions. (g) Financing costs. (h) Counseling costs. (1) Such costs are incurred in connection with counseling of homebuyers who actually purchase an AHP-assisted unit; and (2) The cost of the counseling has not been covered by another funding source, including the member. (i) Cash back to household. § 1291.43 Approval of AHP applications. A Bank shall approve applications for AHP direct subsidy under its Homeownership Set-Aside Programs in accordance with the Bank's criteria governing the allocation of funds. § 1291.44 Procedures for funding. (a) Disbursement of AHP direct subsidies to members. (2) If an institution with an approved application for AHP direct subsidy loses its membership in a Bank, the Bank may disburse AHP direct subsidies to a member of such Bank to which the institution has transferred its obligations under the approved AHP application, or the Bank may disburse AHP direct subsidies through another Bank to a member of that Bank that has assumed the institution's obligations under the approved AHP application. (b) Reservation of Homeownership Set-Aside Program subsidies. (c) Progress towards use of AHP direct subsidy. Subpart E—Monitoring § 1291.50 Monitoring under the General Fund and Targeted Funds. (a) Initial monitoring policies for owner-occupied and rental projects. (1) Satisfactory progress. (i) The project is making satisfactory progress towards completion, in compliance with the commitments made in the approved AHP application, Bank policies, and the requirements of this part; and (ii) Following completion of the project, satisfactory progress is being made towards occupancy of the project by eligible households. (2) Project sponsor or owner certification, rent roll and other documentation; backup and other project documentation. ( i (ii) The household incomes and rents comply with the income targeting and rent commitments made in the approved AHP application; (iii) The project's costs were reasonable in accordance with the Bank's project cost guidelines, and the AHP subsidies were necessary for the completion of the project as currently structured, as determined pursuant to § 1291.24(a)(4); (iv) Each AHP-assisted unit of an owner-occupied project and rental project is subject to an AHP retention agreement that meets the requirements of § 1291.15(a)(7) and (8), respectively; and (v) The services and activities committed in the approved AHP application have been provided. (3) Back-up and other project documentation. (i) Bank review within a reasonable period of time after project completion of back-up project documentation regarding household incomes and rents (not including the rent roll) maintained by the project sponsor or owner, except for projects that received funds from other federal, state or local government entities whose programs meet the requirements in paragraphs (b)(1) and (2) of this section as specified in separate FHFA guidance, or projects that have also been allocated LIHTC; and (ii) Maintenance and Bank review of other project documentation in the Bank's discretion. (4) Sampling plan. (b) Long-term monitoring—reliance on other governmental monitoring for certain rental projects. (1) The compliance profiles regarding income targeting, rent, and retention period requirements of the AHP and the other programs are substantively equivalent; (2) The entity has demonstrated and continues to demonstrate its ability to monitor the project; (3) The entity agrees to provide reports to the Bank on the project's incomes and rents for the full 15-year AHP retention period; and (4) The Bank reviews the reports from the monitoring entity to confirm that they comply with the Bank's monitoring policies. (c) Long-term monitoring policies for rental projects. (1) Annual project sponsor or owner certifications; backup and other project documentation. (i) Bank review of all annual certifications to the Bank by project sponsors or owners, other than sponsors or owners of projects that have been allocated LIHTCs, that household incomes and rents are in compliance with the commitments made in the approved AHP application during the AHP 15-year retention period, along with information on the ongoing financial viability of the project, including whether the project is current on its property taxes and loan payments, its vacancy rate, and whether it is in compliance with its commitments to other funding sources; (ii) Bank review of back-up project documentation regarding household incomes and rents, including the rent rolls, maintained by the project sponsor or owner, except for projects that also received funds from other federal, state or local government entities whose programs meet the requirements in paragraphs (b)(1) and (2) of this section as specified in separate FHFA guidance, or projects that have been allocated LIHTC, provided that the Bank shall review any LIHTC noncompliance notices received from project owners pursuant to § 1291.15(a)(5)(ii) during the AHP 15-year retention period; and (iii) Maintenance and Bank review of other project documentation in the Banks' discretion. (2) Risk factors and other monitoring Risk factors; other monitoring. (ii) Risk-based sampling plan. (d) Annual adjustment of targeting commitments. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.51 Monitoring under Homeownership Set-Aside Programs. (a) Adoption and implementation. (1) The AHP subsidy was provided to households meeting all applicable eligibility requirements in § 1291.42(b) and the Bank's Homeownership Set-Aside Program policies; and (2) All other applicable eligibility requirements in § 1291.42 and the Bank's Homeownership Set-Aside Program policies are met, including that the AHP-assisted units are subject to retention agreements, as required under § 1291.15(a)(7), where the AHP subsidy was used for purchase of the unit, or for purchase of the unit in conjunction with rehabilitation. (b) Member certifications; back-up and other documentation. (1) Bank review of certifications by members to the Bank, prior to disbursement of the AHP subsidy, that the subsidy will be provided in compliance with all applicable eligibility requirements in § 1291.42; (2) Bank review of back-up documentation regarding household incomes maintained by the member; and (3) Maintenance and Bank review of other documentation in the Bank's discretion. (c) Sampling plan. Subpart F—Remedial Actions for Noncompliance § 1291.60 Remedial actions for project noncompliance. (a) Scope. (b) Elimination of project noncompliance Cure. (2) Project modification. (c) Reasonable collection efforts Demand for repayment. (2) Settlement. (ii) The settlement with the project sponsor or owner must be supported by sufficient documentation showing that the sum agreed to be repaid under the settlement is reasonably justified, based on the facts and circumstances of the noncompliance, including any factors in paragraph (c)(2)(i) of this section that were considered in reaching the settlement. § 1291.61 Recovery of subsidy for member noncompliance. A Bank shall recover from a member the amount of any AHP subsidy (plus interest, if appropriate) not used in compliance with the commitments in the member's AHP application or the requirements of this part as a result of the actions or omissions of the member. § 1291.62 Bank reimbursement of AHP fund. (a) By the Bank. (b) By FHFA order. (1) The Bank has failed to reimburse its AHP fund as required under paragraph (a) of this section; or (2) The Bank has failed to recover the full amount of AHP subsidy due from a project sponsor, project owner, or member pursuant to the requirements of §§ 1291.60 and 1291.61, and has not shown that such failure is reasonably justified, considering factors such as those in § 1291.60(c)(2)(i). § 1291.63 Suspension and debarment. (a) At a Bank's initiative. (b) At FHFA's initiative. § 1291.64 Use of repaid AHP subsidies. (a) Use of repaid AHP subsidies for other AHP-eligible projects or households. (b) Re-use of repaid AHP direct subsidies in same project (1) The member or the project sponsor originally provided the AHP direct subsidy as down payment, closing cost, rehabilitation, or interest rate buy down assistance to an eligible household for purchase, or for purchase in conjunction with rehabilitation, of an owner-occupied unit pursuant to an approved AHP application; (2) The AHP direct subsidy, including any interest, was repaid to the member or project sponsor as a result of a sale, transfer, or assignment of title or deed of the unit prior to the end of the retention period to a subsequent purchaser that is not a low- or moderate-income household; and (3) The repaid AHP direct subsidy is made available by the member or project sponsor, within the period of time specified by the Bank in its AHP Implementation Plan, to another AHP-eligible household for purchase, or for purchase in conjunction with rehabilitation, of an owner-occupied unit in the same project in accordance with the terms of the approved AHP application. [83 FR 61231, Nov. 28, 2018, as amended at 87 FR 32969, June 1, 2022] § 1291.65 Transfer of Program administration. Without limitation on other remedies, FHFA, upon determining that a Bank has engaged in mismanagement of its Program, may designate another Bank to administer all or a portion of the first Bank's annual AHP contribution, for the benefit of the first Bank's members, under such terms and conditions as FHFA may prescribe. Subpart G—Affordable Housing Reserve Fund § 1291.70 Affordable Housing Reserve Fund. (a) Deposits. (b) Use or commitment of AHP funds. (1) AHP application alternates in the Bank's final funding round of the year for its General Fund or any Targeted Funds, if the Bank has a policy to approve alternates for funding under such Funds; (2) Pending applications for funds under the Bank's Homeownership Set-Aside Programs, if any; and (3) Project modifications for AHP subsidy increases approved by the Bank pursuant to the requirements of this part. (c) Carryover of insufficient amounts.