Community Investment

2020 Downpayment Plus® Programs

Consult the DPP Program Guide for program information.

How does FHLBank Chicago fund DPP®?

2 Federal Home Loan Bank of Chicago • Member owned. Member focused.

10% of prior year’s net

earnings

65% funds AHP

35% funds DPP®

DPP®

$12.3M statutory allocation + $7.9M voluntary allocation 3,100 approved reservations AHP $27.7M allocation 50 awarded projects

For 2019:

• Forgivable grants of up to $6,000 per homebuyer with income at or below 80% AMI

• Two programs available:

• Downpayment Plus® (DPP®): FHLBank Chicago member institution originates and/or funds the first mortgage

• Downpayment Plus Advantage® (DPP Advantage®): Non-profit organization funds the first mortgage

3 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Downpayment Plus® Programs

• Program opens January 13, 2020

• Maximum grant is the lesser of $6,000; three times the homebuyer’s net contribution; or 25% of the first mortgage amount

• Reservations on a first-come, first-served basis up to $420,000 per member

• DPP Advantage: no member limit

• Grants are forgiven 1/60th per month over 5 years, and secured with a retention agreement

4 Federal Home Loan Bank of Chicago • Member owned. Member focused.

2020 Program Overview

• Household must have a projected annual income at or below 80% of the area median, as determined by HUD and published on our website

• Household income includes income of each household member 18 years or older, with an exception for students who are not heads of households

• Income Calculation Guidelines and workbook are published on www.fhlbc.com and linked through the DPP Program Guide.

5 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Income Guidelines

• $1,000 minimum for DPP®; no contribution requirement for DPP Advantage®

• Gross contribution minus any cash back at closing • Must be homebuyer’s own resources; gifts or other DPA

grants do not qualify • May be assets held jointly with another householder • Cash back at closing cannot exceed $250

•If a member provides a DPP grant exceeding three times the homebuyer’s net contribution, the member will not be fully reimbursed.

6 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Homebuyer Contribution

• Must be provided by a National Industry Standards adopter

• Homeowner Education • Approved online providers eHome America and Framework; homebuyers

may also work with any NIS adopter • May be completed online or in person

• Pre-Purchase Counseling • Referrals from eHome America and Framework; homebuyers may also

work with any NIS adopter • Must be one-on-one, but does not need to be face to face

• Certificates of Completion required for grant reimbursement 7 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Pre-Purchase Education and Counseling

• Reservations are per household and per property.

• An appraisal is required for: • Related-party transactions and member REO properties • Sales price may not exceed the appraised value.

• An appraisal may be required for: • 2-unit properties, to assess market value of rents • FHLBank Chicago will apply 75% of the anticipated rent of

the second unit toward household income calculation.

8 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Property Requirements

• FHLBank Chicago largely defers to member institutions for underwriting; no minimum credit score or DTI

• Total debt-to-income ratios exceeding 45% require explanatory statement regarding household affordability

• No co-signors, guarantors, or other non-occupying co-borrowers

9 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Homebuyer Requirements

• Down payment and closing cost assistance

• Escrow reserves deposited with the lender

• Unused escrow funds, if any, must be applied to mortgage principal

• Eligible rehabilitation costs associated with a purchase

• Independent property inspection report and Scope of Work and Certification form required

• Up to $500 for homeownership education and counseling

10 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Eligible Uses

• Conventional fixed-rate • ARM with minimum term and initial

rate lock of five years • Balloon with minimum five-year term

• Interest-only is ineligible

• Purchase

• Purchase/Construction

• Purchase/Rehabilitation

• Refinance is ineligible

Purpose of Financing

Amortization and Term

Types of First Mortgages • Portfolio

• Rural Development

• Veterans Administration (VA)

• IHDA, WHEDA, or other federal, state, or local housing programs

• Federal Housing Administration (FHA)

• DPP grants may be used with first mortgages sold to MPF, FNMA, or FHLMC, if retention agreement is acceptable

• HUD Section 184

11 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Eligible Mortgage Products

Federal Home Loan Bank of Chicago • Member owned. Member focused. 12

• Program Agreements • Due to FHFA Final Rule requirements, all member

institutions must submit a new Program Agreement to participate in DPP, even if they participated in the past.

• Retention Agreements • Retention agreement has been updated, and is required

for all loan closings on or after 1/1/2020. • New retention agreement applies for grants funded out of 2019 program

year, if loan closes 1/1/2020 or later • Illinois and Wisconsin properties: updated agreement will be provided • Out-of-district properties: members must review and update applicable

retention agreements

Key Changes for 2020

Federal Home Loan Bank of Chicago • Member owned. Member focused. 13

• Microsoft Excel • Effective 1/1/2020, the FHLBank Chicago will require

Microsoft 2010 or newer for files uploaded to DPP Online. • Users are encouraged to obtain Microsoft Excel 2010 or

a newer version prior to January 1 in order to upload worksheets in the system.

• Pre-Purchase Education & Counseling costs

• 2019: Up to $700 of grant could be applied to these costs. • 2020: Up to $500 may be applied to these costs.

Key Changes for 2020

New Repayment Worksheet and repayment methods Repayment is waived for the following: • Unforgiven grant amount is ≤$2,500 (de minimis)

• Home is sold to a purchaser whose household income is ≤80% AMI (proxy method)

• Net proceeds from sale, less homebuyer’s investment, are ≤$2,500

• Net proceeds from refinance are ≤$2,500

• Foreclosure, deed-in-lieu of foreclosure, or assignment to HUD of FHA-insured mortgage.

Repayment Worksheet video available online.

14 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Key Changes for 2020: Repayments

• Apply for first mortgage financing with participating FHLBank Chicago member

• Provide executed purchase contract for the property

• Provide evidence of household income

• Complete homebuyer education and counseling with an approved partner

• Contribute ≥ $1,000 (net) to the purchase transaction

15 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Borrower Roles and Responsibilities

• Verify household income of borrower(s) • Make grant reservation • Ensure borrower satisfies homebuyer education

and counseling requirement • Ensure borrower satisfies ≥ $1,000 net contribution

requirement • Ensure borrower does not receive more than

$250 cash back at closing • Disburse grant funds at closing of first mortgage

16 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Member Roles and Responsibilities

• Initiate reservation via DPP Online

• Reservation Documents (see Reservation Document checklist)

• Purchase contract and 1st mortgage loan application

• Income Calculation Workbook

• Income documentation

• Beneficiary Questionnaire for each household member 18 years of age and older

• Allow two weeks for FHLBank Chicago approval

• Transaction must close within 90 days of approval 17 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Grant Reservation Process

• Closing package must be uploaded within 14 days after closing, and must include:

• Closing Disclosure (most recent)

• Certificate of Borrower Eligibility and Disbursement Request Form (signed)

• Retention Agreement

• Homebuyer Education and Counseling Certificate of Completion

• Allow up to four weeks from closing package upload to disbursement.

18 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Closing and Disbursement

• Reservations automatically expire in 30 days if required data and documents are not submitted via DPP Online.

• Once the DPP reservation is approved the member has 90 days to close and submit the closing package, or the reservation will automatically expire.

19 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Timeline Management

• Incomplete beneficiary questionnaires • Inaccurate income calculation workbooks • Expired reservations • Not ensuring ≥ $1,000 net contribution and/or

<$250 cash back at closing • Reserving funds under correct DPP program

20 Federal Home Loan Bank of Chicago • Member owned. Member focused.

DPP Online Challenges

• Address pending items • Retain copies of all documents submitted • Use a different file name or clarifications and

resubmission of documents • Strategy of determining grant amount

21 Federal Home Loan Bank of Chicago • Member owned. Member focused.

DPP Online Recommendations

• DPP Program Guide, including forms, documentation checklists, and DPP Online step-by-step procedures

• Income Calculation Guidelines, Income Calculation Workbook, and Income Calculation Workbook Instructions

• Repayment Guidelines and calculation worksheet

• Webinars and one-on-one technical assistance

• Customizable marketing brochures 22 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Program Resources

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Federal Home Loan Bank of Chicago • Member owned. Member focused.

Marketing Materials

Downpayment Plus Programs

FHLBank Chicago Community Investment Group Program Administration, Borrower Eligibility Phone: 312-565-5824, Option 1 Email: dpp@fhlbc.com

Member Support DPP Program Enrollment, eBanking, and DPP Online Phone: 855-345-2244, Option 0 Email: membersupport@fhlbc.com

24 Federal Home Loan Bank of Chicago • Member owned. Member focused.

Contact Information