Applying for AHP Competitive FundsFederal Home Loan Bank of Atlanta

June 19, 2013

Joel BrockmannRental Production Manager

Community Investment Services

FHLBank Atlanta

• What is the AHP Competitive Program?

• Focus statement

• What makes AHP different than other funders?

• Uses of AHP funds

• Eligible project types

• Why apply for AHP funds?

• Sponsor

• Member

• How does the AHP Competitive Program work?

• Application Criteria

• Threshold

• Scoring

• Underwriting

• Compliance / Risk Management

• Questions

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Agenda

FHLBank Atlanta

Focus StatementThe primary focus of the Bank’s AHP is to support the community investment finance needs of our members. The Bank’s AHP Competitive and AHP Set-aside programs further the Bank’s Strategic Plan by delivering timely gap funds that enable our members to better manage transactional credit risk and enhance their extension of credit to ready and viable affordable housing finance opportunities. The AHP Competitive program scoring guidelines and the AHP Set-aside program product requirements herein further the Bank’s AHP focus statement and promote the current priorities: very-low income, increased supportive housing, and AHP leveraging.

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FHLBank Atlanta

What makes AHP different than other sources of funds?• Equity-like funding• No interest accrues • No expectation of repayment• Secured with a note and security instrument to ensure

compliance through the affordability period• 5 years for ownership• 15 years for rental

• Maximum 80% of AMI• Subsidized advances are also available

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FHLBank Atlanta

Uses of AHP funds

• Acquisition, rehabilitation, or construction of eligible housing• Residential only (not

commercial)• AHP cannot be used for

capitalized reserves, furnishings, or to provide support services

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FHLBank Atlanta

Eligible project types

• Rental or ownership• Rental projects: 20% of the units must be for Very Low Income

households (50% of AMI or below)

• New construction or rehabilitation• Single family or multifamily• Owner-occupied rehabilitation• Downpayment assistance

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FHLBank Atlanta

• What is the AHP Competitive Program?

• Focus statement

• What makes AHP different than other funders?

• Uses of AHP funds

• Eligible project types

• Why apply for AHP funds?

• Sponsor

• Member

• How does the AHP Competitive Program work?

• Application Criteria

• Threshold

• Scoring

• Underwriting

• Compliance / Risk Management

• Questions

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Agenda

FHLBank Atlanta

Why apply for AHP funds?

Sponsors• Enables the extension of credit• Reduces loan risk• Compatible with public or private debt

and equity• Provides equity for difficult to develop /

critical need projects• Magnet to create new relationships

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FHLBank Atlanta

Why apply for AHP funds?

Members• Enables member to achieve their

business objectives• Business opportunities

• Commercial / construction loans• First mortgage originations

• Reduces loan risk• Public perception / public relations• CRA and compliance friendly• Stimulates real estate activity and

economic development

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FHLBank Atlanta

• What is the AHP Competitive Program?

• Focus statement

• What makes AHP different than other funders?

• Uses of AHP funds

• Eligible project types

• Why apply for AHP funds?

• Sponsor

• Member

• How does the AHP Competitive Program work?

• Application Criteria

• Threshold

• Scoring

• Underwriting

• Compliance / Risk Management

• Questions

10

Agenda

FHLBank Atlanta

How does the AHP Competitive Program work?Overview• One round per year

• Opening approximately 30 days prior to the application deadline

• Submitted through AHP Online, the web-based application intake, underwriting, and scoring system accessed through the FHLBank Atlanta website

• All applications are submitted at the same time• Scored competitively on a 100 point scale• All applications include a Sponsor and a Member

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FHLBank Atlanta

How does the AHP Competitive Program work?Schedule• Underwriting: 3-4 months• Upon board of directors approval, awards are

announced and applicants are notified• Milestone dates:

• 6 months – zoning documentation• 12 months – other funding commitments• 18 months – start construction / take down AHP funds*• 36 months – complete the project

* Sponsors have 36 months to take down AHP funds for ownership projects that are funded at homebuyer closing

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FHLBank Atlanta

• What is the AHP Competitive Program?

• Focus statement

• What makes AHP different than other funders?

• Uses of AHP funds

• Eligible project types

• Why apply for AHP funds?

• Sponsor

• Member

• How does the AHP Competitive Program work?

• Application Criteria

• Threshold

• Scoring

• Underwriting

• Compliance / Risk Management

• Questions

13

Agenda

FHLBank Atlanta

Application Criteria2013

Threshold Criteria• Application Certification

• Include signatures, disclosures, and history / experience

• Sponsor Qualified and Able• Nobody on the development team is on the AHP

suspension list• Site control

• By the sponsor or the project owner

• Sponsor must have an ownership interest in the project throughout the compliance period• Except for owner-occupied rehabilitation, downpayment

assistance, and foreclosure recovery projects

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FHLBank Atlanta

Application Criteria2013

Threshold Criteria (cont.)• 20% of funding sources must be committed by an

unrelated third party• Permanent debt• Construction debt• First mortgage loan• Line of Credit• Equity commitments• LIHTC allocation• Bond inducement• Capital campaigns• Outstanding debt

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FHLBank Atlanta

Application Criteria2013

Threshold Criteria (cont.)• Committed funding does not include:

• AHP subsidies• Deferred developer fee• Sponsor equity• Sponsor loans, including sponsor-provided first mortgages

• Construction cost form completed• Physical Needs Assessment (PNA) information• Construction type, scope, quality and location• Replacement reserves analysis

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FHLBank Atlanta

Application Criteria2013

Threshold Criteria (cont.)• Changes of location are generally not allowed• Changes of sponsor are generally not allowed • Organizations or individuals that have received

FHLBank Atlanta sponsorships or charitable contributions within the past 12 months are not eligible to receive AHP funds

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Donated Government Owned or Other Property5 points / variable•Government property sold for a project, or•Property donated by a private party at a nominal price•At least 25% of the units, land, or land lots•Owner projects:

• 5 points x % of donated lots

•Rental Projects• 5 points x % of donated units or 5 points x % of total land

donated

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Non-profit or Government Sponsor5 points / variable•Rental Projects

• 1 point when the non-profit sponsor has an ownership interest through the retention period

• 4 additional points when the non-profit sponsor has a controlling interest through the retention period

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Non-profit or Government Sponsor (cont.)5 points / variable•Ownership projects – 1 point each for a maximum of 5 points

• Marketing and Outreach• Property acquisition• Pre-development• Construction / rehabilitation• Qualifying borrowers for home mortgages• Providing or arranging permanent mortgage financing

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Targeting20 points / variable•Weighted average•Cannot be self-scored•Rental compared to rental, ownership compared to ownership•Income categories:

• Moderate: >65%-80% of AMI• Low: >50%-65%• Very Low: 50% or less of AMI

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TargetingTargeting

PointsPoints

FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Housing for Homeless Households5 points / fixed•20% of the units are reserved for minimum of six month occupancy•HUD definition of “homeless households”

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Empowerment Activities5 points / variableEmpowerment Activities

Owner (Non-OORehab)

Owner (OORehab Only)

Rental

Homeownership Education Program Pre-closing Counseling

5 Points N/A N/A

Employment Readiness Program

N/A N/A 2.5 Points

On-Site Daycare (Child or Adult)

N/A N/A 2.5 Points

Training and Education Program

N/A 2.5 Points 2.5 Points

Owner / Resident Involvement Program

N/A 2.5 Points 2.5 Points

Counseling Program (Homeowners & Tenants)

N/A 2.5 Points 2.5 Points

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Member Financial Participation15 points / fixed•Minimum 5% of total development costs•Permanent or construction financing•Debt or equity•Credit must be extended / closed

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FHLBank Atlanta

Application Criteria2013Scoring Criteria: Project Readiness10 points / fixed•Rental (non-LIHTC)

• 100% of non-AHP permanent sources committed

•Rental (9% LIHTC or 4% LIHTC without bonds)• Tax credits awarded by state allocating agency

•Rental (4% LIHTC with or without bonds)• Bond inducement resolution or equivalent

•Ownership (new construction / rehabilitation with sale)• 75% of units presold; for DPA 100% of the homebuyers

identified and income qualified

•Owner-Occupied Rehabilitation (with no sale)• 75% of the units identified, including cost specifications / cost

breakdown / owners income eligible25

FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Supportive Housing / Special Needs5 points / fixed•50% increase in supply and 100% of units reserved for special needs populations•Mentally or physically disabled, persons recovering from physical or substance abuse, people with AIDS

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Foreclosure Recovery5 points / fixed•75% of the units in the project are foreclosed•Not application to non-residential properties•Site control not required at applicable for ownership projects only

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Leveraging10 points / fixed•Projects in which AHP funds are less than or equal to 10% or less of total permanent sources

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Subsidy per Unit10 points / variable•Weighted average•Cannot be self-scored•>=$30,000 per unit = 0 points

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Subsidy Subsidy Per UnitPer Unit

PointsPoints

FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Community Stability5 points / variable•2 points for the rehabilitation of vacant or abandoned properties

• Minimum 60% of units are vacant or abandoned• 2 points x % of vacant or abandoned units• Does not include vacant land

•2 points for projects located in a neighborhood targeted for stabilization

• Neighborhood stabilization plan approved by a unit of state or local government

• Targeted for receipt of state or local government funding or support services

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FHLBank Atlanta

Application Criteria2013

Scoring Criteria: Community Stability (cont.)•1 point for projects that do not displace existing low- to moderate-income households

• Displacement may be allowed if the sponsor has a relocation plan for the residents

• Does not apply to new construction projects on previously undeveloped properties

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FHLBank Atlanta

Application Criteria2013Underwriting•Reasonable Cost

• Based on Marshall & Swift, RS Means or other industry construction cost data

• Including remaining useful life / replacement reserves analysis

•Developer Fee• Max. 15% of total development cost net of:

• Acquisition costs• Capitalized reserves• Developer fee

• Includes fees paid to consultants for activities normally done by the developer

• No fees allowed if no transfer of ownership• AHP cannot replace owner equity or deferred developer fee if

construction financing has closed32

FHLBank Atlanta

Application Criteria2013Underwriting (cont.)•Builder overhead, profit and general requirement

• Maximum 16% of hard cost, net of builder overhead, profit and general requirements

•Capitalized Reserves• Maximum 9 months operating expenses (net of reserves in

operating expenses) plus 9 months of hard debt service• Not allowed unless lender or LIHTC investor required• Can defer to published guidelines for projects using state

administered funding

•Soft Costs• Maximum 28% for rental projects, 25% for ownership projects,

20% for owner-occupied rehabilitation

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FHLBank Atlanta

Application Criteria2013Underwriting (cont.)•Debt coverage ratio

• 1.15 - 1.45• Alternate need for subsidy test for projects with no hard debt

or outside these parameters

•Net cash flow• Max. 15%

•Management Fees• 5% - 9% of gross revenue

•Replacement Reserves• $200-$350 per unit per year• Not allowed unless lender or LIHTC investor required

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FHLBank Atlanta

Application Criteria2013Underwriting (cont.)•Market feasibility

• Defer to market feasibility approved by the state if using state-administered funding

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FHLBank Atlanta

• What is the AHP Competitive Program?

• Focus statement

• What makes AHP different than other funders?

• Uses of AHP funds

• Eligible project types

• Why apply for AHP funds?

• Sponsor

• Member

• How does the AHP Competitive Program work?

• How do I apply for AHP funds?

• Threshold criteria

• Scoring

• Underwriting

• Compliance / Risk Management

• Questions

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Agenda

FHLBank AtlantaCompliance / Risk Management

Key Provisions Business Objectives

Compliance and Monitoring Requirements

Fully executed and recorded AHP retention agreement meeting the Bank’s retention requirements for all owner-occupied units and rental projects (see Appendix D of the AHP Implementation Plan)

•Ensure project meets regulatory compliance period of 5-years for ownership projects and 15-years for rental projects

Project Sponsors must complete required initial monitoring review (IMR) training for each project after being reported complete. Failure to complete the monitoring training will result in the project being placed on the Watch List

•Enhance customer service

•Promote Project Sponsor and Member accountability

Documentation is required at project completion demonstrating that the project was completed as committed in the application (e.g., rent rolls, income verification documents, documentation of final funding sources, implementation of empowerment activities)

•Ensure project feasibility and affordability throughout the compliance period

Project Owners must complete required LTM training for each project as it enters the long-term monitoring period. Failure to complete the monitoring training will result in the project being placed on the Watch List

•Enhance customer service; Promote Project Owner accountability

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FHLBank Atlanta

Compliance/ Risk Management • Members must know the borrower (sponsor / homeowner / homebuyer)

and must conduct their own due diligence

• Members and Project Sponsors shall establish and maintain adequate and efficient internal controls, policies and procedures, to assure an effective system for the prevention, detection and reporting of fraud or abuse in connection with any element of the AHP Competitive transaction including but not limited to the appropriate countersignatures and notarization of documents.

• Members and Project Sponsors shall notify the Bank promptly after discovery or notice of any material change, either positive or negative, in the financial condition, operations, properties or prospects of any material party associated with the transaction (including whether any material party to the unit has lost their requisite license or been suspended by any applicable government agency, or has otherwise been barred from participation in any affordable housing program), or any event which has or may have a material impact on the transaction.

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FHLBank Atlanta

Compliance/ Risk Management

• Members and Project Sponsors represent and warrant that all documents and other information delivered to the Bank are and will be true, complete and correct in all material respects at the time of delivery to the Bank, and such documentation is materially consistent with corresponding documentation and information provided to other funding sources.

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FHLBank Atlanta

Compliance/ Risk Management

Non-compliance to program requirements results may lead to:• Placement on FHLBank Atlanta’s Watch List• Restrictions on future applications• Recapture of AHP Competitive funds• Suspension from FHLBank Atlanta’s community investment

programs

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FHLBank Atlanta

2014 AHP Competitive Round

• Look for an announcement for the 2014 AHP Competitive Round shortly after the conclusion of the 2013 round• Schedule• Any scoring or underwriting updates• Please provide a business card if you want to be on the

announcement mailing list

FHLBank Atlanta

Helpful Resources

FHLBank Atlanta website:www.fhlbatl.com

Affordable Housing Program Implementation Planwww.fhlbatl.com/docs/cis/ahp-implementationplan.pdf

Project Sponsor Registration Instructionswww.fhlbatl.com/docs/cis/ahp-sponsor-registration.pdf

Affordable Housing Program Retention Agreement Rider and Instructions www.fhlbatl.com/docs/cis/ahp-retention.pdf

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FHLBank Atlanta

Questions?

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FHLBank Atlanta

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