Affordable Housing Homeownership Programs: An Overview

1. Affordable Housing Homeownership Programs: An Overview Michele Carter AHP Programs Manager

2. Housing & Community Development Programs • Affordable Housing Program (AHP) - Rental and Homeowner • Homeownership Set Aside Program (HSP) • Rural First-time Homebuyer Program (RFHP) • Targeted Ownership Program (TOP) • Disaster area related assistance

3. How does the AHP work? • Each year, FHLBank allocates 10% of its previous year’s net earnings for AHP subsidies. • Awarded in one competitive round with application deadline April 15. • Provides partial funding of financial gap that exists in a housing project or program targeted to LMI households. • Up to $400,000 for purchase, construction or rehabilitation. • Approximate AHP offering in 2011 $6.8 million.

4. Homeowner Projects • All homeowner units must be occupied by households below 80% AMI. • AHP funds may be used to pay for homeownership counseling fees, but only on AHP assisted units. • Retention requirement is five years.

5. AHP Application Process • Online application at: www3.fhlbtopeka.com/ahp/default.aspx • Scoring tips and technical assistance • Pre-application review: 2 weeks prior • Competition deadline: April 15, 2011 – Round will open March 1, 2011

6. Questions about Affordable Housing Program?

7. HSP: HOW IT WORKS • Approximately $1.7 million available in HSP funds in 2011 • 425 homebuyers who may benefit this year

8. HSP PROCESS All forms are available at www.fhlbtopeka.com

9. Eligible Uses • Down payment • Closing Costs • Homebuyer education fees or rehabilitation costs associated with the purchase of a home. • Single-family homes, mobile homes, condominiums and cooperatives.

10. Eligible Uses (cont.) Allowed in combination with: • Secondary market • Mortgage insurance • Non-FHLBank subsidy • Cannot be used with AHP or TOP for the same household. • Any lender may be used, however, they will be subject to cost reasonableness standards. If they do not meet our standards, the request will be denied.

11. HSP/RFHP Criteria • First-time homebuyer • Household income < 80% MRB limits • Home located outside the urbanized area of the central city of an MSA • Household’s primary residence • Minimum of $500 down or documented sweat equity • Mandatory homebuyer education

12. HSP/RFHP Criteria (cont.) • Homebuyer has been qualified for financing. (Income information must be based on the most recent applicable income documentation). • HSP household may not receive cash back in excess of $250 at closing. • Income must be documented and qualified based on all members of the household age 18 and over that reside in the home. • Income must be calculated according to the guidelines of FHLBank Topeka using forms and instructions issued by FHLB Topeka.

13. Retention Period – All HSP Programs • 5-year retention secured by deed restriction requires: • Notice of any sale or refinancing of the unit during that period. • If sold, repayment of a pro rata share of the subsidy upon sale, reduced by 1/60 per month for every month the HSP-assisted borrower owned the unit or sale to an HSP-qualified buyer. • If refinanced, FHLBank will subordinate its position to the first lender. • Check website March 1 for updated retention documents. Outdated documents will not be accepted.

14. FIRST-TIME HOMEBUYER: DEFINITIONS First-time Homebuyer: an individual and his or her spouse who have not owned a home during the three-year period prior to the purchase of a home proposed to receive assistance from the HSP. This includes a spouse or unmarried partner. (If either meets the definition of first-time homebuyer, they are considered first-time homebuyers.) Also eligible for first-time homebuyer status are: • A displaced homemaker, while a homemaker, owned a home with his or her spouse. That individual has not worked full-time, full-year in the labor force for a number of years and during that period, worked primarily without remuneration to care for a home and family. • A single parent, while married, owned a home with his or her spouse or resided in a home owned by the spouse. A single parent is an individual who is unmarried or legally separated from a spouse and has custody or joint custody of one or more minor children.

15. FIRST-TIME HOMEBUYER: DEFINITIONS (continued) Also eligible for first-time homebuyer status: • Any individual who did not purchase a home but holds legal title to a home as a result of special circumstances, including health or disability of a previous homebuyer or owner, subject to documentation acceptable to FHLBank. 4. Any individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations. • Any individual who has only owned a property that was not in compliance with State local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure. 6. Any homeowner in a rural area with damaged/destroyed homes that are within federally declared disaster areas will be eligible for rehabilitation, repair assistance and new construction funds

16. HCD COST REASONABLENESS STANDARDS • Front ratio cannot exceed 38% without an explanation • Cost per unit: Must be within maximum FHA limits • Mortgage rate: Freddie Mac fixed rate plus 2.00% - based on the date the disbursement request was received • Mortgage term: 40 years • Minimum owner down payment/POC: $500 • Education/Counseling fees: $500 maximum • Loan discount fees cannot exceed 2 points • Lender fees (borrowers and sellers) must not exceed 3% (i.e., origination fee, processing fee, etc.) • Any request with amounts outside these guidelines requires an explanation, but may not be approved

17. DISBURSEMENT REQUEST • Accompanied by documentation: • Loan application (signed by borrower or interviewer) • Third-party income verification (VOE, pay stubs, etc.) • Income Calculation worksheet (consistent with income documentation). If using a pay stub we will need two consecutive pay stubs. • Draft closing/settlement statement • Documentation of rehab expenses (if applicable) • Draft RFHP note/subordinate mortgage - please use revised documentation • Homebuyer education certificate • Truth in lending statement (TIL) • Verification of disability for TOP funds • Disaster-related request must submit insurance settlement information.

18. USING HSP TO PAY COUNSELING COSTS • HSP funds may be used to pay for counseling costs only when: • Incurred in connection with counseling of homebuyers who purchase an RFHP-assisted unit. • Costs have not been covered by another source, including the stockholder bank. • FHLBank will pay up to $500 per homebuyer for homebuyer education. The $500 is not in addition to the $4,000 subsidy. In most cases, the $500 is shown as a closing cost.

19. MANDATORY HOMEBUYER EDUCATION • Complete “acceptable” homebuyer counseling program prior to disbursement, includes, but not limited to, training provided by: • HUD-approved Housing Counseling Agency • State Homebuyer Education Association Certified (i.e., REACH, OHEA) • Provide certificate of completion or name of training agency • Training based on a recognized homebuyer education program • Does not apply to disaster repair assistance • If homebuyer education is taken on online, the certificate must be signed by the homebuyer

20. $500 DOWN PAYMENT OR EQUIVALENT • Down payment • Equity contribution • i.e., lot on which new house was built or sweat equity contributed through a self-help housing program) • Costs paid outside of closing • provide documentation of cost of appraisal, loan application, inspections, etc., if POCs are not shown on HUD 1 • Gifts cannot be used as part of the $500 • Documented sweat equity

21. RURAL LOCATION • Rural is defined as located outside of the urbanized area of the central city of a Metropolitan Statistical Area (MSA) • Examples of ineligible communities: Lincoln and Omaha, Nebraska • Examples of eligible rural areas: Grand Island, North Platte, Columbus and Fremont, Nebraska

22. LOAN CLOSING • HSP funds may not be used for home purchases that were closed prior to the first date that disbursement requests are accepted each round. Further, members are discouraged from submitting requests for disbursement of RFHP funds after closing. • EXAMPLE: If an RFHP request is submitted to FHLBank for review after closing and found ineligible by HCD staff, the request for the funds will not be approved. • The entity that disbursed the funds before FHLBank approval will be responsible for recovering their funds.

23. Questions about Rural First-time Homebuyer Program?

24. HSP/Targeted Ownership Program (TOP) • Awards grant funds to stockholders to help first-time homebuyers that have disabled household members to purchase a home. This includes purchase/rehab. • Funds up to $4,000 per homebuyer. Funds can be used for down payment, closing cost or rehabilitation. • In order to request funds a 2011 HSP agreement must be completed first. • Cannot be used for RFHP or AHP assisted households.

25. HSP/TOP Criteria • First-time homebuyer (same definition as RFHP) • Household includes an individual with a physical or developmental disability • Household income < 80% of MRB limits • Home located in district in rural or urban location • Household’s primary residence • Completed HSP agreement form • Minimum of $500 down • Mandatory homebuyer education

26. HSP/TOP Criteria (cont.) • Proof of disability required at time of disbursement of funds. • Homebuyer has been qualified for financing. (Income information must be based on the most recent applicable income documentation). • HSP household may not receive cash back at closing in excess of $250. • Income must be documented and qualified based on all members of household. Anyone age 18 and over who resides in the home.

27. Disabled Household Member Defined • Defined as: • A household which includes a person with a physical impairment or developmental disability which substantially limits one or more major life activities. • Requires documentation of disability or evidence of disability payment.

28. HSP/TOP Application Process • First-come, first-served pool opens March 1 • HSP agreement form must be completed prior to first disbursement • Disbursement to FHLB member bank demand deposit account • Original note, recorded mortgage and final closing documents must be returned to FHLBank within 60 days following disbursement • Lender may be anyone but they must adhere to FHLBank cost reasonableness standards

29. Questions about HSP/Targeted Ownership Program?

30. Disaster Area Related Assistance • HSP funds can be used in federally declared disaster areas. • Household does not have to be a first time homebuyer. • HSP funds must be used for costs related to damage associated with the disaster. • For disaster related requests, copies of insurance settlements, disaster assistance or other assistance related to the cost of the house being repaired or replaced are required at the time of disbursement.

31. Disaster Area Related Assistance Questions about Disaster Area Related Assistance?

32. Top 6 Nebraska Members Using HSP in 2010 • Charter West National Bank, West Point – 44 units for $150,000 • Farmers and Merchants Bank, Milford – 26 units for $97,480 • Equitable Bank, Grand Island – 18 units for $68,000 • Nebraska National Bank, Kearney – 16 units for $64,000 • First National Bank of Wahoo – 14 units for $56,000 • First State Bank and Trust, Fremont – 14 units for $56,000

33. FHLBank Topeka’s Housing and Community Development Staff Tom Thull, HCD Director (6029) Mark Ward, Assistant Director of HCD (6037) Dawn Harris, HCD Assistant (6030) Noelle St.Clair, Community Programs Specialist (6033) Casey Howard, HCD Compliance Specialist(6237) Michele Carter, AHP Programs Manager(6032) Utika Scales, AHP Specialist (6035) Terri Smith, AHP Specialist (6289) Jeff Ragsdale, AHP Specialist (6034) Amy Apitz, AHP Specialist (6031) Mark Orozco, AHP Specialist (6247)

34. FHLBank Website • Applications and Additional Resourceswww.fhlbtopeka.com