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NAFCU, in a letter sent Tuesday to the Federal Housing Finance Agency (FHFA), expressed concerns about the agency's proposed rule to amend regulations related to the Federal Home Loan Banks' (FHLBs) affordable housing program (AHP). Namely, the association is worried the changes would limit the program's flexibility and prevent FHLBs from meeting the needs of their communities.

The proposal would establish new prescribed award percentage outcomes that would require FHLBs to award specific percentages of funds to certain types of projects and sponsors.

In the letter, NAFCU Senior Regulatory Affairs Counsel Ann Kossachev said that while the proposed rule was meant to "provide the FHLBs with greater flexibility to design and implement their own project selection scoring criteria and award AHP funds," it actually forces the banks to focus on meeting outcomes "thereby disadvantaging certain sponsors and types of housing."

"The new required outcomes create a national, prescriptive program that prevents individual FHLBs from addressing the particular needs of their local communities and respective districts," Kossachev wrote.

Kossachev also shared NAFCU's concerns that the proposed rule would:

• make the project selection process less transparent and more complex by forcing the banks to re-rank applications in order to meet award quotas;

• place an undue burden on the sponsor, non-profit and for-profit builders and developers that work with FHLBs because they would have to alter their current business approach to meet the prescribed outcomes approach;

• undermine FHLBs' ability to accommodate differences in housing markets with the elimination of the retention mechanism requirement for owner-occupied, AHP-assisted units; and

• reduce FHLBs' flexibility to reallocate funds as most appropriate with mandatory funding of alternates, which compromises the effectiveness of the AHP.

NAFCU requests that the FHFA not finalize this rule, but rather adopt the approach the agency proposed in its AHP White Paper or keep the processes in the current AHP rule regarding project selection.