The Federal Home Loan Bank system has not had a major overhaul of its main affordable housing program in more than 12 years, according to the Federal Housing Finance Agency’s Office of Inspector General.
An audit released Friday identified the Home Loan Bank system’s competitive application program, one of its two main affordable housing programs, as “higher risk.” The report found that FHFA’s Federal Mortgage Bank Regulation division has not conducted an in-depth review of the program since 2011. The regulator also did not assign or precisely plan the exams.
Home Loan Banks funded $262.6 million in grants and loans through the competitive application program in 2021, the inspector general’s office said, citing the latest data.
The inspector general’s office stated that the Federal Home Loan Bank’s Regulation division “did not plan for or conduct an in-depth review” of a key area within one of its highest-risk affordable housing programs “for more than 10 years.” “.
The audit comes as the Home Loan Bank system is under scrutiny by its regulator, the FHFA. Last year, the FHFA launched an investigation into the public-private partnership of 11 regional banks that was created during the Great Depression. The regulator is now in the second phase of its review with a series of roundtables scheduled for next week in Las Vegas, Los Angeles and Boise, Idaho.
Each federal home loan bank operates an affordable housing program and is required by law to contribute 10% of its income toward affordable housing. A separate program called the discretionary homeownership reserve program received $89.8 million in 2021 to finance down payment, closing costs and rehabilitation assistance for low- and moderate-income households, according to the report.
The vast majority of the system’s affordable housing financing occurs through grants and loans to nonprofit organizations and community development financial institutions, or CDFIs.
The FHFA agreed with all three of the report’s recommendations and said it plans to complete certain actions by June 30.
