1. Applying for AHP Competitive Funds Federal Home Loan Bank of Atlanta June 19, 2013 Joel Brockmann Rental Production Manager Community Investment Services

2. 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 2 Agenda

3. FHLBank Atlanta Focus Statement The 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. 3

4. 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 4

5. 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 5

6. 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 6

7. 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 7 Agenda

8. 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 8

9. 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 9

10. 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

11. 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 11

12. 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 12

13. 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

14. FHLBank Atlanta Application Criteria 2013 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 14

15. FHLBank Atlanta Application Criteria 2013 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 15

16. FHLBank Atlanta Application Criteria 2013 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 16

17. FHLBank Atlanta Application Criteria 2013 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 17

18. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Donated Government Owned or Other Property 5 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 18

19. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Non-profit or Government Sponsor 5 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 19

20. FHLBank Atlanta Application Criteria 2013 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 20

21. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Targeting 20 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 21 Targeting Points

22. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Housing for Homeless Households 5 points / fixed 20% of the units are reserved for minimum of six month occupancy HUD definition of “homeless households” 22

23. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Empowerment Activities 5 points / variable Empowerment Activities Owner (Non-OORehab) Owner (OORehab Only) Rental Homeownership Education Program Pre-closing Counseling 5 PointsN/A Employment Readiness Program N/A 2.5 Points On-Site Daycare (Child or Adult) N/A 2.5 Points Training and Education Program N/A2.5 Points Owner / Resident Involvement Program N/A2.5 Points Counseling Program (Homeowners & Tenants) N/A2.5 Points 23

24. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Member Financial Participation 15 points / fixed Minimum 5% of total development costs Permanent or construction financing Debt or equity Credit must be extended / closed 24

25. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Project Readiness 10 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 eligible 25

26. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Supportive Housing / Special Needs 5 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 26

27. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Foreclosure Recovery 5 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 27

28. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Leveraging 10 points / fixed Projects in which AHP funds are less than or equal to 10% or less of total permanent sources 28

29. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Subsidy per Unit 10 points / variable Weighted average Cannot be self-scored >=$30,000 per unit = 0 points 29 Subsidy Per Unit Points

30. FHLBank Atlanta Application Criteria 2013 Scoring Criteria: Community Stability 5 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 30

31. FHLBank Atlanta Application Criteria 2013 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 31

32. FHLBank Atlanta Application Criteria 2013 Underwriting 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 closed 32

33. FHLBank Atlanta Application Criteria 2013 Underwriting (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 33

34. FHLBank Atlanta Application Criteria 2013 Underwriting (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 34

35. FHLBank Atlanta Application Criteria 2013 Underwriting (cont.) Market feasibility Defer to market feasibility approved by the state if using state- administered funding 35

36. 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 36 Agenda

37. FHLBank Atlanta Compliance / Risk Management Key ProvisionsBusiness 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 37

38. 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. 38

39. 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. 39

40. 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 40

41. 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

42. FHLBank Atlanta Helpful Resources FHLBank Atlanta website: www.fhlbatl.com Affordable Housing Program Implementation Plan www.fhlbatl.com/docs/cis/ahp-implementationplan.pdf Project Sponsor Registration Instructions www.fhlbatl.com/docs/cis/ahp-sponsor-registration.pdf Affordable Housing Program Retention Agreement Rider and Instructions www.fhlbatl.com/docs/cis/ahp-retention.pdf 42

43. FHLBank Atlanta Questions? 43

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