is a credit facility available to lending institutions that promote development in rural areas, agriculture, communities, economy and small businesses. An FHLB loan can also be accessed by mortgage lenders. The U.S federal government sponsors 12 banks under the FHLB loan program. These banks are tasked with providing low cost FHLB loan products to American financial institutions on demand. It is important to note that individuals do not have access to any of FHLB loan products offered by these institutions. FHL banks, together with their members, are the largest source of community credit and home mortgages.
The Origin of The FHLB Loan Program
The FHLB loan system was conceived and chartered by Congress in the year 1932. The main objective of the FHLB loan program was to provide financial services and products to its members in order to enhance community lending and financing of homes. Each of the 12 banks is structured like a cooperative owned and governed by commercial banks, savings and loan associations, insurance companies and credit unions. The 12 banks under the FHLB loan system include the Federal Home Loan Bank of New York, (FHLB of New York), FHLB of Atlanta, FHLB of Des Moines, FHLB of Indianapolis, FHLB of Pittsburgh, FHLB of Seattle, FHLB of Topeka, FHLB of Cincinnati, FHLB of Dallas, FHLB of Chicago, FHLB of Boston and the FHLB of San Francisco. There are many benefits of being a member of an FHL bank.
The FHLB loan program offers credit facilities under two financing programs; Community Investment Program (CIP) and the Affordable Housing Program (AHP).
FHLB Loan – Affordable Housing Program (AHP)
The Affordable Housing Program sponsored by the FHLB loan system is one of the largest sources of grants for affordable housing in the US. The program is funded by 10 percent of annual net income earned by members of FHLB loan banks. The Affordable Housing Program allows for utilization of FHLB loan products in combination with external funding sources or programs like the Low Income Housing Tax Credit among others. In the last two decades, the AHP program under the FHLB loan system has funded projects worth over 4.6 billion dollars. The FHLB loan program is the largest source of funding for the Habitat for Humanity. The program targets the following groups of people; the elderly, first time homeowners, homeless families, the
disabled in society, and people with limited resources. Under the AHP program, 475,000 housing units have been built for low income people. In total, more than 776,000 housing units have been built with the help of FHLB loan program. Funds from the AHP can be used to purchase, construct or rehabilitate rental housing units, or to cover all counseling expenses for borrowers. It can also be used to settle closing costs or pay down-payments. Consumers can get funding though member banks after filling out AHP application forms. Only members can submit FHLB loan applications.
FHLB Loan – Community Investment Program (CIP)
The Community Investment Program (CIP) is designed to act as a catalyst for economic growth in the community. This is achieved though funding of projects that not only create jobs, but also preserve them. Economic growth is stimulated through funding of infrastructure development projects in the community. Under the CIP program, members can access low interest loans for long term financing of projects that benefit low and moderate income neighborhoods and families. Some of the projects that lenders have funded though the community investment program include road and bridge construction, rental and owner occupied housing projects, retail stores and construction of sewage treatment plants among other projects. Under the CIP program, any member can apply for an FHLB loan to provide financing for small businesses. People living in rural areas have benefited greatly from the community investment program. This is because they have had basic infrastructure developed even with their limited resources. Since 1990, 223,000 jobs have been created as a result of projects funded by the FHLB loan system under the CIP program. More than 745,000 housing units have also been built under the same program during the same period. Over 64 billion dollars worth of projects have also been completed under the community investment program thanks to the FHLB loan system. Apart from funding projects, most banks under the FHLB loan program also run voluntary programs that aim to reduce foreclosures, build affordable housing, improve financial literacy and lend to small businesses.
Advantages of The FHLB Loan Program
Since its inception in the 1930s, the FHLB loan system has benefited members as well as consumers in a number of ways. For one, consumers can access affordable loans to build homes. Thousands of low income families now own decent homes due to funding provided by the FHLB loan program under the AHP and CIP programs. The program has benefited people living in rural areas because they now have good roads, sewage systems, market places, retail stores and other amenities that help in economic development. Loans issued under the FHLB loan system normally carry very low interest rates. Small business owners can therefore get affordable financing at incredibly low interest rates. Only members can apply for FHLB loan products.Home,