The Federal Home Loan Bank system has not had an in-depth review of its primary affordable housing program in more than 12 years, according to the Office of Inspector General for the Federal Housing Finance Agency.
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 the FHFA’s division of Federal Home Loan Bank Regulation has not performed an in-depth review of the program since 2011. The regulator also did not accurately assign or plan for exams.
The 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 most recent data.
The inspector general’s office stated that the division of Federal Home Loan Bank Regulation “did not plan or perform an in-depth review” of a key area within one of its higher risk affordable housing programs “for more than 10 years.”
The audit comes as the Home Loan Bank system is under scrutiny from its regulator, the FHFA. Last year, the FHFA launched a probe 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 roundtable discussions planned 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 earnings to affordable housing. A separate program called a discretionary homeownership set-aside program received $89.8 million in 2021 to fund down payment, closing costs, and rehabilitation assistance to low or moderate-income households, the report said.
The vast majority of the system’s affordable housing funding occurs through grants and loans to nonprofit organizations and community development financial institutions, or CDFIs.
The FHFA agreed with the report’s three recommendations and said it plans to complete certain actions by June 30.