1 The Value of Membership - Opportunities for Community Investment February/March 2012.

1www.fhlbi.com

The Value of Membership -

Opportunities for Community Investment

February/March 2012

FHLBI annually reinvests at least 10 percent of our net earnings into affordable housing in partnership with our members

Like every “dividend,” this contribution is predicated on earnings

FHLB’s Affordable Housing Program (AHP) constitutes the largest single source of private “capital” for affordable housing in the country

No other provider of liquidity pays this dividend

Community Investment Programs 3

“Community Dividend” We Deliver

Affordable Housing Program (AHP) – grant funding to create rental and homeownership opportunities for low- and moderate-income households

Homeownership Initiatives – grant funding for down payment, closing cost assistance and homeowner rehabilitation to income-eligible households

Community Investment Program (CIP) Advances and Letters of Credit – discounted advances and letters of credit to support targeted housing and economic development

Community Investment Programs 4

FHLBI Community Investment Programs

Competitive AHP $9 million Homeownership

Initiatives$4.8 million

HOP

NSA

NIP

2012 AHP Allocation to be determined

2011 AHP Contribution (based on 2010 results)

Reviewed by AHAC annually before approval by Board, or as amended

Establishes scoring and set-aside criteria in response to district needs and within regulations

Establishes competitive application round deadlines and set-aside holdback dates

Allocates required annual contributions

Implementation Plan

Provides a direct subsidy (grant) for acquisition, rehabilitation or construction of affordable housing of various types

Only FHLBI members may apply for this grant funding

Project sponsors are non-profit or for-profit housing developers who partner with FHLBI member

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Affordable Housing Program (AHP)

Community Investment Programs

Brotherhood Mutual Insurance Co. partnered with Ft. Wayne Rescue Mission Ministries to obtain an AHP grant of $750,000 to help Charis House build a larger facility for women and children suffering from homelessness, mental illness, addictions, or trauma.

A single funding round in 2012 Competitive application process Maximum grant $500,000 per project Grants - direct subsidies No limit on how many AHP projects a

member can apply for or be awarded per round

Deliver funds to project through member’s deposit account at the FHLBI

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Affordable Housing Program (AHP)


Senior or family rental projects (not assisted living, hospice or nursing homes)

Scattered site single family homes for homeownership, lease purchase or rental

Emergency shelters Transitional housing Permanent supportive housing Habitat for Humanity projects Neighborhood revitalization projects

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Typical AHP Projects


Post Secondary Transition House, a collaborative between SVRC Industries, Inc. and the Saginaw Intermediate School District, provides transitional housing for developmentally disabled persons aged 18 to 26. The school district will provide education and training services to residents. An AHP grant of $750,000 was awarded to Wanigas Credit Union in 2009.

80% of area median income for homeowner projects

50% of area median for rental projects (at least 20% of units must be affordable to households at 50% of area median income)

Mixed income rental projects are allowed

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AHP Definition of Affordable:


Rental: Rent does not exceed 30%

of household income

Homebuyer: Mortgage payments that do not

exceed 35% of borrower’s monthly income. Borrower’s total debt must be less than 45%

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AHP Affordability, continued


Comprehensive community development Aging in Place for seniors and permanent supportive

housing Green building and rehabilitation standards continue

to be a focus Readiness to proceed Economic diversity

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Key 2012 Scoring Changes


Sponsor prepares reports and submits to member semi-annually during development phase. Member submits reports to FHLBI.

Initial monitoring at completion Long-term monitoring for rental projects

◦Project is habitable

◦Rents and incomes are in compliance with targeting commitments

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AHP Monitoring


The FHLBI’s homeownership initiative programs can help first-time homebuyers with down payments and closing costs or assist homeowners with repairs to individual homes or entire neighborhoods. The NSA program created in 2009 helps to address the foreclosure crisis by redeveloping foreclosed properties.

Homeownership Opportunities Program (HOP) provides up to $7,500 in down payment and closing cost assistance for first-time homebuyers

Neighborhood Stabilization Assistance (NSA) provides up to $10,000 in down payment and closing cost assistance to buyers of NSP-assisted homes

Neighborhood Impact Program (NIP) provides up to $10,000 for rehabilitation of owner-occupied homes

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Homeownership Initiatives


Income limit of 80% or less of AMI FHLBI provides $3 per $1 of matching funds If counseling is required, it must be face-to-face with

state or HUD-certified counselor Member cap of $300,000 per program 5 year retention required, prorated recapture

over the 5 years Funding on a first come – first served basis Available balance posted on FHLBI Website

and updated regularly

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Homeownership Initiatives Similarities


The Neighborhood Impact Program (NIP) assists homeowners with renovations. These “before” and “after” photos of a home in Detroit, MI, show the dramatic difference that these dollars can make for the homeowner and an entire neighborhood.

Community Investment Program advances for housing or community economic development purposes

CIP Letters of Credit to enhance bond issuances funding affordable housing and taxable non-housing municipal bonds

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What is CIP?

Community Investment Program

Community Investment Program advances are FHLBI’s lowest cost funding!

Flexible terms/structure

Variable and fixed to 20 year

Up to 30 year amortization

Same collateral, prepayment terms, and activity-based stock requirements as traditional advances

Available at FHLBI’s cost of funds, plus a nominal administrative fee (non-competitive)

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Why is it important to FHLBI Members?


Provide low cost funding for many investment and loan opportunities, including AHP projects

Offer potentially lower rates than competitors Enhance community relations by meeting the

credit needs of your community Match funding to mitigate interest rate risk Fulfill Community Reinvestment Act (CRA) lending

and/or investment tests*

* This does not constitute CRA advice. Please consult appropriate advisors.

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How else does a FHLBI member benefit?


Use CIP to provide financing for predevelopment, purchase, construction, rehabilitation, or refinance:o Housing (residential)… AHP projects qualify

automatically!o Economic development (nonresidential)o Mixed use (combination of residential & nonresidential)

Or to fund:o Future originationso Originations up to 3 months prioro Loan refinancingo Communities or entities financing eligible housing

or economic development initiatives (even fire trucks, hospitals or libraries!)

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Eligible CIP Uses


Many mortgages made by members are likely to be CIP-eligible

Members can purchase a participation interest or participate in a CIP eligible loan consortium

Make loans to a community or other entities financing CIP eligible projects, like fire stations or a library

Use CIP to purchase mortgage revenue bonds, mortgage-backed securities or Low Income Housing Tax Credits

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Eligible CIP Types of Financing


Complete the short application (available year-round) Multiple ways to qualify a project… FHLBI staff can help find the easiest way to qualify your

project FHLBI review time less than 10 business days Minimum typical CIP advance is $100,000

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The application process is easy!


Documentation required at project qualification only No penalty for not taking down a commitment No ongoing monitoring or reporting Project must be closed and funds fully disbursed or

construction draws funded within 3 months prior to the CIP funding date and/or ending 6 months after the funding date

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The rest is easier!


Past Project Funding

CIP Funding

Future Project Funding

Ownership Residential

Individual owner-occupied units owned or purchased

All household incomes <=115% of Area Median Income (AMI)

Documentation requirement: List of originated mortgages

Rental Residential

Financing of rental units and cooperatives

At least 51% of resident incomes <=115% of AMI or

Rents affordable to at least 51% residents whose incomes are <=115% AMI

Documentation requirement: Rent roll, FHLBI Rent Schedule or Income Roll

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CIP Housing Project Qualification


Community Investment Programs29

The former Hekman Biscuit Company in Grand Rapids, MI, was renovated into Roosevelt Park Lofts. The building offers 21 affordable studio, two- and three-bedroom apartments with loft-style features. It also offers 2,400 square feet of commercial space. Lighthouse Community Development received an AHP grant of $147,000 through Fifth Third Bank to assist with the renovations.

Types of Projects:

1. Small Business Administration (SBA) Concern

2. Job creation/retention at qualified wage levels

3. Services and benefits to a qualified area

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CIP Commercial and Economic Development


Project Qualification:

Small Business Concern

Small Business Administration revenue/size standards (North American Industry Classification System Codes (NAICS))

Documentation Requirement: Proof of revenue

Job creation/retention at qualified wage levels

At least 51% of job salaries <=115% AMI

Documentation Requirement: FHLBI Job Information Form

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Accident Fund Insurance Co. combined the renovation of a vacant power plant built in 1938 with new construction to create its headquarters in downtown Lansing, MI. The FHLBI provided a $50 million CIP advance for the construction/renovation and a $31.3 million CIP letter of credit to support the construction of the parking deck.

Services and benefits to a qualified area

Project provides services/benefits to urban or rural area

<=100% AMI for urban areas

<=115% AMI for rural areas

Project location in targeted area (income exemption)

Rural/urban Champion Community/Empowerment Zone or Enterprise Community

Native American area

Federal Brownfield Tax Credit

Area affected by a federal military base closing or realignment

State of Michigan Renaissance Zone

Federally declared disaster area

Documentation Requirement: Verification of AMI or Targeted Area

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Combination of housing project and economic development

Project only required to qualify as economic development

Small Business Concern

Job creation/retention at qualified wage levels

Services and benefits to income targeted location or targeted area

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CIP Mixed Use Project Qualification


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Common CIP Uses


Industrial and manufacturing initiatives• Factories• Bakeries• Warehouses• Assembly Plant

Commercial initiatives• Shopping Centers• Office Buildings• Hotels• Retail Stores• Member Branches

Public-facility initiatives• Buildings / vehicles for police

and fire departments

Social-service initiatives• Office space for nonprofits• Day-care Centers• Hospitals • Nursing Homes

Infrastructure projects• Roads• Sidewalks• Utilities

1 The Value of Membership - Opportunities for Community Investment February/March 2012.

Documents

targeted housing

community dividend

ahp contribution

ahp allocation

forprofit housing developers

homeowner projects

fhlbi members

grant funding project