38514 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Rules and Regulations 

(6) Address such other items that the 

Director shall provide in writing in 

advance of such submission. 

(b) Deadline for submission. A Bank 

must submit a proposed capital 

restoration plan no later than 15 

business-days after it receives written 

notification that such a plan is required 

either because the notice specifically 

states that the Director has required the 

submission of a plan or the notice 

indicates that the Bank’s capital 

classification or reclassification is to a 

category for which a capital restoration 

plan is a mandatory action required of 

the Bank. The Director may extend this 

deadline if the Director determines that 

such extension is necessary. Any such 

extension shall be in writing and 

provide a specific date by which the 

Bank must submit its proposed capital 

restoration plan. 

* * * * * 

Dated: July 29, 2009. 

James B. Lockhart, III, 

Director, Federal Housing Finance Agency. 

[FR Doc. E9–18581 Filed 8–3–09; 8:45 am] 

BILLING CODE P 

FEDERAL HOUSING FINANCE 

AGENCY 

12 CFR Part 1291 

RIN 2590–AA04 

Affordable Housing Program 

Amendments: Federal Home Loan 

Bank Mortgage Refinancing Authority 

AGENCY: Federal Housing Finance 

Agency. 

ACTION: Interim final rule with request 

for comments. 

SUMMARY: Section 1218 of the Housing 

and Economic Recovery Act of 2008 

(HERA) requires the Federal Housing 

Finance Agency (FHFA) to permit the 

Federal Home Loan Banks (Banks) until 

July 30, 2010, to use Affordable Housing 

Program (AHP) homeownership setaside funds to refinance low- or 

moderate-income households’ mortgage 

loans. On October 17, 2008, FHFA 

amended its AHP regulation to 

authorize the Banks to provide AHP 

direct subsidies under their 

homeownership set-aside programs to 

low- or moderate-income households 

who qualify for refinancing assistance 

under the Hope for Homeowners 

Program established by the Federal 

Housing Administration (FHA) under 

Title IV of HERA. Based on the 

comments received on the amendments 

and continuing adverse conditions of 

the mortgage market, FHFA has 

determined that in order for the AHP 

set-aside refinancing program to be 

implemented successfully for the 

benefit of the intended households, the 

scope of the program authority should 

be broadened and the Banks should 

have greater flexibility in implementing 

the program. Accordingly, FHFA is 

issuing and seeking comment on an 

interim final rule that authorizes the 

Banks to provide AHP subsidy through 

their members to assist in the 

refinancing of eligible households’ 

mortgages under eligible Federal, State 

and local programs for targeted 

refinancing in addition to the Hope for 

Homeowners Program. These programs 

would include the Administration’s 

Making Home Affordable Refinancing 

program. The interim final rule permits 

the Banks to provide AHP direct 

subsidy to members and to use the 

subsidy for principal reduction and for 

loan closing costs, and requires that 

households obtain counseling for 

qualification for refinancing and 

foreclosure mitigation. 

In addition, the interim final rule 

enhances the ability of the Banks to 

respond to the mortgage crisis by 

providing greater flexibility to accelerate 

their future annual statutory AHP 

contributions for use in their AHP 

homeownership set-aside programs in 

the current year. The interim final rule 

also permits the Banks to adopt multiple 

housing needs under their Second 

District Priority scoring criterion under 

the AHP competitive application 

program. 

DATES: The interim final rule is effective 

on August 4, 2009. FHFA will accept 

written comments on the interim final 

rule on or before October 5, 2009. 

ADDRESSES: Submit comments, 

identified by regulatory information 

number (RIN) 2590–AA04, by any of the 

following methods: 

• Mail/Hand Delivery: Federal 

Housing Finance Agency, Fourth Floor, 

1700 G Street, NW., Washington, DC 

20552, Attention: Public Comments/RIN 

2590–AA04. 

• E-mail: regcomments@fhfa.gov. 

Please include ‘‘RIN 2590–AA04’’ in the 

subject line of the message. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. If 

you submit your comment to the 

Federal eRulemaking Portal, please also 

send it by e-mail to FHFA at 

regcomments@fhfa.gov to ensure timely 

receipt by the agency. Include the 

following information in the subject line 

of your submission ‘‘Affordable Housing 

Program Amendments: Federal Home 

Loan Bank Mortgage Refinancing 

Authority; RIN 2590–AA04.’’ 

We will post all public comments we 

receive without change, including any 

personal information you provide, such 

as your name and address, on the FHFA 

Web site at http://www.fhfa.gov. 

FOR FURTHER INFORMATION CONTACT: 

Nelson Hernandez, Senior Associate 

Director, Housing Mission and Goals, 

202–408–2819, 

Nelson.Hernandez@fhfa.gov; Charles E. 

McLean, Jr., Acting Manager, Housing 

Mission and Goals, 202–408–2537, 

Charles.McLean@fhfa.gov; or Melissa L. 

Allen, Senior Policy Analyst, 202–408– 

2524, Melissa.Allen@fhfa.gov, Federal 

Housing Finance Agency, 1625 Eye 

Street, NW., Washington, DC 20006; or 

Sharon B. Like, Associate General 

Counsel, 202–414–8950, 

Sharon.Like@fhfa.gov, Federal Housing 

Finance Agency, 1700 G Street, NW., 

Washington, DC 20552. The telephone 

number for the Telecommunications 

Device for the Hearing Impaired is 800– 

877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Comments 

FHFA invites comments on all aspects 

of the interim final rule, and will revise 

the rule as appropriate after taking all 

comments into consideration. Copies of 

all comments will be posted on the 

FHFA Internet Web site at http:// 

www.fhfa.gov. In addition, copies of all 

comments received will be available for 

examination by the public on business 

days between the hours of 10 a.m. and 

3 p.m., at the Federal Housing Finance 

Agency, Fourth Floor, 1700 G Street, 

NW., Washington, DC 20552. To make 

an appointment to inspect comments, 

please call the Office of General Counsel 

at 202–414–6924. 

II. Background 

A. HERA 

Effective July 30, 2008, Division A of 

HERA, Public Law 110–289, 122 Stat. 

2654 (2008), created FHFA as an 

independent agency of the Federal 

Government. HERA transferred the 

supervisory and oversight 

responsibilities over the Federal 

National Mortgage Association (Fannie 

Mae), Federal Home Loan Mortgage 

Corporation (Freddie Mac) (collectively, 

Enterprises), the Banks, and the Bank 

System’s Office of Finance, from the 

Office of Federal Housing Enterprise 

Oversight (OFHEO) and the Federal 

Housing Finance Board (FHFB) to 

FHFA. HERA provides for the 

abolishment of OFHEO and FHFB one 

year after the date of enactment. FHFA 

is responsible for ensuring that the 


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Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Rules and Regulations 38515 

1Letters from two of the Banks also incorporate 

the comments of those Banks’ respective Affordable 

Housing Advisory Councils (Advisory Councils). 

Enterprises and the Banks operate in a 

safe and sound manner, including being 

capitalized adequately, and carry out 

their public policy missions, including 

fostering liquid, efficient, competitive, 

and resilient national housing finance 

markets. The Enterprises and the Banks 

continue to operate under regulations 

promulgated by OFHEO and FHFB until 

FHFA issues its own regulations. See 

HERA at § 1302, 122 Stat. 2795. 

B. The Banks’ Affordable Housing 

Program 

Section 10(j) of the Federal Home 

Loan Bank Act (Bank Act) requires each 

Bank to establish an affordable housing 

program, the purpose of which is to 

enable a Bank’s members to finance 

homeownership by households with 

incomes at or below 80% of the area 

median income (low- or moderateincome households), and to finance the 

purchase, construction, or rehabilitation 

of rental projects in which at least 20% 

of the units will be occupied by and 

affordable for households earning 50% 

or less of the area median income (very 

low-income households). See 12 U.S.C. 

1430(j)(1) and (2). The Bank Act 

requires each Bank to contribute 10% of 

its previous year’s net earnings to its 

AHP annually, subject to a minimum 

annual combined contribution by the 12 

Banks of $100 million. See 12 U.S.C. 

1430(j)(5)(C). Section 1218 of HERA 

amended section 10(j) by adding a new 

paragraph (2)(C) which requires FHFA 

to allow the Banks until July 30, 2010, 

to use AHP homeownership set-aside 

funds to refinance low- or moderateincome households’ first mortgage loans 

on their primary residences. See 12 

U.S.C. 1430(j)(2)(C). The Director of 

FHFA must establish the percentage of 

set-aside funds eligible for this use by 

regulation. 

The AHP regulation authorizes a 

Bank, in its discretion, to set aside a 

portion of its annual required AHP 

contribution to establish 

homeownership set-aside programs for 

the purpose of promoting 

homeownership for low- or moderateincome households. See 12 CFR 1291.6. 

Under the homeownership set-aside 

programs, a Bank may provide AHP 

direct subsidy (grants) to members to 

pay for down payment assistance, 

closing costs, and counseling costs in 

connection with a household’s purchase 

of its primary residence, and for 

rehabilitation assistance in connection 

with a household’s rehabilitation of an 

owner-occupied residence. See 12 CFR 

1291.6(c)(4). Currently, a Bank may 

allocate up to the greater of $4.5 million 

or 35% of its annual required AHP 

contribution to homeownership setaside programs in that year. 

C. AHP Refinancing Initiative and 

Proposed Rule 

In January 2008, FHFB waived certain 

homeownership set-aside program 

provisions of the AHP regulation to 

allow the Federal Home Loan Bank of 

San Francisco (San Francisco Bank) to 

establish a temporary pilot program to 

provide AHP direct subsidy to enable 

eligible households with subprime or 

nontraditional loans held by a San 

Francisco Bank member or its affiliate to 

refinance or restructure the loans into 

affordable, long-term fixed-rate 

mortgages. See FHFB Resolution No. 

2008–01 (Jan. 15, 2008). The authority 

will expire on December 31, 2009. 

In April 2008, FHFB published a 

proposed rule that would have extended 

the temporary authority to use AHP setaside funds for mortgage refinancing or 

restructuring to all 12 Banks. See 73 FR 

20552 (Apr. 16, 2008). FHFB received 

36 comments on the proposal. 

Commenters who supported use of AHP 

funds for refinancing, recommended 

flexibility in the rules governing use of 

the funds so that the Banks and their 

members would be able to assist a 

greater number of borrowers in distress, 

including allowing the use of AHP setaside funds in conjunction with other 

Federal, State or local mortgage 

refinancing programs. 

D. October Interim Final Rule 

Before FHFB took final action on the 

proposed amendments to the AHP 

regulation, section 1218 of HERA added 

section 10(j)(2)(C) to the Bank Act. Title 

IV of HERA also required establishment 

of the Hope for Homeowners Program, 

a temporary mortgage refinancing 

program under the FHA, which will 

expire on September 30, 2011. To 

implement the requirements of section 

1218 of HERA, on October 17, 2008, 

FHFA published an interim final rule 

(‘‘October amendments’’), which added 

new § 1291.6(f) to the AHP 

homeownership set-aside regulation 

authorizing the Banks, in their 

discretion, to temporarily establish an 

AHP set-aside refinancing program. See 

73 FR 61660 (Oct. 17, 2008). 

Specifically, § 1291.6(f) authorized the 

Banks to provide AHP direct subsidy to 

their members to assist in the 

refinancing of low- or moderate-income 

homeowners’ mortgage loans under the 

Hope for Homeowners Program through 

the use of AHP subsidy to reduce loan 

principal and pay FHA-approved 

closing costs. By linking the use of the 

AHP subsidy with the Hope for 

Homeowners Program, FHFA intended 

to leverage and enhance the 

effectiveness of each program, ensure 

that the full range of Federal assistance 

to affected homeowners was available 

quickly, and provide the flexibility that 

the Banks and their members need to 

make the AHP refinancing program 

successful. 

FHFA received 38 comment letters on 

the October amendments, representing 

40 commenters.1 Commenters included: 

8 Banks; 2 Bank Advisory Councils; 3 

trade associations; 2 housing advocacy 

and assistance organizations; and 25 

individuals. Thirteen of the 40 

commenters supported the use of AHP 

subsidies for refinancing households 

with unaffordable mortgages. The other 

27 commenters opposed the use of AHP 

subsidies for refinancing, citing the 

ongoing, critical need for AHP 

homeownership set-aside subsidies to 

assist home purchases. 

E. HERA Section 1201 

Section 1201 of HERA requires the 

FHFA Director to consider the 

differences between the Banks and the 

Enterprises in rulemakings that affect 

the Banks with respect to the Banks’ 

cooperative ownership structure, 

mission of providing liquidity to 

members, affordable housing and 

community development mission, 

capital structure and joint and several 

liability. See 12 U.S.C. 4513(f). In 

preparing the interim final rule, the 

Director considered these factors and 

determined that the rule is appropriate, 

particularly because the rule 

implements a statutory provision of the 

Bank Act that applies only to the Banks. 

See 12 U.S.C. 1430(j). Nonetheless, 

FHFA requests comment on whether 

these factors should result in a revision 

of the rule as it relates to the Banks. 

III. Analysis of the Interim Final Rule 

A. Definition of Eligible Targeted 

Refinancing Program: § 1291.1 

The October amendments provided 

that a household’s loan is eligible to be 

refinanced with AHP direct subsidy if 

the loan is secured by a first mortgage 

on an owner-occupied unit that is the 

primary residence of the household, and 

the loan is refinanced under the Hope 

for Homeowners Program. FHFA 

specifically requested comment on 

whether the Banks should be permitted 

to use AHP set-aside funds to assist 

homeowners refinancing under other 

programs intended to aid distressed 

homeowners, such as those offered by 

the Enterprises, FHASecure, or any 


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38516 Federal Register / Vol. 74, No. 148 / Tuesday, August 4, 2009 / Rules and Regulations 

2Recent changes to the Hope for Homeowners 

Program enacted by Congress may expand its usage. 

State housing finance agency programs. 

See 73 FR 61660, 61662 (Oct. 17, 2008). 

Thirteen commenters supported AHP 

refinancing authority for the Banks but 

opposed limiting the authority to 

assistance under the Hope for 

Homeowners Program. The commenters 

stated that the Hope for Homeowners 

Program is too narrowly tailored to 

assist a large number of households and 

has attracted little lender interest. The 

commenters pointed out that there are 

other, successful Federal and State 

programs targeted to assisting 

households refinance their unaffordable 

mortgages, and that the Banks should be 

permitted to provide AHP subsidy in 

conjunction with these programs. 

Twelve of the 13 commenters 

specifically supported use of AHP 

subsidy with the FHASecure Program, 

U.S. Department of Agriculture (USDA) 

programs, and State and local housing 

finance agency programs. Ten 

commenters recommended that the 

Banks be permitted to provide AHP 

subsidy in conjunction with targeted 

refinancing or restructuring programs of 

Fannie Mae and Freddie Mac, which 

had established the Streamlined 

Modification Program at the time of the 

October amendments. Since then, the 

Administration has superseded the 

Streamlined Modification Program with 

the Making Home Affordable Refinance 

and Modification programs for 

mortgages owned or guaranteed by the 

Enterprises. The commenters stated that 

each Bank should have discretion and 

flexibility to determine which programs 

in its district would make best use of 

AHP subsidy. 

In the past year or so, a number of 

State housing finance agencies 

established taxable bond programs to 

refinance households with unaffordable 

mortgages. To help State and local 

housing finance agencies address the 

need for refinancing households into 

affordable mortgages, HERA authorized 

the temporary use of tax-exempt 

mortgage-revenue bonds for refinancing 

at-risk households with subprime 

mortgages. See HERA, § 3021. Housing 

finance agencies are likely to increase 

their refinancing activity in light of this 

new authority. Most of the Banks work 

closely with the housing finance 

agencies in their districts, some of 

which are also housing associates of the 

Banks, and many Bank members are 

participating lenders in existing housing 

finance agency mortgage-revenue bond 

programs for home purchasers. 

In addition, as part of the 

Administration’s Homeowner 

Affordability and Stability Plan, Fannie 

Mae and Freddie Mac are now 

responsible for implementing the 

Making Home Affordable programs, 

which include the Home Affordable 

Refinance program for first mortgage 

loans owned or guaranteed by these 

agencies. Many Bank members are also 

Fannie Mae and Freddie Mac approved 

seller/servicers that already participate 

in Fannie Mae and Freddie Mac 

homeownership mortgage programs. 

Based on the comments and FHFA’s 

review of Federal, State and local 

refinancing programs, FHFA has 

determined that the Hope for 

Homeowners Program has experienced 

limited usage due to statutory and 

regulatory restrictions and market 

conditions, rendering the current AHP 

refinancing authority of limited utility.2

To date, no Bank has implemented an 

AHP refinancing program pursuant to 

the current AHP regulatory refinancing 

authority. However, other Federal, State 

and local targeted mortgage refinancing 

programs could be used in conjunction 

with the AHP set-aside refinancing 

authority. Accordingly, the interim final 

rule provides that loans are eligible for 

refinancing with AHP subsidy if they 

are refinanced under an ‘‘eligible 

targeted refinancing program,’’ which is 

defined in § 1291.1 as a program offered 

by the Department of Housing and 

Urban Development (HUD), USDA, 

Fannie Mae, Freddie Mac, a State or 

local government, or a State or local 

housing finance agency for the limited 

purpose of refinancing first mortgages 

on primary residences for households 

that cannot afford or are at risk of not 

being able to afford their monthly 

payments, as defined by the program, in 

order to prevent foreclosure. The Hope 

for Homeowners Program, as a HUD 

program, continues to be an eligible 

program that may be used in 

conjunction with the AHP set-aside 

refinancing program. Making the AHP 

subsidy available for State and local 

housing finance agency refinancing 

programs is consistent with the 

provision in HERA authorizing housing 

finance agencies to issue Federal taxexempt mortgage-revenue bonds 

through the end of 2010 in order to 

refinance households that have 

subprime mortgages and are at risk of 

financial hardship. Including additional 

eligible targeted refinancing programs of 

other Federal, State and local agencies 

is also consistent with the requirement 

in section 10(j)(9)(G) of the Bank Act 

that the AHP regulation coordinate AHP 

activities with other Federal or 

federally-subsidized affordable housing 

activities to the maximum extent 

possible. See 12 U.S.C. 1430(j)(9)(G). 

FHFA believes that there should be 

sufficient demand among these eligible 

targeted refinancing programs to absorb 

the limited amount of AHP subsidy that 

will be available for refinancing. Eligible 

targeted refinancing programs do not 

include programs that permit 

households to refinance for any reason, 

programs that provide the full amount 

of subsidy or other financing 

concessions needed for a household to 

achieve an affordable mortgage in 

accordance with the program’s terms 

(see discussion under the Eligible Uses 

of Subsidy section below), or programs 

that involve the modification or 

restructuring of the loans, rather than 

refinancing (i.e., paying off the original 

mortgage with the proceeds of a new 

loan). 

The interim final rule does not limit 

eligible targeted refinancing programs to 

those in existence as of the effective 

date of the rule. Federal, State and local 

agencies and housing authorities are 

likely to add or replace refinancing 

programs during the period of AHP setaside refinancing authorization, based 

on refinancing needs and housing 

market conditions, and FHFA does not 

wish to preclude the use of AHP 

subsidy with such programs that are 

consistent with the purposes of this 

rule. USDA is a primary source of 

Federal funding for owner-occupied 

housing primarily in rural areas, and 

although it has not announced a 

targeted refinancing program to date, it 

may do so in the future. A number of 

State housing finance agencies are also 

expected to implement targeted 

refinancing programs under their new 

tax-exempt mortgage-revenue bond 

authority in the near future. The 

FHASecure Program, which ended in 

December 2008 and assisted thousands 

of households in troubled mortgages, 

may be revived, or a program of a 

similar nature may be established. 

Several commenters suggested that 

FHFA permit AHP subsidy to be used in 

conjunction with private targeted 

refinancing programs including not-forprofit programs. One commenter 

recommended limiting the AHP 

refinancing set-aside program to 

assisting in the refinancing of loans 

originated by Bank members. Three 

commenters also supported the use of 

AHP subsidy to restructure or refinance 

mortgages originated by members and 

purchased by the Banks for their 

Mortgage Partnership Finance (MPF) 

and Mortgage Purchase Program (MPP) 

portfolios, as consistent with efforts by 

the Federal Deposit Insurance 

Corporation to promote lender 


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modifications. The interim final rule 

does not authorize the use of AHP 

subsidy in conjunction with private 

refinancing programs, Bank-sponsored 

targeted advances programs for 

refinancing, Bank member loan 

refinancing programs such as the San 

Francisco Bank AHP refinancing pilot 

program, or refinancing of MPF or MPP 

loans. Authorizing the use of AHP 

subsidy in conjunction with such 

private refinancing sources would 

require the establishment of minimum 

program standards for eligible 

refinancing, including affordability 

requirements for the refinanced loan, 

loan-to-value ratios and other lending 

terms. If AHP subsidy were permitted to 

be used in conjunction with refinancing 

member loans, the interim final rule 

would need to establish member 

contribution requirements to ensure that 

the subsidy was not rewarding members 

or the Banks for poor underwriting or 

investment decisions. The comments on 

the April 2008 AHP refinancing 

proposal, which was based largely on 

the San Francisco Bank AHP 

refinancing pilot program and which 

included explicit program loan 

underwriting and member contribution 

requirements, indicated that the 

circumstances of the pilot program were 

not applicable outside of the San 

Francisco Bank district. 

B. Funding Allocation: § 1291.2(b)(2)(i) 

The AHP regulation permits a Bank, 

in its discretion, to set aside annually, 

in the aggregate, a maximum of the 

greater of $4.5 million or 35% of its 

annual required AHP contribution to 

provide funds to members participating 

in homeownership set-aside programs, 

including mortgage refinancing 

programs established under § 1291.6(f). 

See 12 CFR 1291.2(b)(2). Prior to the 

October amendments, the AHP 

regulation also required that at least 

one-third of a Bank’s aggregate annual 

set-aside allocation to such programs be 

targeted for first-time homebuyers. The 

October amendments changed this 

requirement by allowing a Bank to 

allocate the maximum permissible 

homeownership set-aside allocation 

entirely to a mortgage refinancing 

program established under § 1291.6(f). 

See 12 CFR 1291.2(b)(2)(i)(A). The 

October amendments also provided that 

if a Bank sets aside funds solely for 

homeownership set-aside programs 

other than a mortgage refinancing 

program established under § 1291.6(f), 

at least one-third of the Bank’s aggregate 

annual set-aside allocation to such 

programs shall be to assist first-time 

homebuyers. See 12 CFR 

1291.2(b)(2)(i)(B). 

All 27 commenters that opposed the 

October amendments opposed using 

AHP subsidies for refinancing at the 

expense of assisting new home 

purchases, especially at a time when 

there are fewer sources of purchase 

assistance and the decline in home 

prices is making homeownership 

possible for more low- or moderateincome households. Two of these 

commenters expressed concern that 

refinancing often does not prevent a 

household from losing its home due to 

factors other than the terms of the 

original mortgage and, therefore, does 

not constitute a better use of AHP 

subsidy than purchase assistance. Three 

commenters stated that the regulation 

should retain the existing 

homeownership set-aside requirement 

that a minimum one-third of the total 

set-aside allocation be allocated for firsttime homebuyers in order to ensure that 

some minimum amount of AHP home 

purchase assistance is available. 

FHFA finds these comments to be 

persuasive. In the current market where 

many existing homeowners are unable 

to sell their homes and purchase moveup homes because their mortgages 

exceed their homes’ value, efforts to 

promote new home purchases could 

contribute to recovery and stabilization 

of the housing market. Ensuring that at 

least some portion of AHP set-aside 

subsidies is available for home purchase 

assistance is also consistent with 

HERA’s establishment of Federal 

funding for what is commonly referred 

to as the Neighborhood Stabilization 

Program (NSP). See HERA, §§ 2301 

through 2305. The NSP provides 

funding to State and local government 

programs for purchasing, rehabilitating 

and renting or selling foreclosed 

properties in order to mitigate the blight 

on communities resulting from the 

housing crisis. A number of State 

housing finance agencies are using NSP 

and mortgage-revenue bond funds to 

assist first-time homebuyers in 

purchasing these foreclosed properties. 

Consequently, the interim final rule 

reinstates in § 1291.2(b)(2)(i) the 

requirement that at least one-third of a 

Bank’s total annual set-aside allocation 

shall be targeted to assist first-time 

homebuyers, regardless of whether the 

set-aside allocation is being used for 

homeownership or refinancing 

assistance, or both. Thus, a Bank may 

use up to two-thirds of its annual setaside allocation for the AHP set-aside 

refinancing program. If a Bank wants to 

increase the amount of AHP subsidy 

dollars available for refinancing 

assistance, the Bank may increase its 

total AHP set-aside allocation, and 

thereby its refinancing set-aside amount, 

by accelerating additional funding from 

subsequent years’ AHP contributions as 

permitted under § 1291.2(b)(3) and 

discussed further below. In addition, the 

first-time homebuyers provision 

requires that the Bank allocate one-third 

of the Bank’s set-aside funding for firsttime homebuyers but does not require 

the Bank to commit or use the amount 

of the allocation for first-time 

homebuyers. If there is not sufficient 

demand for the first-time homebuyers 

allocation and the Bank does not 

commit the entire allocation to first-time 

homebuyers, then the Bank may 

ultimately carry over the unused portion 

of the first-time homebuyers allocation 

to other AHP set-aside uses, including 

refinancing. 

C. Acceleration of Future AHP 

Contributions: § 1291.2(b)(3) 

Under the Bank Act, a Bank is 

required to contribute at least 10% of its 

prior year’s net earnings to its current 

year’s AHP. See 12 U.S.C. 1430(j)(5)(C). 

Section 1291.2(b)(3) of the current AHP 

regulation permits a Bank, in its 

discretion, to reallot (i.e., accelerate), 

from the subsequent year’s required 

annual AHP contribution for use in the 

current year, an amount up to the 

greater of $2 million or 20% of its 

required annual AHP contribution for 

the current year. See 12 CFR 

1291.2(b)(3). Prior to amendment in 

2007, the AHP regulation based the 

percentage amount on the Bank’s 

estimated amount of its required AHP 

contribution for the subsequent year, 

rather than on its required contribution 

for the current year. 

The current housing and financial 

crises have created unprecedented 

financial conditions not contemplated 

by the AHP regulation. Bank earnings 

declined in 2008, and the Banks’ 

earnings potential in the near future is 

uncertain and more unpredictable than 

in previous years because of market 

instability. In this environment, a Bank 

that accelerates AHP funds from the 

subsequent year’s required contribution 

may find that the subsequent year’s 

actual required AHP contribution is less 

than the amount accelerated. At the 

same time, a Bank may have no required 

current year AHP contribution on which 

to base a percentage calculation, or even 

expectation of a required subsequent 

year AHP contribution. In 2009, two 

Banks with no 2008 earnings have no 

required AHP contributions, while 

several other Banks have very small 

required AHP contributions. The ability 

to accelerate funds from future required 

AHP contributions would enable these 

Banks to make some level of AHP 

funding available in 2009. 


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Consequently, the interim final rule 

amends § 1291.2(b)(3) to increase the 

maximum amount that a Bank may 

accelerate in any one year to the greater 

of $5 million (an increase from $2 

million) or 20% of the Bank’s required 

annual AHP contribution for the current 

year. In addition, because of the 

uncertainty of future earnings and the 

possibility that a Bank may find itself in 

the same situation of having little or no 

required AHP contribution in the 

subsequent year, the interim final rule 

allows a Bank to credit the amount of 

the accelerated contribution against 

required AHP contributions over one or 

more of the subsequent five years. This 

is consistent with FHFA’s policy for 

treatment of excess AHP annual 

contributions, under which a Bank that 

restates its earnings with the result that 

its annual AHP contribution exceeded 

the statutorily required amount, may 

credit the excess contributions against 

required AHP contributions in future 

periods. See Advisory Bulletin 06–01, 

‘‘AHP and REFCORP Contributions’’ 

(Jan. 25, 2006). FHFA specifically 

requests comment on the revised 

acceleration provision in the interim 

final rule, including whether it provides 

sufficient flexibility to enable the Banks 

to maintain adequate AHP contributions 

during the current housing market and 

economic crisis. 

As a technical matter, FHFA has 

found that use of the term ‘‘allot’’ in the 

current AHP regulation to describe the 

acceleration process has been confused 

with the process of allocating AHP 

funding between the homeownership 

set-aside and competitive application 

programs, and may also be confused 

with the process of allocating AHP setaside funds between the 

homeownership set-aside and 

refinancing set-aside programs. 

Accordingly, the interim final rule uses 

the term ‘‘acceleration,’’ which was 

used prior to 2007, in lieu of the term 

‘‘allot’’ to describe the process of using 

future required AHP contributions in 

the current year. 

D. General AHP Refinancing Program 

Authority; Retention Agreements: 

§ 1291.6(f)(1) 

Section 1291.6(f)(1) authorizes a 

Bank, in its discretion, to establish a 

homeownership set-aside program for 

the use of AHP direct subsidy by its 

members to assist in the refinancing of 

a household’s mortgage loan that meets 

the requirements in § 1291.6, except for 

certain specified provisions, as well as 

with the requirements of part 1291. The 

October amendments exempted the 

AHP set-aside refinancing program from 

the provisions in § 1291.6 governing 

five-year retention agreements on AHPassisted household’s units. See 12 CFR 

1291.6(c)(5). Thus, an AHP-assisted 

household under the refinancing 

program would not repay AHP subsidy 

in the event of a subsequent sale or 

refinancing of the unit during the fiveyear retention period. See 12 CFR 

1291.6(c)(5) and 1291.9(a)(7). This 

exemption from the AHP retention 

requirements was considered in light of 

the equity and appreciation sharing 

requirements of the Hope for 

Homeowners Program. See HERA, 

§ 1402(a) (National Housing Act sec. 

257(e)(4)(B), and (k)); 73 FR 61660, 

61663 (Oct. 17, 2008). 

Three commenters recommended that 

the Banks be able to require AHP 

retention agreements for repayment of 

the AHP subsidy in the event of a sale 

or refinancing during the five-year 

retention period. Four commenters 

stated that there could be cases where 

households receive AHP subsidy but 

subsequently fail to qualify under the 

Hope for Homeowners Program because 

they fail to make the first payment on 

their newly refinanced loan, and the 

Bank could not recover the AHP subsidy 

in such cases if the household 

subsequently sold or refinanced the 

home. 

Under the Banks’ current AHP 

competitive application and home 

purchase set-aside programs, AHP 

retention agreements, which may be 

subordinate liens or other forms of 

legally enforceable agreements, are used 

in conjunction with all types of 

mortgage financing provided by all 

Federal, State and local agencies, 

including other FHA programs. Because 

the AHP regulation requires that AHP 

subsidy only be repaid from any net 

gain from the sale or refinancing, the 

AHP repayment requirement should not 

interfere with any appreciation or equity 

sharing requirements of the eligible 

targeted refinancing programs. 

Requiring AHP retention agreements for 

the AHP set-aside refinancing program 

would also maintain consistency 

between the refinancing program and all 

other AHP programs, which are subject 

to the retention agreement requirement. 

Accordingly, the interim final rule 

requires that a household assisted under 

the AHP set-aside refinancing program 

be subject to an AHP five-year retention 

agreement in accordance with 

§ 1291.6(c)(5). 

E. Eligible Loans: § 1291.6(f)(2) 

As discussed above, the interim final 

rule amends § 1291.6(f)(2) to make loans 

refinanced under other eligible targeted 

refinancing programs in addition to the 

Hope for Homeowners Program eligible 

for AHP refinancing subsidy. To be 

eligible for AHP refinancing assistance, 

a household must meet the terms of 

refinancing established by the eligible 

targeted refinancing program, such as 

the mortgage debt-to-income ratio, loanto-value ratio, payment history, type of 

original loan (e.g., subprime or 

nontraditional), and reasons for 

delinquency. In addition, pursuant to 

HERA, the household must have an 

income at or below 80% of the area 

median income (AMI), and the 

household’s loan being refinanced must 

be a first mortgage on an owneroccupied unit that is the household’s 

primary residence. Two commenters 

recommended that FHFA establish 

parameters or details for eligibility and 

underwriting standards under which 

other programs’ requirements would 

fall. In the October amendments, FHFA 

noted that it was not necessary to 

establish underwriting and other 

household and loan eligibility 

requirements for the AHP set-aside 

refinancing program, because the 

requirements and standards of the Hope 

for Homeowners Program provide 

adequate protections to borrowers 

whose loans will be refinanced and 

protect the integrity of the AHP. See 73 

FR at 61662. The requirements and 

standards of the other eligible targeted 

refinancing programs included in the 

interim final rule similarly protect 

borrowers and the integrity of the AHP. 

Reliance on the requirements and 

standards of other lenders is also 

consistent with the AHP home purchase 

set-aside program, which does not 

establish specific requirements for 

underwriting a household’s mortgage, 

leaving the establishment of such 

requirements to the individual lender. 

Five commenters supported this 

approach, and several commenters 

stated that FHFA should not limit 

eligible loans to subprime and 

nontraditional mortgages, or require that 

a household be delinquent in order to 

receive assistance. 

Consistent with the October 

amendments, for purposes of 

determining whether a household is at 

or below 80% of AMI under the AHP 

set-aside refinancing program, the 

interim final rule does not establish 

specific requirements for how a Bank 

should calculate a household’s income. 

Thus, a Bank may make its own 

calculation of total household income, 

or may use the eligible targeted 

refinancing program’s calculation of 

total household income for purposes of 

determining whether a household meets 

the 80% of AMI income limit. This is 

also consistent with the AHP home 


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purchase set-aside program, under 

which each Bank establishes 

requirements for how to calculate 

household income, which may include 

relying on the member’s calculation of 

household income determined in the 

process of underwriting the mortgage. 

The Hope for Homeowners Program and 

the Home Affordable Refinance program 

do not require households to meet 

certain income limits in order to be 

eligible for the program, but do calculate 

total household income for purposes of 

determining loan underwriting ratios. 

State housing finance agency 

refinancing programs have specific 

household income limits under their 

mortgage-revenue bond programs 

(generally 100% of AMI), and calculate 

total household income for purposes of 

determining compliance with those 

income limits as well as for purposes of 

determining underwriting ratios. The 

housing finance agency refinancing 

programs vary in how they calculate 

total household income with regard to 

the income time period (past income or 

current income) and the income sources 

(only the mortgage borrowers or all 

adult household members) used. Ten 

commenters recommended that the 

Banks rely on the calculation of total 

household income determined by other 

programs providing the refinancing 

assistance where such programs 

calculate income. 

Section 1291.6(c)(2)(i) of the existing 

AHP regulation requires a Bank or 

member to determine a household’s 

income eligibility at the time the 

member enrolls the household in the 

AHP homeownership set-aside program. 

Consistent with this requirement, the 

Bank or member must determine that 

the household is at or below 80% of 

AMI at the time of enrollment in the 

AHP set-aside refinancing program. 

However, a Bank or member may use 

the total household income provided by 

the eligible targeted refinancing program 

regardless of when that program 

calculated the amount. 

F. Eligible Uses of AHP Subsidy: 

§ 1291.6(f)(3) 

1. Reduction in Outstanding Loan 

Principal Balance 

The October amendments provided 

that AHP subsidy may pay to reduce the 

outstanding principal balance of the 

household’s loan below the maximum 

loan-to-value ratio required under the 

Hope for Homeowners Program in order 

for the household to also meet that 

program’s maximum debt-to-income 

ratio. 12 CFR 1291.6(f)(3)(i). However, 

there may also be cases where the 

household meets the program’s 

maximum mortgage debt-to-income 

ratio but the outstanding principal 

balance of the loan exceeds the 

program’s maximum loan-to-value ratio. 

To take into account such cases, the 

interim final rule amends the AHP 

regulation to permit use of the AHP 

subsidy to reduce the outstanding loan 

principal balance to the eligible targeted 

refinancing program’s maximum loanto-value ratio even if this results in the 

household having a mortgage debt-toincome ratio below the program’s 

maximum mortgage debt-to-income 

ratio. The maximum amount of AHP 

subsidy that may be provided for the 

refinancing is the least amount that 

results in the loan meeting both the 

program’s maximum loan-to-value ratio 

and maximum mortgage debt-to-income 

ratio. Consequently, there is no need for 

any AHP subsidy where a refinancing 

program already provides concessions 

and subsidy sufficient for a household 

to achieve an affordable mortgage in 

accordance with the program’s terms. 

For example, the Fannie Mae and 

Freddie Mac Home Affordable 

Refinance program, with certain 

exceptions, does not require maximum 

mortgage debt-to-income ratios, so, 

generally, the AHP subsidy could be 

used only to reduce loan principal to 

achieve that program’s maximum loanto-value ratio. The interim final rule 

also clarifies that the applicable 

program underwriting debt-to-income 

ratio is the mortgage debt-to-income 

ratio. 

2. Loan Closing Costs 

The October amendments also 

authorized a member to use the AHP 

subsidy to pay only FHA-approved loan 

closing costs in connection with the 

refinancing of an eligible loan under the 

Hope for Homeowners Program. 12 CFR 

1291.6(f)(3)(ii). One commenter opposed 

restricting the use of AHP subsidy for 

loan closing costs that are FHAapproved, noting that this is 

inconsistent with the provision in the 

AHP regulation that does not specify 

that AHP subsidy may pay only for 

FHA-approved closing costs in 

connection with the purchase of a home 

under the homeownership set-aside 

program or under the competitive 

application program. See 12 CFR 

1291.6(c)(4) and (8). To maintain 

consistency between the AHP 

homeownership and refinancing setaside programs, the interim final rule 

removes the language restricting eligible 

closing costs to FHA-approved closing 

costs. 

Two commenters requested 

clarification that AHP subsidy may be 

used to pay FHA up-front insurance 

premiums under the AHP set-aside 

refinancing program. Because they are 

required for the mortgage financing, 

FHA up-front insurance premiums are 

eligible costs under the AHP 

homeownership set-aside and 

competitive application programs. 

Consequently, AHP subsidy may pay for 

such insurance premiums under the 

AHP set-aside refinancing program. 

The October amendments excluded 

the current requirement of the AHP 

homeownership set-aside program that 

the rate of interest, points, fees and any 

other charges for all loans made in 

conjunction with the AHP subsidy 

cannot exceed a reasonable market rate 

of interest, points, fees and other 

charges for loans of similar maturity, 

terms and risk. 12 CFR 1291.6(c)(7). As 

part of the goal to achieve consistency, 

where applicable, between the 

requirements of the AHP 

homeownership set-aside and the 

refinancing set-aside programs, the 

interim final rule applies § 1291.6(c)(7) 

to the refinancing set-aside program. 

G. Eligible Lender Participants: 

§ 1291.6(f)(4) 

The October amendments stated that 

a Bank may provide AHP direct subsidy 

to members that are FHA-approved 

lenders for the purpose of refinancing 

an eligible loan with an FHA-insured 

loan by the member under the Hope for 

Homeowners Program. The October 

amendments also stated that a Bank 

may, in its discretion, provide the AHP 

subsidy to members that will provide 

the subsidy to FHA-approved lenders 

that are not members of the Bank for the 

purpose of refinancing an eligible loan 

if, after consulting with the Bank’s 

Advisory Council, the Bank determines 

that such action would be in the best 

interests of borrowers in the Bank’s 

district. 12 CFR 1291.6(f)(4). All 13 

commenters supporting refinancing, 

opposed limiting participants in the 

AHP set-aside refinancing program to 

FHA-approved lenders, noting that 

relatively few Bank members are FHAapproved lenders and many Bank 

members participate in housing finance 

agency mortgage-revenue bond 

programs and are Fannie Mae and 

Freddie Mac approved seller/servicers. 

Several commenters also stated that 

assistance should be available to 

households based on their 

qualifications, regardless of whether the 

member providing the AHP subsidy is 

FHA-approved. In addition, the 

requirement that members be FHAapproved is too restrictive since the 

interim final rule permits the use of the 

AHP subsidy with other eligible targeted 

refinancing programs in addition to the 

FHA’s Hope for Homeowners Program. 


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3Requiring a household to obtain a new mortgage 

through the member is one of several types of 

optional household eligibility requirements that a 

Bank may establish under § 1291.6(c)(2)(iii). 

Accordingly, the interim final rule 

eliminates the FHA-approved lender 

requirement. 

Under the current AHP home 

purchase set-aside program, the Banks 

have discretionary authority to decide 

whether to permit a household to obtain 

a purchase-money mortgage from any 

lender or to require the household to 

obtain its mortgage from the member 

providing the AHP assistance.3

Consistent with this authority, 

§ 1291.6(f)(4) of the interim final rule 

permits a Bank, in its discretion, to 

require a household to obtain its 

refinancing loan through a member 

participating in the eligible targeted 

refinancing program that is providing 

the new mortgage to the household. The 

interim final rule also removes the 

requirement that a Bank must consult 

with its Advisory Council before 

determining that a household may use 

a lender other than a member of the 

Bank. This requirement is not specified 

in § 1291.6(c)(2)(iii) with respect to the 

adoption of other optional household 

eligibility requirements under the home 

purchase set-aside program and, in any 

case, is redundant with the general 

regulatory requirement that the Banks 

consult with their Advisory Councils in 

adopting their AHP Implementation 

Plans. 12 CFR 1291.3(a) and (b). 

H. Household Counseling: § 1291.6(f)(5) 

Section 1291.6(c)(2)(iii) of the current 

AHP regulation permits a Bank, in its 

discretion, to require homebuyers who 

are not first-time homebuyers to obtain 

homeownership counseling under the 

AHP home purchase set-aside program. 

See 12 CFR 1291.6(c)(2)(iii). The 

October amendments did not make the 

discretionary authority to adopt 

additional household eligibility 

requirements, such as counseling, 

applicable to the AHP set-aside 

refinancing program. Several 

commenters objected to the exclusion of 

counseling as an optional household 

eligibility requirement, noting the 

importance of counseling for 

households with troubled loans. The 

2008 Consolidated Appropriations Bill 

recognized the importance of 

homeowner counseling by establishing 

and funding the National Foreclosure 

Mitigation Counseling (NFMC) program 

to assist households seeking refinancing 

or restructuring of their mortgages in 

order to avoid foreclosure. See Public 

Law 110–161. The NFMC program, 

under the auspices of NeighborWorks 

America, is comprised of an array of 

counseling groups including 

NeighborWorks’ partner organizations, 

the Homeownership Preservation 

Foundation, HUD’s HOPE NOW 

counseling coalition, the National Urban 

League, USA Cares (military assistance), 

and State and local housing finance 

agency counseling programs. Most, if 

not all, of the State housing finance 

agency refinancing programs require 

households to be reviewed and vetted 

by these counseling organizations before 

applying to their programs. The Home 

Affordable Refinance program 

encourages households to seek 

counseling assistance to determine if 

they qualify for the Fannie Mae/Freddie 

Mac refinance program. The NFMC 

program is playing an important role in 

counseling households to help them 

determine their options and 

qualifications for refinancing assistance 

under these Fannie Mae, Freddie Mac 

and State housing finance agency 

eligible targeted refinancing programs. 

FHFA agrees that counseling is an 

important component of successful 

refinancing, and should be provided by 

competent and reputable counseling 

programs, such as the NFMC program or 

other counseling programs used by State 

or local government or housing finance 

agencies that may not be part of the 

NFMC program. These counseling 

programs can also serve as an efficient 

and effective means of identifying for 

households the assistance programs for 

which they may qualify. Accordingly, 

§ 1291.6(f)(5) of the interim final rule 

requires that a household seeking AHP 

assistance must obtain counseling for 

foreclosure mitigation and qualification 

for refinancing by an eligible targeted 

refinancing program, through the NFMC 

program or other counseling program 

used by a State or local government or 

housing finance agency. Bank members 

would refer interested households to an 

NFMC program participant, or to a State 

or local government or housing finance 

agency counseling program, which 

would determine whether the 

households are eligible to have their 

loans refinanced through an eligible 

targeted refinancing program. 

Households determined by a counseling 

organization to qualify for refinancing 

under an eligible targeted refinancing 

program would then be referred to 

participating Bank members, who 

would enroll the households in the AHP 

set-aside refinancing program upon 

determination of their AHP income 

eligibility. 

Under the interim final rule, the 

NFMC program and other permissible 

counseling organizations would thereby 

act as a gateway for households seeking 

refinancing assistance. The interim final 

rule does not establish a requirement for 

the type of educational counseling that 

may take a period of time that could 

delay the closing on the refinancing. 

Rather, the interim final rule requires 

the household to go to an NFMC 

program principally to determine if its 

loan can be refinanced by one of the 

eligible targeted refinancing programs 

and whether AHP subsidy will be 

needed in order for the household to 

obtain the refinancing. Although the 

household will benefit from 

accompanying foreclosure mitigation 

and credit counseling, the primary 

purpose of the interim final rule 

requirement is to ensure that the 

household receives counseling on a 

variety of available refinancing options 

that are suitable for that household. For 

example, a lender, such as an FHA 

lender or Fannie Mae/Freddie Mac 

seller/servicer, may be able to determine 

if a household is eligible for a specific 

program involving that lender, but is not 

likely to know if the household has 

other options if it is not eligible for the 

lender’s specific program. 

Consequently, under the interim final 

rule, when a household contacts a 

member directly, the member would 

refer the household to the NFMC 

program or other State or local 

government or housing finance agency 

counseling program, to determine the 

household’s eligibility before enrolling 

the household in the AHP refinancing 

program and committing AHP subsidy. 

All NFMC program counseling is free 

to households; therefore, the interim 

final rule does not authorize the use of 

AHP subsidy to pay for such counseling 

costs. FHFA specifically requests 

comment on whether households 

should be required to obtain counseling 

for foreclosure mitigation and 

qualification for refinancing by an 

eligible targeted refinancing program 

prior to enrollment in the AHP set-aside 

refinancing program. 

I. Sunset Date: § 1291.6(f)(6) 

The October amendments included a 

provision terminating the Banks’ 

authority to commit AHP subsidy for 

refinancing after July 30, 2010, which is 

the expiration date of the two-year 

period in section 1218 of HERA. 12 CFR 

1291.6(f)(5). FHFA specifically 

requested comment on whether the 

sunset date should be extended to be coextensive with the sunset date of the 

Hope for Homeowners Program on 

September 30, 2011. See 73 FR at 61663. 

Two commenters supported an 

extension of this sunset date to coincide 

with the sunset date for the Hope for 

Homeowners Program. See HERA, 


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§ 1402(a) (National Housing Act sec. 

257(r)). One commenter recommended 

that FHFA consider adopting the sunset 

dates of other refinancing programs. The 

interim final rule retains the sunset date 

of July 30, 2010 in redesignated 

§ 1291.6(f)(6). FHFA may reconsider an 

extension of the sunset date based on 

program performance as the sunset date 

approaches. 

J. Competitive Application Program; 

Second District Priority Scoring 

Criterion: § 1291.5(d)(5)(vii) 

Under the Banks’ AHP competitive 

application program, the Second District 

Priority is the only one of nine scoring 

criteria in the AHP regulation for which 

a Bank may select a housing need that 

is not prescribed in the regulation. 

Unlike the First District Priority scoring 

criterion, the Second District Priority 

permits a Bank to establish only one 

housing need in its district. 12 CFR 

1291.5(d)(5)(vi), (d)(5)(vii). The current 

housing crisis has led to acute housing 

needs that the AHP regulation does not 

contemplate. These needs reflect a 

number of interconnected factors related 

to foreclosures and declining home 

values, which adversely affect all 

participants in the housing industry. 

The hardest hit areas must contend with 

blighted properties and declining 

communities where there is a critical 

need for sustainable and affordable 

homeownership and assistance to rental 

sponsors to absorb properties being sold 

to avoid foreclosure or that are in 

foreclosure. At the same time, there is 

an increased demand for affordable 

rental housing in the wake of 

households losing their homes, 

compounded by a significant decline in 

investors for low-income housing tax 

credits and housing finance agency 

bonds for rental production. 

FHFA believes that these housing 

market conditions have generated an 

urgent need for more flexibility in the 

Banks’ capacity to respond under the 

AHP. The current scoring system in the 

AHP regulation can address foreclosed 

properties only marginally within the 

context of other, more general housing 

needs. Permitting the Banks to establish 

one or more housing needs under the 

Second District Priority scoring criterion 

would allow the AHP competitive 

application program to complement the 

efforts of the AHP refinancing set-aside 

and other targeted refinancing programs 

for foreclosure prevention and HERA’s 

NSP for the disposition of foreclosed 

properties. Accordingly, the interim 

final rule amends § 1291.5(d)(5)(vii) of 

the AHP regulation to permit a Bank to 

establish one or more housing needs in 

the Bank’s district under the Second 

District Priority scoring criterion. 

FHFA believes that the severity of the 

housing market and the urgent need for 

housing assistance create exigent 

circumstances for amending the Second 

District Priority scoring criterion 

through an interim final rule. An 

immediate change is also necessary to 

allow the Banks and their Advisory 

Councils the opportunity to make any 

scoring revisions in this regard to their 

AHP Implementation Plans that would 

be applicable to their 2009 AHP 

competitive application funding rounds. 

FHFA specifically requests comment on 

whether this scoring change benefits the 

AHP competitive application program. 

IV. Notice and Public Participation 

FHFA for good cause finds that the 

notice and comment procedure required 

by the Administrative Procedure Act is 

impracticable or contrary to the public 

interest in this instance. See 5 U.S.C. 

553(b)(B). Section 1218 of HERA 

requires that FHFA’s regulations 

authorize the use of AHP set-aside 

subsidy for mortgage refinancing for a 

two-year period commencing on July 30, 

2008. Issuance of an interim final rule 

will enable the Banks to expedite 

implementation of AHP set-aside 

refinancing programs pursuant to 

§ 1218. In addition, as discussed above, 

exigent circumstances exist for 

amending the Second District Priority 

scoring criterion through an interim 

final rule. The delay that would ensue 

during a proposed notice and comment 

rulemaking would significantly curtail 

the available period of time for 

implementation and operation by the 

Banks of AHP mortgage refinancing 

programs and revised Second District 

Priorities. In view of the number and 

nature of the changes being made by 

this rule, FHFA is requesting comments 

and will consider all comments received 

on or before October 5, 2009 in 

promulgating a final rule. 

V. Effective Date 

For the reasons stated in part IV. 

above, FHFA for good cause finds that 

the interim final rule should become 

effective on August 4, 2009. See 5 U.S.C. 

553(d)(3). 

VI. Paperwork Reduction Act 

The information collection contained 

in the current AHP regulation, entitled 

‘‘Affordable Housing Program (AHP),’’ 

has been assigned control number 3069– 

0006 by the Office of Management and 

Budget (OMB). The interim final rule 

does not substantively or materially 

modify the approved information 

collection. Consequently, FHFA has not 

submitted any information to OMB for 

review under the Paperwork Reduction 

Act of 1995. See 44 U.S.C. 3501 et seq. 

VII. Regulatory Flexibility Act 

FHFA is issuing this regulation in the 

form of an interim final rule and not as 

a proposed rule. Therefore, the 

provisions of the Regulatory Flexibility 

Act do not apply. See 5 U.S.C. 601(2) 

and 603(a). 

List of Subjects in 12 CFR Part 1291 

Community development, Credit, 

Federal home loan banks, Housing, 

Reporting and recordkeeping 

requirements. 

■ For the reasons stated in the preamble, 

FHFA hereby amends chapter XII of title 

12 of the Code of Federal Regulations as 

follows: 

PART 1291—FEDERAL HOME LOAN 

BANKS’ AFFORDABLE HOUSING 

PROGRAM 

■ 1. The authority citation for part 1291 

continues to read as follows: 

Authority: 12 U.S.C. 1430(j). 

■ 2. In § 1291.1, add the following 

definition in alphabetical order: 

§ 1291.1 Definitions 

* * * * * 

Eligible targeted refinancing program 

means a program offered by the U.S. 

Department of Housing and Urban 

Development (HUD), the U.S. 

Department of Agriculture (USDA), the 

Federal National Mortgage Association 

(Fannie Mae), the Federal Home Loan 

Mortgage Corporation (Freddie Mac), a 

State or local government, or a State or 

local housing finance agency for the 

limited purpose of refinancing (i.e., 

paying off) first mortgages on primary 

residences for households that cannot 

afford or are at risk of not being able to 

afford their monthly payments, as 

defined by the program, in order to 

prevent foreclosure. 

* * * * * 

■ 3. Amend § 1291.2(b)(2)(i) and (b)(3) 

to read as follows: 

§ 1291.2 Required annual AHP 

contributions; allocation of contributions. 

* * * * * 

(b) * * * 

(2) Homeownership set-aside 

programs.—(i) Allocation amount; firsttime homebuyers. A Bank, in its 

discretion, may set aside annually, in 

the aggregate, up to the greater of $4.5 

million or 35% of the Bank’s annual 

required AHP contribution to provide 

funds to members participating in 

homeownership set-aside programs, 


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including a mortgage refinancing setaside program established under 

paragraph (f) of this section, provided 

that at least one-third of the Bank’s 

aggregate annual set-aside allocation to 

such programs shall be to assist firsttime homebuyers, pursuant to the 

requirements of this part. 

* * * * * 

(3) Additional funding. A Bank may 

accelerate to its current year’s program 

from future annual required AHP 

contributions an amount up to the 

greater of $5 million or 20% of its 

annual required AHP contribution for 

the current year. The Bank may credit 

the amount of the accelerated 

contribution against required AHP 

contributions under this part 1291 over 

one or more of the subsequent five 

years. 

■ 4. Amend § 1291.5(d)(5)(vii) to read as 

follows: 

§ 1291.5 Competitive application program. 

* * * * * 

(d) * * * 

(5) * * * 

(vii) Second District priority: Defined 

housing needs in the District. The 

satisfaction of one or more housing 

needs in the Bank’s District, as defined 

by the Bank in its AHP Implementation 

Plan. The Bank may, but is not required 

to, use one of the criteria listed in 

paragraph (d)(5)(vi) of this section, 

provided it is different from the 

criterion or criteria adopted by the Bank 

under such paragraph. 

* * * * * 

■ 5. Amend § 1291.6(f) to read as 

follows: 

§ 1291.6 Homeownership set-aside 

programs. 

* * * * * 

(f) Mortgage refinancing program.— 

(1) General. A Bank may establish a 

homeownership set-aside program for 

the use of AHP direct subsidy by its 

members to assist in the refinancing of 

a household’s mortgage loan, provided 

such program meets the requirements of 

this paragraph (f) and otherwise meets 

the requirements of regulations in this 

part. The provisions of paragraphs 

(c)(2)(ii), (c)(2)(iii), (c)(4), (c)(6) and 

(c)(8) of this section, shall not apply to 

such program. 

(2) Eligible loans. A loan is eligible to 

be refinanced with AHP direct subsidy 

if the loan is secured by a first mortgage 

on an owner-occupied unit that is the 

primary residence of the household, and 

the loan is refinanced under an eligible 

targeted refinancing program. 

(3) Eligible uses of AHP direct 

subsidy. Members may provide the AHP 

direct subsidy to: 

(i) Reduce the outstanding principal 

balance of the loan by no more than the 

amount necessary for the new loan to 

qualify under both the maximum loanto-value ratio and the maximum 

household mortgage debt-to-income 

ratio required by the eligible targeted 

refinancing program; or 

(ii) Pay loan closing costs. 

(4) Eligible lender participants. A 

Bank, in its discretion, may require that 

a household obtain its refinancing loan 

through a member participating in an 

eligible targeted refinancing program. 

(5) Counseling. Prior to enrollment in 

an AHP set-aside refinancing program 

established under this paragraph (f), a 

household must obtain counseling for 

foreclosure mitigation and for 

qualification for refinancing by an 

eligible targeted refinancing program 

through the National Foreclosure 

Mitigation Counseling program or other 

counseling program used by a State or 

local government or housing finance 

agency. 

(6) Sunset.—(i) This paragraph (f) 

shall expire on July 30, 2010, and a 

Bank may not commit AHP subsidy to 

households under its AHP set-aside 

refinancing program after such date. 

(ii) A lender may use the AHP subsidy 

committed by such date for a loan 

submitted to the eligible targeted 

refinancing program for approval on or 

before July 30, 2010 that is approved for 

refinancing under such program after 

such date. 

Dated: July 28, 2009. 

James B. Lockhart, III, 

Director, Federal Housing Finance Agency. 

[FR Doc. E9–18484 Filed 8–3–09; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 135 

[Docket No. FAA–1999–5401; Amendment 

No. 135–118] 

Manual Requirements 

AGENCY: Federal Aviation 

Administration, DOT. 

ACTION: Final rule; technical 

amendment. 

SUMMARY: The Federal Aviation 

Administration (FAA) is making a 

minor technical change to a final rule 

published in the Federal Register on 

February 2, 2005. This final rule 

established new manual requirements 

for aging aircraft under 14 CFR part 135. 

In the final rule, the FAA inadvertently 

changed one of the regulatory references 

in § 135.427(a). 

DATES: Effective Dates: Effective on 

August 4, 2009. 

FOR FURTHER INFORMATION CONTACT: Kim 

A. Barnette, Flight Standards Service 

(AFS–320), Federal Aviation 

Administration, 800 Independence 

Ave., SW., Washington, DC; phone (202) 

385–6403; e-mail 

Kim.A.Barnette@faa.gov. 

SUPPLEMENTARY INFORMATION: On 

February 2, 2005, the FAA published a 

final rule in the Federal Register (70 FR 

5533), better known as ‘Aging Airplane 

Safety’, clarifying the content 

requirements in the maintenance 

manual. In the process, this final rule redesignated 14 CFR 135.424 to § 135.423, 

and failed to revise § 135.427(a), which 

still referenced § 135.424. 

Technical Amendment 

This technical amendment will 

correct § 135.427(a) to properly 

reference § 135.423. 

List of Subjects 

14 CFR Part 135 

Air taxis, Aircraft, Airmen, Alcohol 

abuse, Aviation safety, Drug abuse, Drug 

testing, Reporting and recordkeeping 

requirements. 

■ Accordingly, Title 14 of the Code of 

Federal Regulations (CFR) part 135 is 

amended as follows: 

PART 135—OPERATING 

REQUIREMENTS; COMMUTER AND 

ON DEMAND OPERATIONS AND 

RULES GOVERNING PERSONS ON 

BOARD SUCH AIRCRAFT 

■ 1. The authority citation for part 135 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 41706, 44113, 

44101, 44701–44702, 44705, 44709, 44711– 

44713, 44715–44717, 44722. 

■ 2. Amend § 135.427 by revising 

paragraph (a) to read as follows: 

§ 135.427 Manual requirements. 

(a) Each certificate holder shall put in 

its manual the chart or description of 

the certificate holder’s organization 

required by § 135.423 and a list of 

persons with whom it has arranged for 

the performance of any of its required 

inspections, other maintenance, 

preventive maintenance, or alterations, 

including a general description of that 

work. 

* * * * * 


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