Federal Banks are different than regular commercial banks. Membership is by banks as opposed to membership by individuals. However, as the name implies, they do have both direct and indirect effects on the housing market in the form of stabilizing programs that help member banks deal with market volatilities. The details of their programs are very sophisticated and mostly deal with providing financial flexibility in cash flow and interest rate fluctuations.
Supporting Community Development
Federal Banks also enter the market and directly help their member institutions through their Community Investment Program advances (or loans) that allow members to fund affordable housing while maintaining profit margins and minimizing risk. Members can take advantage of their Community Lending Programs to gain access to a reliable source of funding at their lowest advance rates for projects that create housing, improve business districts, and strengthen neighborhoods. THeir funding programs include the Community Investment Program (CIP), the Urban Development Advance (UDA) and the Rural Development Advance (RDA). Members can obtain discounted advances that are priced up to 10 basis points below regular commercial advances to support qualified affordable housing development. These programs in turn are offered to developers and home builders to create an incentive for the construction of low cost housing.
Supporting Affordable Housing
Each year the Federal Home Loan Bank of New York sets aside 10 percent of their annual net income to provide funding for affordable housing. AHP funds are awarded to members who submit applications on behalf of project sponsors who are planning to purchase, rehabilitate, or construct affordable homes or apartments. Funds are awarded through a competitive process which typically takes place either once or twice a year, at the HLB’s discretion. Their programs include help first-time homebuyers fulfill the dream of owning a home and provide much needed resources to help developers create affordable housing for very low- to moderate- income families.