CINCINNATI, April 20, 2006 (PRIMEZONE) -- At its April 20, 2006 meeting, the FHLBank Board of Directors (FHLBank Board) elected to temporarily suspend the FHLBank's two voluntary housing programs, New Neighbors and the American Dream Homeownership Challenge. This action was taken in response to the Federal Housing Finance Board's (Finance Board) proposed rule which would require the FHLBank to reduce its outstanding excess stock and increase its retained earnings. The FHLBank issued a public notice to members on March 31, 2006, explaining the impact of the rule on FHLBank programs and operations.
According to the FHLBank's preliminary estimates, the proposed rule would require the FHLBank to increase retained earnings by at least $109 million and to buy back at least $421 million in Fifth District members' excess stock. "Good corporate governance will not allow us to continue funding the multi-million dollar voluntary housing programs until we are in a position to know the full extent of our retained earnings shortfall and the negative impact this proposed regulation would have on our business model," said Charles "Bud" Koch, Chairman, FHLBank Board and Chairman, Charter One Bank, N.A., Cleveland. "Our FHLBank Board is deeply disappointed to temporarily suspend two successful, innovative programs that were effectively meeting affordable housing needs of residents in our FHLBank District."
New Neighbors is a $15 million grant program providing permanent housing assistance for households displaced by Katrina and other hurricanes of 2005. To date, the FHLBank has disbursed or committed $1.7 million in grants to help 85 families move into permanent housing. The FHLBank will honor New Neighbors commitments through May 15, 2006. The American Dream Homeownership Challenge is a $1 million grant program for minorities and persons with special needs. The FHLBank Board established the program in 2003 to complement President Bush's Blueprint for the American Dream initiative to increase minority homeownership. Through the American Dream Homeownership Challenge, the FHLBank has awarded $4 million to assist 800 homebuyers in purchasing their own homes. The FHLBank will suspend the Homeownership Challenge after completing the first round of funding, in the amount of $500,000, honoring the application deadline of May 1, 2006.
The FHLBank's other housing programs are unaffected by this decision. Since 1990, the Affordable Housing Program (AHP) has invested more than $200 million to help build some 35,000 housing units in Kentucky, Ohio and Tennessee. The FHLBank has allocated $25.9 million for AHP in 2006.
The FHLBank plans to submit a comment letter to the Finance Board within the 120-day public comment period, ending July 13, 2006. Pending completion of the Finance Board's rule-making process, the FHLBank Board will evaluate the final impact on all FHLBank programs and services and determine the FHLBank's ability to re-establish its voluntary housing programs.
The FHLBank is an $77.2 billion congressionally chartered wholesale regional bank providing financial services for residential housing and economic development to 742 member financial institutions located in Kentucky, Ohio and Tennessee. It has contributed $200 million for the creation of 34,000 units of lower-income housing through its Affordable Housing Program since 1990, and $4 million to help 658 persons become first-time homebuyers through the American Dream Homeownership Challenge. The FHLBank System includes 12 district Banks, is wholly owned by its 8,100 member institution stockholders and does not use taxpayer dollars.