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U.S. Code as of:
01/19/04
Section 1430. Advances to members
(a) In general
(1) All advances
Each Federal Home Loan Bank is authorized to make secured
advances to its members upon collateral sufficient, in the
judgment of the Bank, to fully secure advances obtained from the
Bank under this section or section 1431(g) of this title.
(2) Purposes of advances
A long-term advance may only be made for the purposes of -
(A) providing funds to any member for residential housing
finance; and
(B) providing funds to any community financial institution
for small businesses, small farms, and small agri-businesses.
(3) Collateral
A Bank, at the time of origination or renewal of a loan or
advance, shall obtain and maintain a security interest in
collateral eligible pursuant to one or more of the following
categories:
(A) Fully disbursed, whole first mortgages on improved
residential property (not more than 90 days delinquent), or
securities representing a whole interest in such mortgages.
(B) Securities issued, insured, or guaranteed by the United
States Government or any agency thereof (including without
limitation, mortgage-backed securities issued or guaranteed by
the Federal Home Loan Mortgage Corporation, the Federal
National Mortgage Corporation, and the Government National
Mortgage Association).
(C) Cash or deposits of a Federal Home Loan Bank.
(D) Other real estate related collateral acceptable to the
Bank if such collateral has a readily ascertainable value and
the Bank can perfect its interest in the collateral.
(E) Secured loans for small business, agriculture, or
securities representing a whole interest in such secured loans,
in the case of any community financial institution.
(4) Additional bank authority
Subparagraphs (A) through (E) of paragraph (3) shall not affect
the ability of any Federal Home Loan Bank to take such steps as
it deems necessary to protect its security position with respect
to outstanding advances, including requiring deposits of
additional collateral security, whether or not such additional
security would be eligible to originate an advance. If an advance
existing on August 9, 1989, matures and the member does not have
sufficient eligible collateral to fully secure a renewal of such
advance, a Bank may renew such advance secured by such collateral
as the Bank determines is appropriate. A member that has an
advance secured by such insufficient eligible collateral must
reduce its level of outstanding advances promptly and prudently
in accordance with a schedule determined by the Federal home loan
bank.
(5) Review of certain collateral standards
The Board may review the collateral standards applicable to
each Federal home loan bank for the classes of collateral
described in subparagraphs (D) and (E) of paragraph (3), and may,
if necessary for safety and soundness purposes, require an
increase in the collateral standards for any or all of those
classes of collateral.
(6) Definitions
For purposes of this subsection, the terms "small business",
"agriculture", "small farm", and "small agri-business" shall have
the meanings given those terms by regulation of the Finance
Board.
(b) Appraisals and other investigations; acceptance of home
mortgages as collateral security only by formal Board resolution
For the purposes of this section, each Home Loan Bank shall have
power to make, or to cause or require to be made, such appraisals
and other investigations as it may deem necessary. No home mortgage
otherwise eligible to be accepted as collateral security for an
advance by a Home Loan Bank shall be accepted if any director,
officer, employee, attorney or agent of the Home Loan Bank or of
the borrowing institution is personally liable thereon, unless the
Board has specifically approved by formal resolution such
acceptance.
(c) Notes of borrowing members; interest rate; lien on stock
Such advances shall be made upon the note or obligation of the
member secured as provided in this section, bearing such rate of
interest as the Federal home loan bank may approve or determine,
and the Federal Home Loan Bank shall have a lien upon and shall
hold the stock of such member as further collateral security for
all indebtedness of the member to the Federal Home Loan Bank.
(d) Obligation to repay; additional security; sale of advances to
other banks
The institution applying for an advance shall enter into a
primary and unconditional obligation to pay off all advances,
together with interest and any unpaid costs and expenses in
connection therewith according to the terms under which they were
made, in such form as shall meet the requirements of the bank. The
bank shall reserve the right to require at any time, when deemed
necessary for its protection, deposits of additional collateral
security or substitutions of security by the borrowing institution,
and each borrowing institution shall assign additional or
substituted security when and as so required. Any Federal Home Loan
Bank shall have power to sell to any other Federal Home Loan Bank,
with or without recourse, any advance made under the provisions of
this chapter, or to allow to such bank a participation therein, and
any other Federal Home Loan Bank shall have power to purchase such
advance or to accept a participation therein, together with an
appropriate assignment of security therefor.
(e) Priority of certain secured interests
Notwithstanding any other provision of law, any security interest
granted to a Federal Home Loan Bank by any member of any Federal
Home Loan Bank or any affiliate of any such member shall be
entitled to priority over the claims and rights of any party
(including any receiver, conservator, trustee, or similar party
having rights of a lien creditor) other than claims and rights that
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(1) would be entitled to priority under otherwise applicable
law; and
(2) are held by actual bona fide purchasers for value or by
actual secured parties that are secured by actual perfected
security interests.
(g) (!1) Community support requirements
(1) In general
Before the end of the 2-year period beginning on August 9,
1989, the Board shall adopt regulations establishing standards of
community investment or service for members of Banks to maintain
continued access to long-term advances.
(2) Factors to be included
The regulations promulgated pursuant to paragraph (1) shall
take into account factors such as a member's performance under
the Community Reinvestment Act of 1977 [12 U.S.C. 2901 et seq.]
and the member's record of lending to first-time homebuyers.
(h) Special liquidity advances
(1) In general
Subject to paragraph (2), the Federal Home Loan Banks may, upon
the request of the Director of the Office of Thrift Supervision,
make short-term liquidity advances to a savings association that
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(A) is solvent but presents a supervisory concern because of
such association's poor financial condition; and
(B) has reasonable and demonstrable prospects of returning to
a satisfactory financial condition.
(2) Interest on and security for special liquidity advances
Any loan by a Federal Home Loan Bank pursuant to paragraph (1)
shall be subject to all applicable collateral requirements,
including the requirements of subsection (a) of this section, and
shall be at an interest rate no less favorable than those made
available for similar short-term liquidity advances to savings
associations that do not present such supervisory concern.
(i) Community investment program
(1) In general
Each Bank shall establish a program to provide funding for
members to undertake community-oriented mortgage lending. Each
Bank shall designate a community investment officer to implement
community lending and affordable housing advance programs of the
Banks under this subsection and subsection (j) of this section
and provide technical assistance and outreach to promote such
programs. Advances under this program shall be priced at the cost
of consolidated Federal Home Loan Bank obligations of comparable
maturities, taking into account reasonable administrative costs.
(2) Community-oriented mortgage lending
For purposes of this subsection, the term "community-oriented
mortgage lending" means providing loans -
(A) to finance home purchases by families whose income does
not exceed 115 percent of the median income for the area,
(B) to finance purchase or rehabilitation of housing for
occupancy by families whose income does not exceed 115 percent
of median income for the area,
(C) to finance commercial and economic development activities
that benefit low- and moderate-income families or activities
that are located in low- and moderate-income neighborhoods, and
(D) to finance projects that further a combination of the
purposes described in subparagraphs (A) through (C).
(j) Affordable housing program
(1) In general
Pursuant to regulations promulgated by the Board, each Bank
shall establish an Affordable Housing Program to subsidize the
interest rate on advances to members engaged in lending for long
term, low- and moderate-income, owner-occupied and affordable
rental housing at subsidized interest rates.
(2) Standards
The Board's regulations shall permit Bank members to use
subsidized advances received from the Banks to -
(A) finance homeownership by families with incomes at or
below 80 percent of the median income for the area; or
(B) finance the purchase, construction, or rehabilitation of
rental housing, at least 20 percent of the units of which will
be occupied by and affordable for very low-income households
for the remaining useful life of such housing or the mortgage
term.
(3) Priorities for making advances
In using advances authorized under paragraph (1), each Bank
member shall give priority to qualified projects such as the
following:
(A) purchase of homes by families whose income is 80 percent
or less of the median income for the area,
(B) purchase or rehabilitation of housing owned or held by
the United States Government or any agency or instrumentality
of the United States; and
(C) purchase or rehabilitation of housing sponsored by any
nonprofit organization, any State or political subdivision of
any State, any local housing authority or State housing finance
agency.
(4) Report
Each member receiving advances under this program shall report
annually to the Bank making such advances concerning the member's
use of advances received under this program.
(5) Contribution to program
Each Bank shall annually contribute the percentage of its
annual net earnings prescribed in the following subparagraphs to
support subsidized advances through the Affordable Housing
Program:
(A) In 1990, 1991, 1992, and 1993, 5 percent of the preceding
year's net income, or such prorated sums as may be required to
assure that the aggregate contribution of all the Banks shall
not be less than $50,000,000 for each such year.
(B) In 1994, 6 percent of the preceding year's net income, or
such prorated sum as may be required to assure that the
aggregate contribution of the Banks shall not be less than
$75,000,000 for such year.
(C) In 1995, and subsequent years, 10 percent of the
preceding year's net income, or such prorated sums as may be
required to assure that the aggregate contribution of the Banks
shall not be less than $100,000,000 for each such year.
(6) Grounds for suspending contributions
(A) In general
If a Bank finds that the payments required under this
paragraph are contributing to the financial instability of such
Bank, it may apply to the Federal Housing Finance Board for a
temporary suspension of such payments.
(B) Financial instability
In determining the financial instability of a Bank, the
Federal Housing Finance Board shall consider such factors as
(i) whether the Bank's earnings are severely depressed, (ii)
whether there has been a substantial decline in membership
capital, and (iii) whether there has been a substantial
reduction in advances outstanding.
(C) Review
The Board shall review the application and any supporting
financial data and issue a written decision approving or
disapproving such application. The Board's decision shall be
accompanied by specific findings and reasons for its action.
(D) Monitoring suspension
If the Board grants a suspension, it shall specify the period
of time such suspension shall remain in effect and shall
continue to monitor the Bank's financial condition during such
suspension.
(E) Limitations on grounds for suspension
The Board shall not suspend payments to the Affordable
Housing Program if the Bank's reduction in earnings is a result
of (i) a change in the terms for advances to members which is
not justified by market conditions, (ii) inordinate operating
and administrative expenses, or (iii) mismanagement.
(F) Congressional notification and action
The Federal Housing Finance Board shall notify the Committee
on Banking, Finance and Urban Affairs of the House of
Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate not less than 60 days before such
suspension takes effect. Such suspension shall become effective
unless a joint resolution is enacted disapproving such
suspension.
(7) Failure to use amounts for affordable housing
If any Bank fails to utilize or commit the full amount provided
in this subsection in any year, 90 percent of the amount that has
not been utilized or committed in that year shall be deposited by
the Bank in an Affordable Housing Reserve Fund administered by
the Board. The 10 percent of the unutilized and uncommitted
amount retained by a Bank should be fully utilized or committed
by that Bank during the following year and any remaining portion
must be deposited in the Affordable Housing Reserve Fund. Under
regulations established by the Board, funds from the Affordable
Housing Reserve Fund may be made available to any Bank to meet
additional affordable housing needs in such Bank's district
pursuant to this section.
(8) Net earnings
The net earnings of any Federal Home Loan Bank shall be
determined for purposes of this paragraph -
(A) after reduction for any payment required under section
1441 or 1441b of this title; and
(B) before declaring any dividend under section 1436 of this
title.
(9) Regulations
The Federal Housing Finance Board shall promulgate regulations
to implement this subsection. Such regulations shall, at a
minimum -
(A) specify activities eligible to receive subsidized
advances from the Banks under this program;
(B) specify priorities for the use of such advances;
(C) ensure that advances made under this program will be used
only to assist projects for which adequate long-term monitoring
is available to guarantee that affordability standards and
other requirements of this subsection are satisfied;
(D) ensure that a preponderance of assistance provided under
this subsection is ultimately received by low- and
moderate-income households;
(E) ensure that subsidies provided by Banks to member
institutions under this program are passed on to the ultimate
borrower;
(F) establish uniform standards for subsidized advances under
this program and subsidized lending by member institutions
supported by such advances, including maximum subsidy and risk
limitations for different categories of loans made under this
subsection; and
(G) coordinate activities under this subsection with other
Federal or federally-subsidized affordable housing activities
to the maximum extent possible.
(10) Other programs
No provision of this subsection or subsection (i) of this
section shall preclude any Bank from establishing additional
community investment cash advance programs or contributing
additional sums to the Affordable Housing Reserve Fund.
(11) Advisory Council
Each Bank shall appoint an Advisory Council of 7 to 15 persons
drawn from community and nonprofit organizations actively
involved in providing or promoting low- and moderate-income
housing in its district. The Advisory Council shall meet with
representatives of the board of directors of the Bank quarterly
to advise the Bank on low- and moderate-income housing programs
and needs in the district and on the utilization of the advances
for these purposes. Each Advisory Council established under this
paragraph shall submit to the Board at least annually its
analysis of the low-income housing activity of the Bank by which
it is appointed.
(12) Reports to Congress
(A) The Board shall monitor and report annually to the Congress
and the Advisory Council for each Bank the support of low-income
housing and community development by the Banks and the
utilization of advances for these purposes.
(B) The analyses submitted by the Advisory Councils to the
Board under paragraph (11) shall be included as part of the
report required by this paragraph.
(C) The Comptroller General of the United States shall audit
and evaluate the Affordable Housing Program established by this
subsection after such program has been operating for 2 years. The
Comptroller General shall report to Congress on the conclusions
of the audit and recommend improvements or modifications to the
program.
(13) Definitions
For purposes of this subsection -
(A) Low- or moderate-income household
The term "low- or moderate-income household" means any
household which has an income of 80 percent or less of the area
median.
(B) Very low-income household
The term "very low-income household" means any household that
has an income of 50 percent or less of the area median.
(C) Low- or moderate-income neighborhood
The term "low- or moderate-income neighborhood" means any
neighborhood in which 51 percent or more of the households are
low- or moderate-income households.
(D) Affordable for very-low income households
For purposes of paragraph (2)(B) the term "affordable for
very-low income households" means that rents charged to tenants
for units made available for occupancy by low-income families
shall not exceed 30 percent of the adjusted income of a family
whose income equals 50 percent of the income for the area (as
determined by the Secretary of Housing and Urban Development)
with adjustment for family size.
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