The Federal Home Loan Bank of Chicago has announced its new Low-Income Housing Tax Credit (LIHTC) Collateral Pilot Program, which will provide members with increased lendable value on their pledged collateral for up to $300 million of qualifying mortgage loans on housing credit projects.
Through member banks, credit unions, insurance companies, Community Development Financial Institutions (CDFIs), and eligible housing associates, the program aims to amplify and incentivize lending in support of affordable housing for low-income individuals and families, according to FHLBank Chicago leaders.
While all FHLBank Chicago members are eligible to participate, up to $200 million of the pilot program funding will be reserved for members with assets under $1.46 billion, including CDFIs.
Loans needed to fund LIHTC projects are often sold to investors for securitization, but projects meeting local or specialized needs may have smaller loan amounts that can be challenging and more expensive to finance, since the lender may have to hold the loans in their portfolio.
“Our members are working to address needs and gaps in affordable housing to serve and improve their communities,” said Michael Ericson, president and CEO of FHLBank Chicago. “Our new LIHTC Collateral Pilot Program enhances the value of this important collateral asset class to increase available funding for LIHTC loans in our district, provides much-needed liquidity for affordable housing to benefit low-income individuals and families, and delivers on our mission.”
Here are some program details:
- Eligible loans must be first-lien, permanent loans on LIHTC projects;
- Eligible loans must be current and are subject to FHLBank Chicago eligibility requirements for multifamily loans;
- Eligible loans must be reported to FHLBank Chicago using the LIHTC collateral listing file; and
- Eligible loans are subject to FHLBank Chicago review prior to receiving the reduced “haircut.”
FHLBank Chicago officials said they are continuing to respond to community needs, increasing its annual commitment to over $180 million for affordable housing and community development initiatives, as of the second quarter. The new LIHTC Collateral Pilot Program marks the second pilot program the bank has announced this summer. In July, FHLBank Chicago announced the launch of its Community Impact Advance Pilot Program, which provides $50 million in interest rate subsidies to help expand affordable housing, economic development, and community partnerships. The $50 million in interest rate subsidies was fully reserved by members in just 10 days.
The LIHTC Collateral Pilot Program will be available for up to three years through August 2027, with regular evaluation. For more information, visit FHLBank Chicago’s Pilot Transparency Page.
