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Notice No. 0007 | December 19, 2008

AHP Subsidy Disbursement Prior to Construction Start (Rental Projects)

Dear Community Lending Partner:

The Federal Home Loan Bank of San Francisco permits members and sponsors to request disbursement of Affordable Housing Program (AHP) subsidy before construction starts on a project. The subsidy can be used to support the sponsor's efforts in securing other financing sources to the project, which may reduce development costs and facilitate the development of affordable housing.

The Bank would like to remind sponsors and members, however, that requesting disbursement prior to the start of construction entails the risk of subsidy recapture if a project eventually falls out of compliance because the units are not completed. Therefore, before requesting an early disbursement of funds, a member should carefully review with the sponsor the certainty of a project's sources of funds, including the status of tax credit reservations and investors, as well as construction and permanent financing. The Bank also reminds members that a legally enforceable retention agreement or mechanism should be recorded and secured against the project site before subsidy can be passed on to the sponsor. Sample templates for use by members are available on our website.

We encourage sponsors and members responsible for evaluating a project’s status to carefully weigh the risks outlined above before they submit a request for subsidy disbursement.

Please call me at (415) 616-2753 if you have questions about this notice or about the AHP.



Emmanuel R. Ungson
Assistant Vice President, Community Investment Department, Research and Analysis