1www.fhlbi.com

Investing in Communities

February/March 2013

FHLBI annually reinvests at least 10 percent of our net earnings into affordable housing in partnership with our members

Like every “dividend,” this contribution is predicated on earnings

FHLB’s Affordable Housing Program (AHP) constitutes the largest single source of private “capital” for affordable housing in the country

No other provider of liquidity pays this dividend

“Community Dividend” We Deliver

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Affordable Housing Program (AHP) – grant funding to create rental and homeownership opportunities for low- and moderate-income households

Homeownership Initiatives (HOP and NIP) – grant funding for down payment, closing cost assistance and homeowner rehabilitation to income-eligible households

Community Investment Program (CIP) Advances and Letters of Credit – discounted advances and letters of credit available to members to support targeted housing and economic development

FHLBI Community Investment Programs

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2013 AHP Allocation to be determined

2012 AHP Contribution (based on 2011 results)

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Single AHP round funded 27 projects with $10.5M in subsidy (649 affordable units)

Homeownership Initiatives Programs funding of $5.3 million assisted 743 households

Community Investment Program transactions totaled $109.4 million to 25 projects

2012 Highlights

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Reviewed by AHAC annually before approval by Board, or as amended

Establishes AHP scoring and set-aside program criteria in response to district needs and within regulations

Establishes competitive application round deadlines and set-aside holdback dates

Allocates required annual contributions

Implementation Plan

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The roadmap by which community leaders are brought together to fulfill a common objective

Member institution Has desire to invest in the community Foundations or philanthropy goals Community Reinvestment Act (CRA)

Sponsor/Owner/Developer Has a desire to invest in the community Creates long-term, sustainable community housing assets Fulfills a need or mission Non–profit with housing as a core mission

FHLBI Has a desire to invest in the community Leverages AHP with other stakeholders with common objectives Creates opportunity for new and existing relationships with members Creates jobs long term and short-term jobs

2013 Implementation Plan

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Provides a direct subsidy (grant) for acquisition, rehabilitation or construction of affordable housing of various types

Only FHLBI members may apply for this grant funding

Project sponsors are non-profit or for-profit housing developers who partner with FHLBI member

Affordable Housing Program (AHP)

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Community Investment Programs9

River Center Apartments, Mishawaka, IN1st Source Bank partnered with Mishawaka Housing Authority & Community Development to obtain an AHP grant of $305,482 to redevelop the former Mishawaka High School into one- and two-bedroom senior apartments.

Land or building acquisition Down payment and closing costs

for homebuyers Construction or rehabilitation costs Owner-occupied rehabilitation Some soft costs (developer fee, architectural,

legal, survey, engineering)

Eligible AHP Uses

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Operating or administrative costs of sponsor

Infrastructure costs

Processing fees charged to administer AHP Replacement or operating reserves including

investor service fees or investor reserves

Ineligible AHP Uses

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2012 was a competitive round with a 2:1 ratio of applications to awarded projects

53 applications received and scored Average score was 60.2

Lowest score = 52.7 Highest score = 68

Average total subsidy for rental projects = $417,400

Average subsidy per unit for rental projects = $38,900

AHP 2012 Award Summary

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A single funding round in 2013 Competitive application process Maximum grant $500,000 per project No limit on how many AHP projects a member

can apply for or be awarded per round Deliver funds to project through member’s

deposit account at FHLBI

2013 AHP

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March - Round 2013A Opens April 30 – Notifications of Intent Due (soft deadline) May 30 – Member Application Deadline (required for

technical review) June 14 – Last day for questions June 19 – Application Deadline (5:00 PM EDT “in hand”) September 27 – Award announcement

Important 2013 AHP Dates

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Senior or family rental projects (not assisted living, hospice or nursing homes)

Scattered site single family homes for homeownership, lease purchase or rental

Emergency shelters Transitional housing Permanent supportive housing Habitat for Humanity projects Neighborhood revitalization projects

Typical AHP Projects

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Development team Lender General contractor Consultant Architect Green specialist

Site control and zoning Funding commitment Funding gap Demonstrated market need for housing

type Financially feasible

AHP Key Thresholds:

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Comprehensive community development Aging in place for seniors and permanent

supportive housing Green building and rehabilitation standards

continue to be a focus Readiness to proceed Economic diversity Subsidy per unit increased to 15 points

Key 2013 Scoring Categories

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A $500,000 AHP grant from Mercantile Bank of Michigan helped to create or rehabilitate 92 beds and units of transitional housing for very low-income women and their children. The Mel Trotter Ministries project addresses a critical need in Grand Rapids by providing housing with supportive services, as well as solutions for homelessness.

Legal mechanism recorded to ensure property is used for affordable housing during retention period

15 years for rental, 5 years for homeownership Generally a deed restriction, second mortgage

‘soft’ second Specific language is required by Regulation to be

included in the retention mechanism

Retention Requirement

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Sponsor prepares reports and submits to member semi-annually during development phase; member submits reports to FHLBI

Initial monitoring at completion Long-term monitoring for rental projects

Project is habitable Rents and incomes are in compliance with

targeting commitments

AHP Monitoring

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Training on Demand (TOD) is available for applications being prepared for the 2013 AHP competitive round.  A member may request a face-to-face meeting, conference call or personalized webinar to discuss a potential AHP project.

Five Help Lines between May 7-June 3 (1-2 hour time slots when applicants can call during scheduled times with questions and leave the call at any time)

HelpMail – AHP application questions can be submitted electronically any time and answers will be received within one business day

AHP Technical Assistance

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April 3 - Scoring Overview and Getting Started (tips and scoring requirements)

April 10 - Supportive Housing Rental (development budget/funding sources, pro-forma)

April 17 - Homeownership (development budget, Habitat gap calculation)

April 24 - Rental and Lease Purchase (development budget/funding sources, pro-forma)

May 15 - Member Institutions ONLY (member role and requirements – overview)

AHP Webinars (Wednesdays 2:00-4:00 EDT)

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Technical Reviews for complete AHP applications submitted to members by May  30th will be provided in person subject to scheduling:

June 5 & June 6 9:00 am – 4:00 pm Okemos Conference Center 2187 University Park Drive, Okemos, MI

June 10 & June 11 9:00 am – 4:00 pm FHLBI

8250 Woodfield Crossing Blvd., Indianapolis, IN

AHP Application Technical Reviews

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The FHLBI’s homeownership initiative programs can help first-time homebuyers with down payments and closing costs or assist homeowners with repairs to individual homes or entire neighborhoods.

HOP – Homeownership Opportunities Program Down payment and closing cost assistance for eligible

first-time homebuyers

NIP – Neighborhood Impact Program Owner-occupied rehabilitation for eligible homeowners

DRP – Disaster Relief Program Rehabilitation or down payment assistance for state or

federally declared disaster areas in FHLBI’s district—requires board approval

Members may access up to $300,000 per program, per year

2013 Homeownership Initiatives Programs

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Program Households Funds Disbursed

HOP/NSA 244 $1.6M

NIP 499 $3.7M

2012 Disbursement Summary

$1.6M

$3.7M

HOP/NSA NIP

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Member institutions - often used for their own mortgage business

Members often partner with non-profit or government sponsors

Non-profit partners providing required homeownership counseling or manage owner-occupied rehabilitation programs

Municipalities or Land Banks with NSP/HOME/CDBG or other local funds

Who uses Homeownership Initiatives?

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Limit to existing customers or require customer to establish banking relationship

Limit to employees (great for staff recruitment/ retention!)

Limit scope of NIP to basics: windows/doors, siding/ insulation, roofing, etc.

Customize program to meet your institution’s objectives

Require partner organizations attend FHLBI training

Execute MOUs, agency contract or similar agreement with partnering organizations

Member electives and program best-practices

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Member (primary or secondary contact) must complete workshop training or webinar training

Training is available and recommended for anyone planning to use Homeownership Initiative funding

Member institution must complete and submit Master Agreement and Registration Form (covers HOP and NIP)

Registered Members may have contact information posted on FHLBI website

Homeownership Initiatives Participation Requirements

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Income limit of 80% or less of AMI FHLBI provides $3 per $1 of matching funds If counseling is required, it must be face-to-face

with state or HUD-certified counselor Member cap of $300,000 per program 5 year retention recorded to property title,

prorated recapture over the 5 years Funding on a first come – first served basis Available balance posted on FHLBI Website

and updated regularly

Homeownership Initiatives Requirements

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First-time homebuyer

Up to $10,000 for member originated mortgages

Up to $5,000 for non-member mortgages with 3:1 eligible matching funds

$1,000 cash contribution from homebuyer

Approved homebuyer counseling (up to $150 of HOP funds allowed toward cost)

No more than $250 cash back to buyer at closing

HOP Recipient Requirements

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Lidbeck Family, Iron Mountain, MI – First National Bank & Trust of Iron Mountain has helped 149 area homeowners make improvements to their homes, such as new windows and siding.

Up to $10,000 with required 3:1 eligible matching funds or member first lien-holder

Up to $7,500 with no match

Funding must be used toward eligible repairs, i.e.: roofing gutters siding windows doors HVAC

Own and occupy property for minimum of 6 months

NIP Recipient Requirements

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In partnership with 1st Source Bank in South Bend, IN, Habitat for Humanity renovated an old Frank’s Nursery & Crafts building into a new ReStore that provides items generally needed for housing improvements at reduced prices. The project was financed with a $1.6 million loan funded with a Community Investment Program advance from the FHLBI, along with support from Mishawaka Tax Increment Financing funds.

Community Investment Program advances are FHLBI’s lowest cost funding!

Flexible terms/structure Variable and fixed to 20 year Up to 30 year amortization

Same collateral, prepayment terms, and activity-based stock requirements as traditional advances

Available at FHLBI’s cost of funds, plus a nominal administrative fee (non-competitive)

Community Investment Program (CIP)

Help improve a member’s bottom line…

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Provide low cost funding for many investment and loan opportunities, including AHP projects

Offer potentially lower rates than competitors Enhance community relations by meeting the

credit needs of your community Match funding to mitigate interest rate risk Fulfill Community Reinvestment Act (CRA)

lending and/or investment tests*

* This does not constitute CRA advice. Please consult appropriate advisors.

Other CIP member benefits

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Use CIP to provide financing for predevelopment, purchase, construction, rehabilitation, or refinance:

Housing (residential)… AHP projects qualify automatically!

Economic development (nonresidential) Mixed use (combination of residential &

nonresidential)

Or to fund: Future originations Originations up to 3 months prior Loan refinancing Communities or entities financing eligible housing

or economic development initiatives (even fire trucks, hospitals or libraries!)

Eligible CIP Uses

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Complete the short application (available year-round)

Multiple ways to qualify a project… FHLBI staff can help find the easiest way to

qualify your project FHLBI review time less than 10 business days Minimum typical CIP advance is $100,000

The application process is easy!

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Documentation required at project qualification only

No penalty for not taking down a commitment No ongoing monitoring or reporting Project must be closed and funds fully disbursed

or construction draws funded within 3 months prior to the CIP funding date and/or ending 6 months after the funding date

The rest is easier!

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Ownership Residential Individual owner-occupied units owned or purchased All household incomes <=115% of Area Median Income (AMI)

Documentation Required: List of originated mortgages

Rental Residential Financing of rental units and cooperatives At least 51% of resident incomes <=115% of AMI or Rents affordable to at least 51% residents whose incomes

are <=115% AMI

Documentation Required: Rent roll, FHLBI Rent Schedule or Income Roll

CIP Housing Project Qualification

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Project Qualification:

Small Business Concern Small Business Administration revenue/size standards

(North American Industry Classification System Codes (NAICS))

Documentation Required: Proof of revenue

Job creation/retention at qualified wage levels At least 51% of job salaries <=115% AMI for rural At least 51% of job salaries <=100% AMI for urban

Documentation Required: FHLBI Job Information Form

CIP Commercial and Economic Development

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Consumers Credit Union used CIP funds to build its new branch located in Portage, MI. Since opening, the branch has averaged 70 new members per month and increased staff to accommodate the growth.

Services and benefits to a qualified area Project provides services/benefits to urban or rural area

<=100% AMI for urban areas

<=115% AMI for rural areas

Project location in targeted area (income exemption) Rural/urban Champion Community/Empowerment Zone

or Enterprise Community

Native American area

Federal Brownfield Tax Credit

Area affected by a federal military base closing or realignment

State of Michigan Renaissance Zone

Federally declared disaster area

Documentation Requirement: Verification of AMI or Targeted Area

CIP Commercial and Economic Development

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Combination of housing project and economic development

Project only required to qualify as economic development

Small Business Concern Job creation/retention at qualified wage levels Services and benefits to income targeted location

or targeted area

CIP Mixed Use Project Qualification

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Common CIP Uses

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MaryBeth Wott, Community Investment Officer mwott@fhlbi.com

317-465-0368

Marjorie Green, Development Manager mgreen@fhlbi.com

517-230-2361

www.fhlbi.com800-688-6697

Q & A / Contact Information

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Shannon Fountain, Community Lending Manager sfountain@fhlbi.com

317-465-0428

Ronna Edwards, Compliance Analyst redwards@fhlbi.com

317-465-0369

www.fhlbi.com800-688-6697

Contact Information – Homeownership Initiatives

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Trish Lewis, AHP Portfolio Manager plewis@fhlbi.com

317-465-0379

Becky Hyink, Compliance Analyst rhyink@fhlbi.com

317-465-0362

Rose Marie Roberts, Compliance Analyst rroberts@fhlbi.com

317-465-0377

www.fhlbi.com800-688-6697

Contact Information – Competitive AHP

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www.fhlbi.com 49