Financing for multifamily housing preservation continues to shrink as the recession grinds on. One of the remaining and most reliable sources of affordable housing funds is now threatened. That’s due to a convergence of two issues that may seem to have little to do with one another: the Affordable Housing Program (AHP) of the Federal Home Loan Banks, and the mark-to-market accounting rule of the Financial Accounting Standards Board (FASB).
The AHP is the nation’s largest source of private sector funds for housing and community development. It is funded with 10 percent of the Home Loan Banks’ net income each year. Nearly three-quarters of a million housing units have been built using the AHP.
Such funding could dry up overnight if adjustments aren’t made to FASB’s mark-to-market rule.
During normal times, mark-to-market makes sense. It helps provide transparency to investors. Now, however, the market has disappeared for the mortgage assets held by many of the Federal Home Loan Banks. Simply put, there is no market in which to mark the assets.
These institutions plan to hold the assets to maturity. Regardless, the rule makes them value these assets as if they would be selling them now. That forces the Home Loan Banks to take huge accounting losses on paper, and therefore no funds are available for the AHP. If FASB adjusts the rule, AHP funds would continue to flow.
Mark-to-market shouldn’t be suspended altogether. Advocates who have lobbied Congress and FASB to adjust the rule say the rule can be changed without gutting it. FASB decides very soon.
Melody Fennel is a public policy and government relations professional based in Washington, DC. She previously served as assistant secretary for congressional affairs at the U.S. Department of Housing and Urban Development and as a professional staff member for the U.S. Senate Committee on Banking, Housing and Urban Affairs.