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How to Handle First Mortgage Refinancing
Agree to subordinate the junior mortgage that secures the AHP direct
subsidy to refinanced first mortgage. No subsidy would have to be repaid.
Transfer the retention agreements to the new lender on the same terms and
timetable. The new lender must also execute a Direct Subsidy Agreement with the Chicago Bank
to ensure repayment. No subsidy would have to be repaid.
Collect the unforgiven portion of the subsidy when the new loan
is closed if neither of the first two options is chosen.
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| Repayment of the AHP Subsidy |
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Under certain circumstances, members and project sponsors or owners may be
required to return AHP subsidies to the Chicago Federal Home Loan Bank
(Chicago FHLB). Checks should be made payable to or endorsed to the Chicago FHLB.
Checks should be mailed to the following address:
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Community Investment Group |
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Chicago Federal Home Loan Bank |
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111 E. Wacker Drive, Suite 800 |
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Chicago, IL 60601 |
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| Repayment by the Homeowner |
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The Chicago FHLB must be given notice of any sale, refinancing,
foreclosure, or change in owner-occupied status occurring prior to the
end of the retention period.
- In the case of a sale, a pro rata share of the AHP subsidy,
reduced for every full month the seller(s) owned the unit and used it as
their primary residence, shall be repaid to the Chicago FHLB from any
net gain realized upon the sale of the unit after deduction for sales
expenses, unless the purchaser is a low or moderate income household,
i.e. at time of execution of sales contract having an income of 80% or
less of area median income based on household size, and assumes the
remaining AHP lien.
- In the case of refinancing, a pro rata share of the AHP
subsidy, reduced for every full month the seller(s) owned the unit and used it
as their primary residence, shall be repaid to the Chicago FHLB from
any net gain realized upon refinancing unless the unit continues to
be subject to a legally enforceable retention agreement.
- In the case of a foreclosure, the obligation to repay any subsidy
is terminated after foreclosure.
The AHP/DPP® repayment is calculated on a monthly basis with
1/60th of the subsidy forgiven for each full month.
The member must include a Repayment Worksheet with the check.
Click here for assistance with calculating a repayment.
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| Repayment by the Project Sponsor/Owner |
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The sponsor, or owner if applicable, will be responsible for repayment of all or a portion
of the AHP subsidy in the following circumstances:
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| Owner-Occupied Projects |
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The AHP subsidy was used upfront for construction/rehab costs and:
- A reduction in project development costs or an increase in
financing sources reduces the need for the AHP subsidy.
- The AHP subsidy was used for ineligible costs.
- The benefit of the AHP subsidy was not passed through to the
homebuyer/owner.
- The project is out of compliance with the commitments made in the
AHP application.
Sponsors of owner occupied projects may be required to repay
subsidies not used in compliance with the terms of the application that
result from the sponsor's actions or omissions.
Community Investment staff will determine the amount of AHP subsidy to be
repaid and notify the project sponsor, or owner if applicable, in writing.
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| Rental Projects |
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- A reduction in project development costs or an increase in
financing sources reduces the need for the AHP subsidy.
- The AHP subsidy was used for ineligible costs.
- The project is out of compliance with the commitments made in the
AHP application.
- In the case of a sale or refinancing of the project property
prior to the end of the retention period, the full amount of the
subsidy shall be repaid to the Chicago FHLB, unless the project
continues to be subject to a deed restriction or other legally
enforceable retention agreement or mechanism incorporating the income
eligibility and affordability restrictions committed to in the AHP
application (or subsequent approved modifications).
- If a member or project sponsor lends a direct subsidy to a project
any repayments of principal and payments of interest received by the
member or sponsor must be paid forthwith to the Chicago FHLB.
- project sponsor, or owner if applicable, may be required to repay
subsidies not used in compliance with the terms of the application that
result from the sponsor's or owner's actions or omissions.
Community Investment staff will determine the amount of AHP subsidy to be
repaid and notify the project in writing.
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