Solutions

Opportunity

FHLBank Chicago recently launched its revamped Community Advance offering members an improved process for application and approval as well as expanded eligibility, better pricing, and streamlined requirements.

This paper explores how members can pair FHLBank Chicago’s Downpayment Plus Advantage® (DPP Advantage®) program with the Community Advance to unlock better advance pricing, expand access to capital for nonprofits, and ultimately pass cost savings to income-eligible homebuyers. Together, these tools from FHLBank Chicago can support members’ community impact with affordable housing for low and moderate-income homebuyers.

Downpayment Plus Advantage

DPP Advantage offers forgivable grants to assist qualified homebuyers with down payment and closing costs on first mortgages for primary residences, provided these mortgages are originated by nonprofit organizations. The grant amount is capped at the lesser of $10,000 or 25% of the first mortgage amount, and grants are forgiven on a monthly basis over a five-year retention period. Eligible homebuyers must have household incomes at or below 80% of the Area Median Income (AMI) and complete both homebuyer education and Housing and Urban Development (HUD) certified counseling.

What sets DPP Advantage apart from Downpayment Plus (DPP) is its origination model: the first mortgage is originated and funded by a nonprofit organization, such as Habitat for Humanity (Habitat) or Neighborhood Housing Services. A member institution partners with the nonprofit organization, providing grant funds from FHLBank Chicago to the homebuyer. DPP Advantage grants do not reduce members’ DPP availability - Members can access up to an additional $1 million of grant funds from FHLBank Chicago through DPP Advantage, allowing for further community support.

For members, DPP Advantage offers an opportunity to further strengthen partnerships with nonprofit housing providers, expand community engagement, and attract new customers. As an added benefit to participating members, DPP Advantage may qualify for Community Reinvestment Act (CRA) credit. Homebuyers benefit with a forgivable grant, and DPP Advantage does not require a homebuyer contribution, further enhancing affordability and flexibility.

To ensure eligibility for DPP Advantage, all participating members must adhere to applicable fair housing and fair lending regulations.

The diagram below shows the flow of DPP Advantage funds: 

Community Advance

The new Community Advance offers members discounted advance rates of up to 200 basis points to support qualifying affordable housing and economic development activities. For owner-occupied housing, household income is limited to 115% AMI, which is above the DPP Advantage limit. Members can qualify with various affordable housing financing vehicles, such as loan originations or mortgage-backed securities backed by loans to income-eligible homebuyers. All activities must close or settle within 90 calendar days prior to the Community Advance execution.

A new feature for the Community Advance is expanded eligibility to support nonprofit mortgage originators and non-depository Community Development Financial Institutions (CDFIs) who make eligible Community Advance affordable housing loans. Members who lend to or purchase loans from these entities can qualify for a Community Advance with a discount of 200 basis points from regular advance rates, subject to applicable member limits. FHLBank Chicago members can access deeply discounted advance financing, while nonprofit mortgage originators and non-depository CDFIs gain access to capital.

Pairing a Community Advance with DPP Advantage

Integrating DPP Advantage with Community Advances creates a powerful opportunity for members to amplify community impact.

Pairing Scenario

Partnership Structure:

In this example, Habitat for Humanity (Habitat) is the nonprofit mortgage originator. Habitat works with an FHLBank Chicago member to find loans that qualify for the DPP Advantage program. After Habitat originates and funds the loan, it sells the loan to the member, which uses a Community Advance to fund it. This structure allows Habitat to offer 0% or below-market interest mortgages to income-qualified homebuyers while using the member’s discounted funding to improve liquidity and expand its mission-driven impact.

Homebuyer Benefits:

The homebuyer purchases a home through their local Habitat. Habitat works with their FHLBank Chicago member institution to access DPP Advantage, securing forgivable downpayment assistance and waiving the $1,000 minimum contribution requirement.

By offering a mortgage at 0%, the homebuyer saves over $215,000 in interest payments over the life of the loan. When combined with DPP Advantage, the total value provided to the homebuyer approaches $226,000. 

Visual 1: Value to Homebuyer

Habitat Benefits:

Once Habitat funds the mortgage at closing, it can sell the loan to a member institution at a discount—for example, $85.00 loan purchase price, with a forgivable soft second lien provided by Habitat. By selling the loan to a member institution, Habitat gains critical liquidity today instead of waiting for principal payments from the homebuyer for up to 30 years. This allows for reinvestment in additional affordable housing projects, further increasing housing supply and affordability in the community.  

In this example, Habitat receives reimbursement from the member institution for the already applied homebuyer DPP Advantage Grant issued at closing and gains an additional $148,750 in liquidity from the loan sale.

Visual 2: Loan Structure

Member Institution Benefits:

The member institution funds the purchase of the Habitat loan using a discounted Community Advance, reducing its cost of funding and directly supporting affordable housing efforts.

By acquiring the mortgage at a discount, the member institution realizes a Compound Annual Growth Rate (CAGR) of 2.35% over the first 7 years. In addition to saving interest on the advance funding, members gain further value through FHLBank Chicago’s Dividend Benefit, as illustrated below.

Visual 3: Community Advance Structure

Visual 4: Annual Yield 

Visual 5: Annual Cash Flows

Visual 6: Annual Cash Flows Gains

Pairing DPP Advantage with Community Advances creates a scalable model for affordable lending to homebuyers in need. This approach allows homebuyers to achieve sustainable homeownership, provides members with deeply discounted advance rates and potential CRA benefits, and gives nonprofits immediate liquidity to accelerate their ability to serve more families.

Next Steps

To participate in DPP programs, members must complete a Program Agreement and submit an Annual Certification to reserve funds. Institutions with grants in retention must submit these certifications.  

Members who are ready to transact can access the Community Advances platform through eBanking. There are no additional agreements or requirements to apply for a Community Advance.

Build relationships with nonprofit organizations and collaborate to put these programs to work for your communities. Reach out to your FHLBank Chicago Sales Director with further questions on DPP Advantage or Community Advances.

• View information on DPP
• Learn more about the new Community Advance Program

Download a PDF of this White Paper.

Anthony Olavarria Analyst Business Development and Customer Insights Sales, Strategy and Solutions

DISCLAIMER: The examples and scenarios in this paper were prepared without any consideration of your institution’s balance sheet composition, hedging strategies, financial assumptions and plans, or particular situation, any of which may affect the relevance of these scenarios to your own analysis. The Federal Home Loan Bank of Chicago (FHLBank Chicago) makes no representations or warranties (express or implied) about the accuracy, currency, completeness, or suitability of any information in this paper. This paper is not intended to constitute legal, accounting, investment, or financial advice or the rendering of legal, accounting, consulting, or other professional services of any kind. You should consult with your accountants, counsels, financial representatives, consultants, and/or other advisors regarding the extent these scenarios may be useful to you and with respect to any legal, tax, business, and/or financial matters or questions. In addition, certain information included here speaks only as of the date(s) included, and the information may have become out of date. FHLBank Chicago does not undertake an obligation, and disclaims any duty, to update any of the information in this paper. Moreover, this paper may include forward-looking statements, which are based upon FHLBank Chicago’s current expectations and speak only as of the date(s) thereof. These forward-looking statements involve risks and uncertainties including, but not limited to, the risk factors set forth in FHLBank Chicago’s periodic filings with the Securities and Exchange Commission, which are available on its website.