February 12, 2007

Dear Seattle Bank Members and Community Investment Project Sponsors,

The Federal Home Loan Bank of Seattle will be instituting a number of important revisions to the Affordable Housing Program (AHP) and Home$tart Program for 2007. Some of these changes respond to revised requirements issued by our regulator, the Federal Housing Finance Board, while others have been initiated by the Seattle Bank in our effort to be more responsive to the affordable housing needs in our district.

Our 2007 AHP Implementation Plan, which is available for your review on the Seattle Bank’s Web site at www.fhlbsea.com, incorporates the revisions to both programs. We encourage all participating members and sponsors to review the plan prior to preparing and submitting your applications for the 2007 program year. For your convenience, we highlight key revisions to each of the programs below.

Key Revisions to the Affordable Housing Program (AHP)
Beginning with the 2007 program year, we are very pleased to be able to increase the per project cap from $250,000 to $400,000, and to increase the per member cap for AHP-submitted applications from $920,000 to $1.5 million.

In addition, we will increase the benchmark for development costs per square foot to $200 in all states except Alaska and Hawaii, where this benchmark will be $450.

Based on changing needs within our district, we will implement the following changes in our AHP scoring criteria:

• Revising the Native Housing scoring criterion in the Second District Priority
• Revising the Targeting scoring criterion for owner-occupied projects
• Eliminating points for “visitable” housing in the First District Priority

A complete list of the 2007 AHP scoring criteria is available on the Seattle Bank’s Web site.

Nonprofit sponsors must partner with a Seattle Bank member to submit an AHP application. We encourage our members and nonprofit sponsors to use the months before the application due date to work together to ensure complete and accurate submissions.

Seattle Bank members must underwrite the AHP applications they submit to the standard they would use if they were providing a loan to the project. Further, when approving an AHP application or requesting an AHP disbursement, Seattle Bank members must acknowledge their responsibility to replenish the AHP fund if a project fails to comply with the terms of the AHP at any time throughout the retention period (i.e., five years for homeownership projects and 15 years for rental projects) as a result of the member’s actions or omissions, such as incomplete underwriting. We recognize that this is a serious commitment on the part of our members, and we fully support your decision to decline an AHP application if you have not had sufficient time to review, or if you question the project’s feasibility or ability to comply with all the commitments made in the application.

Key Revisions to the Home$tart Program
The primary change to the Home$tart Program is that beginning in 2007, the reservation period for guaranteed allocations will be reduced from six to four months to provide more of our members with faster access to Home$tart funds.

2007 AHP and Home$tart Program Timeline
The 2007 AHP funding round will begin June 1, 2007, with final applications due on September 3 at 4:00 p.m. A printable version of the AHP application will be available on the Seattle Bank’s Web site prior to June 1. The Seattle Bank will conduct Web seminars in advance of the AHP application deadline to review the program’s requirements.

The 2007 Home$tart allocations will be announced on April 2, 2007. Seattle Bank members that have enrolled a household in the Home$tart Program between April 1, 2006, and March 31, 2007, will be awarded an equal allocation of funds. Seattle Bank members participating in the 2007 Home$tart Program are encouraged to view our archived Web seminar, “Community Investment 101: Using the Home$tart Program,” to learn more about our 2007 allocation strategy, qualifying and enrolling homebuyers, requesting disbursements, and post-disbursement requirements. The Web seminar is available on the Seattle Bank’s Web site.

We encourage your participation in our 2007 Community Investment programs, and we look forward to helping you meet the affordable housing needs in the communities you serve. Please visit the Seattle Bank’s Web site for more information. Contact Jennifer Ernst (206.340.8737) or with any questions regarding AHP and Tracy Brewer (206.340.8748) with questions regarding our Home$tart Program.

This Community Investment News contains forward-looking statements that are subject to risk and uncertainty. These forward-looking statements may contain terms such as “will,” “believe,” “expect,” “intend,” “may,” “could,” “should,” and “anticipate” and describe our expectations regarding future events and developments. Future events are difficult to predict, and actual events, actions, or results may differ from those we currently anticipate. Any forward-looking statements made in this Community Investment News speak only as of the date hereof, and we do not undertake to update any such statements.