WASHINGTON - Three Federal Home Loan banks are doing an inadequate job of grading applications for Affordable Housing Program funds, according to the General Accounting Office.

The congressional watchdog agency also found Home Loan banks underpaying their Affordable Housing Program subsidies and approving ineligible projects.

The Affordable Housing Program receives 10% of the Federal Home Loan Bank System's net income each year, or $100 million, whichever is greater.

On the whole, the program has succeeded in providing a flexible source of funding for affordable-housing projects, the GAO concluded in a report to Congress this month.

From 1990 through 1993, the Federal Home Loan Bank System made available about $234 million of subsidies through the Affordable Housing Program. That money helped finance about 1,600 projects with more than 62,000 housing units nationwide.

The Home Loan banks came under fire in 1992 when examinations "disclosed a pervasive lack of documentation to substantiate decisions on how they select projects and calculate the funding," GAO said.

Most of the banks have fixed these problems, according to the GAO, but three - unnamed in the June report - have not.

In 1994, examiners from the Federal Housing Finance Board, which regulates the Home Loan banks, cited three banks "for not following regulations requiring them to make clear distinctions among applications," the GAO report said.

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