Here’s something housing advocates around the country may not be focused on: the connection between the debate over mark-to-market accounting and their own funding needs. With the economic downturn, housing nonprofits are seeing revenues shrink dramatically. One of the last reliable sources is the Affordable Housing Fund (AHP) of the Federal Home Loan Banks. Now those dollars are threatened too.

The Federal Home Loan Banks’ AHP is the largest source of private sector funds for housing and community development, funded every year with 10 percent of each home loan bank’s net income. More than 600,000 housing units have been financed using the AHP.

But now, much of that money could disappear if the Financial Accounting Standards Board doesn’t make adjustment to its mark-to-market rule. Mark-to-market --- or so-called fair-value --- accounting is designed to improve the quality of information available to investors. Nothing wrong with that. But there are some unintended --- and for housers: dire --- consequences during these tough times.

Many of the Federal Home Loan Banks put mortgage securities on their books as collateral for which now there is virtually no market if sold. It’s the same situation that other large banking institutions find themselves now in the nation’s financial crisis. But the Federal Home Loan Banks plan to hold these securities to maturity. Mark-to-market principles dictate that they must be valued as if they were sold today.

That could force the Federal Home Loan Banks which hold these assets to take big accounting losses, even though their underlying economics are strong. Bingo-bango: no AHP funds.

The Federal Home Loan Banks and other financial interests have been pressuring Congress and FASB to reconsider. A number of members of Congress agree that FASB should find a way to strike a balance during the economic downturn. Several lawmakers are particularly sympathetic because of the impact the rule has on the availability of housing funds through the AHP.

FASB closes its comment period next week and is expected to decide soon thereafter.