The Mortgage Bankers Association
penned a letter to Federal Housing Finance Agency Director Mark Calabria urging the agency to expand membership in the Federal Home Loan Bank (FHLB) system, according to a report
. The MBA wants captive insurers including mortgage REITs and independent mortgage bankers included in the membership.
"Increased diversity in FHLB members would more accurately reflect the breadth of institutions that contribute to the national system of housing finance, in effect creating a ‘21st Century’ FHLB System," wrote MBA President and CEO Robert Broeksmit, CMB.
To make the change, the MBA suggests an amendment to the FHFA's 2016 rule on FHLB membership eligibility to allow captive insurer members. They also suggested a number of safeguards to go along with the amendment that would align with the mission, safety and soundness. The release states that the revised framework for captive insurer affiliates would not discriminate based on charter type, however, mortgage real estate investment trusts (REITs) and independent mortgage banks (IMBs) would likely be the two sets of institutions that satisfy updated requirements.
"Such a framework, if implemented effectively, would ensure that FHLB advances are only available to institutions that are aligned with the mission of the FHLB System," the letter said. "It would also create a more level regulatory construct by reducing disparities based on institutions’ charters. Indeed, rather than open a ‘back door’ for FHLB membership, FHFA should clearly and transparently define the minimum requirements for captive insurer affiliates, which would provide direction to the FHLBs as they evaluate new applicants. Finally, a well-crafted framework would strengthen the broader housing finance system by increasing the supply of reliable, longer-term liquidity to institutions that play critical roles in this system."
The letter was a response to the FHFA's request for input on the subject and in it, the MBA also stated that a more diverse FHLB membership base would also enhance many consumer benefits including greater choice, lower pricing and more favorable loan terms.