The Federal Housing Finance Agency (FHFA) said Wednesday it will conduct a comprehensive review of the Federal Home Loan Bank (FHLBank) System, beginning this fall.
The FHLBank System was founded in 1932 by the Federal Home Loan Bank Act as a government-sponsored enterprise to support mortgage lending and related community investment. It is composed of 11 regional FHLBanks and the system’s fiscal agent, the Office of Finance. Each FHLBank is a separate, government-chartered, member-owned corporation.
“FHFA plays a vital role in supporting affordable, equitable, and sustainable access to mortgage credit,” FHFA Director Sandra L. Thompson said. “FHFA’s regulated entities function as a reliable source of liquidity and funding for housing finance and community investment. As the Federal Home Loan Banks approach their centennial, FHFA will conduct a comprehensive review to ensure they remain positioned to meet the needs of today and tomorrow.”
FHFA said in a news release that the FHLBanks have been “a critical source of liquidity for their members for the past 90 years, especially during times of market stress, such as the Great Recession and the outset of the COVID-19 pandemic.”
The FHLBanks also support low-income housing and community development directly by offering a variety of programs to their members, including the Affordable Housing Program, the Community Investment Program, and the Community Investment Cash Advance Program.
Following the announcement of the review, Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), issued a statement in support of it.
“MBA applauds FHFA’s announcement to examine the appropriate role of the Federal Home Loan Bank system,” Broeksmit said. “We have long supported the responsible expansion of FHLB membership eligibility to better reflect the diverse providers of single-family and multifamily housing finance throughout the country.”
Broeksmit said the banks’ membership framework has seen only “piecemeal updates since its creation, and there’s a need for an FHLB system that better reflects today’s housing finance market — not one from the 1930s.”
He said the FHFA’s announcement is well-timed, because the MBA and banking industry are trying to address housing affordability and the racial homeownership gap. He also noted that independent mortgage banks “have been the largest provider of single-family mortgages for much of the past decade, and now service about half of all home loans. Similarly, REITs are significant investors in both single-family and multifamily mortgages, as well as agency MBS.”
"Today’s housing finance market,” Broeksmit said, “is also dominated by the securitization process. Any comprehensive review of the FHLB System should also include examining the ways in which the banks’ perform their critical mission as a liquidity backstop by rethinking the type of securitization-related collateral members can pledge.”
He added, "The business activities of these currently excluded entities are strongly aligned with the FHLB housing mission, and FHLB membership could provide added resiliency to the housing finance system if these entities could participate as members.”
As part of its review process, the FHFA said it will hold two public listening sessions and a series of regional roundtable discussions, “to consider and evaluate the mission, membership eligibility requirements, and operational efficiencies of the FHLBanks.” The agency said it will hear from stakeholders on the banks’ role or potential role in addressing housing finance, community and economic development, affordability, and related issues.
FHFA invites interested parties to speak or attend the first event, “FHLBank System at 100: Focusing on the Future,” a listening session scheduled for Thursday, Sept. 29, 2022, from 12:30 to 4 p.m. The session will be held at the Constitution Center in Washington, D.C., with the option to participate either in person or virtually.
FHFA said it is specifically interested in receiving feedback in six key areas:
- The FHLBanks’ general mission and purpose in a changing marketplace;
- FHLBank organization, operational efficiency, and effectiveness;
- FHLBanks’ role in promoting affordable, sustainable, equitable, and resilient housing and community investment;
- Addressing the unique needs of rural and financially vulnerable communities;
- Member products, services, and collateral requirements; and
- Membership eligibility and requirements.
You can register here to attend or speak at the Sept. 29 listening session.
FHFA said it will also accept written comments through Oct. 21, 2022, via its website or mailed to: Federal Housing Finance Agency, 400 7th St., SW, Washington, D.C. 20024.
