The Federal Agency for Housing Financing (FHFA) said Wednesday it will conduct a comprehensive review of the Federal Home Loan Bank (FHLBank) system beginning this fall.
The FHLBank system was established by the Federal Home Loan Bank Act in 1932 as a government-sponsored entity to support mortgage lending and related community investments. It consists of 11 regional FHL banks and the system’s fiscal agent, the Office of Finance. Each FHLBank is a separate, state-chartered, member-owned corporation.
“FHFA plays a critical role in supporting affordable, equitable and sustainable access to mortgage credit,” said FHFA Director Sandra L. Thompson. “The regulated entities of the FHFA act as a reliable source of liquidity and funding for home finance and community investments. As Federal Home Loan Banks approach their centenary, the FHFA will conduct a comprehensive review to ensure they remain prepared for the demands of today and tomorrow.”
The FHFA said in a press release that FHL banks “have been a critical source of liquidity for its members for 90 years, particularly during times of market stress such as the Great Recession and the onset of the COVID-19 pandemic.”
FHL Banks also directly support low-income housing and community development by offering a variety of programs to its 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 of support.
“MBA welcomes the FHFA’s announcement that it will review 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 diversity of providers of single-family and multi-family home financing across the country.”
Broeksmit said the banks’ membership framework has only been “gradually updated since its inception, and there is a need for an FHLB system that better reflects today’s home finance market – not one from the 1930s.”
He said the FHFA’s announcement is timely as the MBA and the banking industry seek to address housing affordability and the racial divide in home ownership. He also noted that independent mortgage lenders “were the largest providers of single-family home mortgages for much of the last decade and now service about half of all home loans. Similarly, REITs are significant investors in both single- and multi-family mortgages and 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 how banks are fulfilling their important role as a liquidity backstop by reconsidering the way securitization-related collateral members can pledge.”
He added, “The business activities of these currently excluded companies are strongly aligned with FHLB’s mission in housing, and FHLB’s membership could add additional resilience to the housing finance system if these companies were able to participate as members.”
As part of its review process, the FHFA said it will hold two public listening sessions and a series of regional roundtables “to review and evaluate the mission, membership eligibility requirements, and operational effectiveness of FHL banks.” The agency said it will be hearing from stakeholders about the role or potential role of banks in addressing home finance, community and economic development, affordability and related issues.
The FHFA invites interested parties to attend the first event, “FHLBank System at 100: Focusing on the Future,” a listening session scheduled for Thursday, September 29, 2022 from 12:30 p.m. to 4:00 p.m. at the Constitution Center in Washington, DC with the option to attend either in person or virtually.
The FHFA said it is particularly interested in receiving feedback in six key areas:
- The overall mission and purpose of FHLBanks in a changing marketplace;
- organization, operational efficiency and effectiveness of FHLBank;
- role of FHL banks in promoting affordable, sustainable, equitable and resilient housing and community investment;
- addressing the unique needs of rural and financially vulnerable communities;
- products, services and security requirements for members; and
- Membership and Requirements.
You can register here to attend or speak at the September 29 listening session.
The FHFA said it will also be accepting written comments on theirs by October 21, 2022 website or by mail to: Federal Housing Finance Agency, 400 7th St., SW, Washington, DC 20024.