In February, the Federal Housing Finance Agency announced it would seek input on expanding the field of membership in the FHLB system to nonbank mortgage lenders and real estate investment trusts. 

As of December 2019 membership in the system consisted of commercial banks (4,021); credit unions (1,526); insurance companies (472); savings and loan associations (660); and community development financial institutions (60).

“That’s Congress’s decision,” said Kristina K. Williams, president and CEO of the Federal Home Loan Bank of Des Moines. In April, Williams and the heads of the 10 other Home Loan Banks jointly submitted a comment letter urging the FHFA to consider the primacy of safety and soundness when considering expansion, specifically “ensuring capital and stock purchase requirements were the same for all members, that collateral standards and decisions remain with respective Home Loan Banks, that any expansion of membership to a new class of members not unreasonably dilute the market value of existing members’ stock, and not put the traditional advance business of the Banks at risk.”

FHFA Director Mark Calabria said there isn’t a predetermined outcome for his agency’s request for input “other than to ensure that membership rules are clear, consistently applied to all applicants, and that access to the Banks’ low cost advances do not jeopardize the System’s role as a key source of liquidity to support housing finance.” 

“Generally, our opinion is, if you’re going to expand membership, you need to do it on a level playing field with your existing members … you need to have the right safety and soundness controls,” Williams said. 

In their letter, the heads of the Federal Home Loan Banks also stated that any new entrants “must be subject to a supervisory regime” equivalent to current members, and they should have demonstrated a commitment to housing or community development.


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