MBA Call to Action Urges Congress to Reject FHFA Rule on Mortgage REITs

The Mortgage Bankers Association’s grassroots advocacy arm, the Mortgage Action Alliance, issued a Call to Action yesterday, urging its members to contact their representatives in Congress in support of a bill that would require the Federal Housing Finance Agency to withdraw a controversial proposed rule on Federal Home Loan Bank System membership.  

The proposed rule, proffered by FHFA in September 2014, would redefine the term “insurance company” to exclude captive insurers; and would institute for the first time an ongoing asset test that its members must meet in order to apply for or maintain their membership within an individual Home Loan Bank.  

The Call to Action urges support for H.R. 3808 (, introduced by Reps. Blaine Luetkemeyer, R-Mo., Denny Heck, D-Wash., Patrick McHenry, R-N.C., and John Carney, D-Del. The bill would require FHFA to withdraw the proposed regulation, and instead direct the Government Accountability Office to conduct a study on the rule.  

MBA and other industry trade groups have voiced strong objections to the proposal, arguing that if enacted, the proposed rule would reduce liquidity in the housing market and place in doubt the future of membership eligibility. “Individual Federal Home Loan Banks would be deprived of capital, since terminated members, particularly captive insurers, would be forced to withdraw capital contributions,” MBA said. “A smaller membership base would reduce the amount of liquidity that the System could provide to prospective homebuyers.”  

“We are asking MAA members to contact their Representatives and urge them to co-sponsor H.R. 3808 so that this harmful rule does not go into effect without a thorough study of its ramifications,” MBA said.  

In an op-ed this past summer that appeared in American Banker (, MBA President and CEO David Stevens, CMB, said unilaterally changing the long-standing meaning of the term “insurance company” to exclude captive insurance companies, including mortgage real estate investment trusts.  

“Mortgage REITs in particular are critical to the health and success of the mortgage markets,” Stevens wrote. “They have recently experienced a resurgence, having stepped into the void left by the mandated reduction in the government-sponsored enterprises’ retained portfolios and the wind-down of the Fed’s quantitative easing program. They are connected to the FHLB system through captive insurance companies that are approved, licensed and regulated at the state level. The Federal Home Loan Bank Act allows “any … insurance company” to become a member of an FHLB, and the system has enjoyed captive insurance companies as members for more than two decades.”  

Stevens asserted that FHFA’s proposed rule, if finalized, would “permanently exclude these housing-focused members from the system. This would pull the rug out from under an emerging bright spot in today’s housing market at the expense of borrowers who have few financing alternatives.”  

In September, MBA joined nearly a half-dozen trade groups in a letter ( Letter to Congress re FHLB ProposalSigned final.pdf) to Congress opposing the FHFA proposed rule.  

The Proposed Rule will cause harm not only to the System itself, but the communities and borrowers who rely on the capital it provides,” the letter said. “Congress should take action and ensure that the System continues to serve its broad membership base and fulfills its statutory mission.”  

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