FHFA Announces ‘Comprehensive Review’ of FHLB System

The Federal Housing Finance Agency on Wednesday announced it will conduct a comprehensive review of the Federal Home Loan Bank System beginning this fall.

“FHFA plays a vital role in supporting affordable, equitable, and sustainable access to mortgage credit,” said FHFA Director Sandra L. Thompson. “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.” 

In a statement, Mortgage Bankers Association President & CEO Robert Broeksmit, CMB, commended FHFA’s actions.

“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 only seen 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. 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 agency MBS.”

Broeksmit noted today’s housing finance market 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 said. “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. “This announcement is well-timed, as MBA and the entire industry seek to address housing affordability and the racial homeownership gap.”

The FHLBanks, established in 1932, have been a 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.

As part of the review process, FHFA said it will host 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. FHFA will hear from stakeholders on the FHLBanks’ role or potential role in addressing housing finance, community and economic development, affordability and other related issues.  

FHFA is specifically interested in receiving feedback in six key areas:

1. The FHLBanks’ general mission and purpose in a changing marketplace;

2. FHLBank organization, operational efficiency, and effectiveness;

3. FHLBanks’ role in promoting affordable, sustainable, equitable, and resilient housing and community investment;

4. Addressing the unique needs of rural and financially vulnerable communities; 

5. Member products, services, and collateral requirements; and

6. Membership eligibility and requirements.

The first listening session, FHLBank System at 100: Focusing on the Future, will take place on Thursday, September 29, from 12:30-4:00 p.m. ET. The session will take place at the Constitution Center in Washington, D.C., with the option to participate virtually.

Interested participants can register to attend or speak at the September 29 listening session. Participants can select in-person or virtual attendance. FHFA is also accepting written comments through October 21,  via FHFA’s website or mailed to: Federal Housing Finance Agency, 400 7th Street, SW, Washington, DC 20024.