MBA-Supported Senate Bill Would Restore Captive Insurance Companies in FHLB System
A bill introduced this week in the Senate would restore captive insurance companies’ membership in the Federal Home Loan Bank system, a provision strongly supported by the Mortgage Bankers Association.
S. 2361 the Housing Opportunity Mortgage Expansion (HOME) Act, (https://www.duckworth.senate.gov/imo/media/doc/HOME Act – text.pdf), amends the Federal Home Loan Bank Act to restore membership for those captive insurance subsidiaries that were removed from the FHLB System in February 2017 and seeks to continue membership for remaining captive insurers that are scheduled to be forced to exit the system by February 2021.
The bipartisan legislation was introduced by Sens. Tammy Duckworth, D-Ill.; Ron Johnson, R-Wis.; and Tim Scott, R-S.C.
MBA President and CEO David Stevens, CMB, issued a statement commending introduction of S.2361, calling it an “important piece of legislation.”
“Captive insurers whose housing focus is aligned with that of the FHLB System act as a stabilizing force in the housing finance market and create a reliable source of capital for lenders and investors,” Stevens said. “This bill represents an important step forward in recognizing the need for multiple forms of private capital as Congress considers the future of housing finance. “MBA looks forward to continuing to work with these and other key senators to advance this important legislation.”
The bill comes in response to a January 2016 Federal Housing Finance Agency membership rule that excluded captive insurers from the FHLB system, despite objections from MBA and other industry trade groups.
Duckworth said the FHFA rule would gut the Chicago FHLB’s membership and funding source, which could fundamentally impair its ability to support affordable housing options and small business lending. She said the FHFA rule has a particularly devastating impact on FHLB-Chicago, which serves Illinois and Wisconsin, because its longstanding captive insurer members provide the bank with nearly one-third of its total borrowings.
The HOME Act would retain longstanding FHLB members who joined prior to the FHFA proposed rule and reinstate newer members that joined a bank while the proposed rule was pending or who have already had their FHLB membership terminated.
“Every American deserves an equal chance at reaching the American Dream, including an equal chance become a homeowner,” Duckworth said. “By safeguarding lending options for low-income families, small businesses and farmers, we can protect economic opportunities for hardworking Americans across the country.”
MBA sent a letter to Duckworth, Johnson and Scott in support of the bill (http://mba-pc.informz.net/mba-pc/data/images/MBA_S2361.pdf). MBA Senior Vice President of Legislative and Political Affairs Bill Killmer noted captive insurance companies have long functioned as valuable members of the Federal Home Loan Bank System, advancing its mission of supporting housing finance and community investment.
“Captive insurers, including those associated with real estate investment trusts (REITs) and other housing-focused entities, have been valuable FHLB members for more than two decades, functioning as a stabilizing force in the housing finance market and creating a reliable source of capital for lenders and investors,” Killmer wrote. “This legislation carefully considers the role of these vital sources of stable private capital in the broader housing system, and represents an important step forward in recognizing the need for multiple forms of private capital as Congress considers the future of housing finance.”
