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FHL Bank’s New Housing Goals

On Monday, the Federal Housing Finance Agency [1] (FHFA) issued a notice seeking comments on the proposed amendments to the existing regulation for the Federal Home Loan Bank [2]'s (FHL Bank) housing goals.

The new proposal seeks to replace the existing four separate retrospective housing goals with a single prospective mortgage purchase housing goal and establish a separate small member participation housing goal.

Under the proposed rule, the FHFA would set a single prospective mortgage purchase housing goal as a share of each FHL Bank's total Acquired Member Asset (AMA) purchase. It would also set a new small member participation housing goal for participation by small institutions.

The FHFA said that the proposed rule also intended to eliminate the volume threshold and instead allow FHLBanks to propose different goals levels for mortgage purchases and small member participation, subject to FHFA approval as well as simplify and expand the eligibility criteria to enable federally backed loans to count for goals purposes.

The proposed rule would also allow the Banks to request FHFA approval of alternative target levels for the proposed goals.  The rule is proposing to eliminate the existing $2.5 billion volume threshold that triggers the application of housing goals for each Bank.

“To be successful housing goals should lead the FHLBanks to make affordable housing part of their business plans for AMA," said FHFA Director Melvin L. Watt.  “The overall approach of the proposed amendments will encourage FHLBanks and their members to build on the strengths of the AMA program to assist targeted borrower groups in a safe and sustainable manner."

The Federal Home Loan Bank Act requires that the Director of FHFA establish housing goals with respect to the purchase of mortgages, if any, by the FHLBanks.  According to the FHFA, the goals should be consistent with those for Fannie Mae and Freddie Mac while considering the unique mission and ownership structure of the FHLBanks. FHLBanks purchase mortgages through the AMA program, which is voluntary for the banks.