Group voices need for a membership structure that includes IMBs and mortgage REITs
The Federal Housing Finance Agency (FHFA) has unveiled its strategy to adapt the Federal Home Loan Bank (FHLB) system’s role in supporting mortgage lending and community investment. However, the report has been criticized by the Mortgage Bankers Association (MBA) for not fully addressing potential membership expansions.
The FHFA has conducted an extensive review of the FHLB System as it nears its centennial. The review outlines a multi-year plan to enhance the system’s governance, provide stable funding to members, and offer innovative products to support housing and community development, all within a highly compliant partnership model.
The plan calls for a re-examination of the FHLBanks’ mission to address the changes that have occurred over time due to the expanded types of collateral and member institutions. Additionally, it acknowledges the ongoing challenges of housing affordability, emphasizing a commitment to reducing barriers and increasing support for housing activities, particularly in underserved markets.
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However, Pete Mills, senior vice president of residential policy and strategic industry engagement at the MBA, criticized the report for not fully exploring the potential benefits of diversifying the FHLB system’s membership.
“MBA is disappointed that the report fails to engage in a more meaningful examination of the potential benefits of diversifying the FHLB system through the expansion of membership to other critical providers of mortgage origination, servicing, and investment activities,” Mills said in a statement.
He suggested that the FHLBanks would gain from a membership base that aligns with today’s housing finance system dynamics.
“The FHLBs would benefit from a membership base that better reflects today’s housing finance system, including independent mortgage banks (IMBs), who originate and service most mortgages, and mortgage REITs, which are important long-term holders of mortgages and mortgage-backed securities,” Mills added. “A more diverse FHLB membership would reinvigorate the system and expand access to credit, lower pricing, and increase choices for consumers.”
Despite his critique, Mills recognized some positive aspects of the report, particularly concerning multifamily lending and affordable housing.
“MBA will remain engaged with FHFA, the FHLBs, and lawmakers on both sides of the aisle on any future proposals or legislation affecting the FHLBs and will continue to advocate for expanding membership to institutions like IMBs and mortgage REITs that are almost exclusively focused on housing finance while ensuring the safety and soundness of the FHLB system,” Mills said.
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