The Federal Housing Finance Agency (FHFA) proposed a rule on September 2 that would amend financial institutions' requirements for application and membership retention in one of the 12 Federal Home Loan Banks.
The rule revision was proposed to ensure that members stay committed to housing finance and that only those eligible will have access to membership benefits and advances from one of the Federal Home Loan Banks. FHFA director Mel Watt described several issues in a recent speech at the Federal Home Loan Bank Director's Conference, one of which was re-emphasizing the FHFA's housing finance mission and ensuring that the banks stay focused on that mission.
One of the proposed revisions to the rule requires members to hold one percent of their assets in home mortgage loans (HML) on an ongoing basis. The current rule requires members to demonstrate this only at the time of their application and not at any time afterward. Yet another change would require members to adhere to the 10 percent residential mortgage loan (RML) requirement on an ongoing basis. Similar to the current HML rule in place, the 10 percent RML rule affects members only at their time of application.
The proposed amendments include changing the definition of "insurance company" to include only those companies that have insurance underwriting for nonaffiliated parties as their primary business. This would in effect prevent captive insurers from becoming members and keep out those entities not eligible for membership from using a captive insurer to gain access to advances from one of the Federal Home Loan Banks.
Those who wish to comment should visit www.fhfa.gov. The deadline for commenting is 60 days after the rule is published in the Federal Register.