The Federal Housing Finance Agency has created new housing goals for Federal Home Loan Banks, also known as FHLBanks, a move that the agency said would help underserved borrowers.

The final rule, issued on June 3, will take effect in 2021. Enforcement of the rule will be phased in over three years, the FHFA said in a statement.

“By creating housing goal targets that are achievable for the Federal Home Loan Banks, the final rule helps ensure they make meaningful contributions to affordable homeownership,” FHFA Director Mark Calabria said in a statement. “This rule will expand responsible homeownership opportunities for underserved communities across the country.”

Housing goals for purchasing mortgages are required by the Federal Home Loan Bank Act. The goals should be consistent with those for Fannie Mae and Freddie Mac, according to the FHFA, while considering the unique mission and ownership structure of the FHLBanks.

The Federal Home Loan Bank System is a government-sponsored enterprise that supports mortgage lending and related community investment. They system has 11 regional FHLBanks, and 6,800 financial institutions are members of the system, according to the FHFA’s website, including commercial banks, credit unions, thrift institutions, insurance companies and certified community development financial institutions. The Federal Home Loan Bank of Boston covers the six New England states.

The FHLBanks have Acquired Member Asset (AMA) programs used for purchasing 15- to 30-year conventional mortgages and loans guaranteed or insured by a department or agency of the U.S. government.

According to the FHFA statement, the FHLBanks’ new housing goals are:

  • Eliminate the retrospective evaluation using HMDA data and set a single prospective mortgage purchase housing goal as a share of each FHLBank’s total AMA purchases;
  • Set a new small member participation housing goal for participation by small institutions;
  • Eliminate the volume threshold and instead allow FHLBanks to propose different levels for the goals for mortgage purchases and small member participation, subject to FHFA approval;
  • Simplify and clarify the eligibility criteria to enable federally backed loans sold by small institutions eligible to count for goals purposes.

The FHFA also said that the final rule would encourage smaller institutions to participate, noting that these institutions are more likely to serve low-income borrowers and families in low-income areas.

“By creating housing goal targets that are achievable for the FHLBanks, the final rule helps ensure the FHLBanks make meaningful contributions to affordable homeownership,” the FHFA said in its statement.

New Housing Goals for FHLBanks

by Banker & Tradesman time to read: 2 min