CHLA Urges FHFA to Include IMBs in FHLBank Membership

The Community Home Lenders of America (CHLA) has formally requested that the Federal Housing Finance Agency (FHFA) consider making independent mortgage banks (IMBs) eligible for membership in the Federal Home Loan Bank System. This plea comes as the FHFA is in the process of reviewing and potentially eliminating regulations that govern new business activities undertaken by the Federal Home Loan Banks (FHLBanks). In a letter dated August 12 and addressed to FHFA general counsel Clinton Jones, CHLA expressed its support for the FHFA's proposal to repeal these existing regulations. The trade group argued that the current regulations impose "overly prescriptive and duplicative requirements" which, in turn, can restrict the operational flexibility of the FHLBanks. CHLA stated its support for granting FHLBanks greater operational flexibility, but emphasized that this increased flexibility should not lead to the expansion of activities that could introduce unnecessary risks to the FHLBank System or blur the lines between the FHLBanks and government-sponsored enterprises like Fannie Mae and Freddie Mac. CHLA outlined three primary priorities for the FHFA's consideration: the imperative to maintain safeguards around any significant new activities undertaken by FHLBanks, the expansion of membership and liquidity access to include IMBs, and the necessity of ensuring that continued membership remains contingent upon ongoing mortgage lending activity. The organization specifically voiced concerns regarding potential expansions of FHLBank programs that involve the direct acquisition of residential mortgages. While FHLBanks currently possess the capability to acquire eligible mortgage assets through their Acquired Member Assets (AMA) programs, CHLA indicated that the repeal of Part 1272 of the Code of Federal Regulations could potentially facilitate a broader scope of mortgage purchase activities without the rigorous review required for assessing new or material risks. CHLA has a history of opposing proposals that would move FHLBanks closer to direct loan purchasing functions, which are typically associated with government-sponsored enterprises. CHLA reiterated its long-standing objective to secure FHLBank membership eligibility for IMBs, noting that current eligible members primarily consist of commercial banks, thrifts, credit unions, and Community Development Financial Institutions.