FHFA Proposes New Rules for Membership in the Federal Home Loan Banks

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The Federal Housing Finance Agency has proposed changes to the requirements which financial institutions in the United States have to meet in order to obtain and maintain membership in one of the 12 Federal Home Loan Banks. These banks are sponsored by the Federal Government and their role is to provide low-cost funding to member financial institutions on demand. The funding is used primarily for the provision of mortgage loans, but it is used for rural, agricultural, small business and economic development lending.
The proposal of FHFA includes 4 main points. They are open to discussion until November 1st 2014.

Under the proposed rules, financial institutions will have to hold at least 1% of their assets in mortgage loans at all times. At present, institutions which apply for membership in the banks are required to present nominal amount of home mortgage loans at the time of making the application. However, they are not required to maintain it throughout their membership in case of approval.

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The second proposed rule requires financial institutions to keep 10% residential mortgage loans on a continuous basis. Under the rules which are applied at present, the institutions are required to maintain such a balance only at the time of the application and not on an ongoing basis.
FHFA also plans to change the definition of the term “insurance company” for the purpose of making its rules stricter. Under the new definition, an insurance company is a company whose main business is the underwriting of insurance for persons that are non-affiliated. Given this new term, captive insurers and the institutions that use their service will not be able to qualify for membership.

The term “principle place of business” which is applied to insurance companies will also have a new clearer definition. In this way, the proper bank district for membership will be determined with greater precision.

Christian

Christian

Christian Calvin mortgage Christian is a contributing writer for Mortgage.info. He is a graduate from the University of Tennessee with a degree in Communications and a concentration in Broadcasting. Christian has served as vice-president for a privately-held company for more than 20 years. Additionally, he has also applied his writing and business knowledge to various websites with a focus on business and sports news . . . both of which are passions. Christian enjoys playing golf and spending time with his family and friends.

Contact: christian@mortgage.info
Christian

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