Your Input Needed as FHFA Begins Rulemaking on FHLB Modernization

Posted by Ryan Fitzgerald on June 27, 2024

The Federal Housing Finance Agency (FHFA) appears to be initiating the start of surrounding its previously announced plans to modernize the Federal Home Loan Bank (FHLB) system as it prepares to turn 100 years old at the end of this decade. The FHFA rolled out an official Request for Information (RFI) to solicit public comment on what they are calling an effort to understand “the mission of the Federal Home Loan Bank System,” as the FHFA considers next steps for related rulemakings.

As previously reported by the GoWest Advocacy team, the FHFA completed a yearlong review at the end of 2023, resulting in the FHLB at 100 report, which you can view here. The report was based on a number of interactions, inputs and data gathering completed by the FHFA, including listening sessions, roundtables, and written comments the Administration received between 2022 and the end of 2023 including direct input and a comment letter from the GoWest Credit Union Association.

GoWest continues to take a proactive approach to the FHFA’s review and any plans to modernize the FHLBank System in order to ensure the interest of GoWest credit unions are protected, and that the liquidity and stability currently offered by the FHLBanks is not eroded or dramatically altered by any proposed changes. GoWest credit unions who are FHLB members joined the advocacy team in participating in listening sessions with leaders of the FHLBanks of Des Moines and San Francisco. We also continue to work closely with key members of Congress, Senator Cynthia Lummis (R-WY) and Rep. Juan Ciscomani (R-AZ-6), to ensure we take an active role in protecting key features of the system in the event Congress considers changes to the system, because of the report or other stakeholder input.

We will be discussing the rollout of the RFI at the upcoming Regulatory Advocacy Subcommittee, Moreover, we will continue to work with credit unions and members of the FHLBank system to review suggestions and proposals and deploy targeted advocacy to safeguard the interests of GoWest members and the integrity of the system at large.

Additional Background:

As previously mentioned, the FHLB at 100 report calls for a number of proposed changes, both at the Administration level, via the proposed rulemaking process, while also outlining proposed statutory changes that must be taken up by Congress. At this juncture, the FHFA is seeking comments to initiate some of the proposed rulemaking that was suggested in the report; however, it is important to understand and reiterate that when Congress makes laws it usually establishes the purpose, mission and focus of an agency or program, known as legislative or Congressional intent. In looking at the report and this recent RFI, the FHFA may be seeking to alter or recalibrate Congressional intent for the FHLB, which is not the role of the Executive Branch, thus raising concerns of the FHLBanks, financial institutions and Congressional leaders.

While GoWest supports certain aspects of the FHLB at 100 report recommendations, such as the expansion of eligible collateral, the reform of the Affordable Housing Program (AHP), and the curtailment of market-distorting advances by the nation’s largest banks, we also have concerns, especially based on this initial RFI announcement. Some initial concerns include the recommendation that an FHLB member should maintain a certain level of mortgage assets and that they may attempt to tier the system based on meeting certain incentives for those borrowers who meet specific objectives regarding asset purchases or committing to certain aspect of the AHP outlined by the FHFA.

Posted in Advocacy on the Move, Regulatory Advocacy.