WASHINGTON (9/3/14)--Financial institutions hoping to apply and retain membership in one of 12 Federal Home Loan Banks (FHLB) may have a new set of requirements to meet, the Federal Housing Finance Agency (FHFA) announced Tuesday.
The proposed rule is intended to ensure members maintain a commitment to housing finance and that only eligible entities can gain access to FHLB advances and the benefits of membership, the FHFA said in a release.
The FHLB system provides its members with a source of funding for mortgages and asset-liability management, liquidity for a member's short-term needs and additional funds for housing finance and community development. According to the FHFA, 1,204 credit unions are currently FHLB members.
The proposed rule would:
The Credit Union National Association is gathering data regarding the number of credit union FHLB members who might fall below the 10% threshold and have their FHLB membership put at risk.
"Based on an initial review of the proposal, it may be harder for credit unions to maintain eligibility for FHLB membership because of the 10% requirement," said Robin Cook, CUNA assistant general counsel for special projects.
"Although we appreciate the need for FHFA to ensure FHLB members have an ongoing commitment to housing finance, 10% on an annual basis may be a high bar for many credit unions."
The FHLBs are a very important source of liquidity for many credit unions, and membership should not be put at risk. CUNA will continue to assess the potential effects of this proposal on credit unions."
CUNA will meet this week with FHLB representatives to discuss the impact of the proposal on credit unions.
The rule does not expand FHLB membership to privately insured credit unions, which would require Congressional action. Under current law, privately insured credit unions are generally prohibited from joining the FHLB program under current law unless they are designated as community development financial institutions.
CUNA supports the passage of the Capital Access for Small Community Financial Institutions Act (H.R. 3584), which would make 132 small, privately insured credit unions eligible for membership. H.R. 3584 was passed by the House May 6, and CUNA wrote to the Senate Banking Committee May 19 urging the committee to take up the bill.
Comments are due to the FHFA by Nov. 1. Use the resource link below to access the complete proposed rule.