WASHINGTON (11/19/14)--Sixty-eight members of the U.S. Congress have signed a letter to the Federal Housing Finance Agency (FHFA) raising concerns about the agency's proposed change to Federal Home Loan Bank (FHLB) program. The FHFA's proposal, issued in early September, would change the membership requirements in the FHLB program.
All credit unions, along with certain other financial institutions, would be required to have 10% of assets in residential mortgage loans on an ongoing basis under the proposal, as opposed to the current requirement of 10% when financial institutions apply for membership. It would also require all members to hold 1% of assets in home mortgage loans, and to do so on an ongoing basis.
The Credit Union National Association expressed concerns about the proposal in a comment letter filed with the FHFA in September. Based on CUNA regulatory advocacy staff's preliminary assessment of the proposal, it is believed the proposal would make it more difficult for credit unions to gain or maintain access to the FHLB system.
The legislators share CUNA's concern, saying the proposed rule could jeopardize the benefits community financial institutions such as credit unions receive from being part of the FHLB program.
"The FHL Banks serve as a critical source of liquidity for community banks, credit unions and their various other members, as witness by the crucial role FHL Banks played during the financial crisis," the letter reads. "The banks also serve as an important conduit to the secondary markets for community financial institutions."
Congress has the authority to determine the nature and scope of eligibility for FHLB membership, and "frequently" reviews membership and member access to the program's services, according to the letter.
"On multiple occasions, Congress has expanded the categories of eligible membership and facilitated access to the important funding the FHLB provide," the letter reads. "As recently as four years ago, Congress adjusted FHL Bank membership rules and did not choose to narrow eligibility for participation in the system, making its intent clear."
Both CUNA and the legislators pressed the FHFA for an open dialogue when it comes to any changes in the FHLB program.
Comments on the proposal were originally due Nov. 1, but CUNA, along with the Senate Banking Committee, pushed for an additional 60 days, a request that was granted. Comments are now due to the agency by Jan. 12.