CHLA asks FHFA to allow IMBs FHLBank membership

The Community Home Lenders of America (CHLA) has formally requested that the Federal Housing Finance Agency (FHFA) extend Federal Home Loan Bank System (FHLBank) membership to independent mortgage banks (IMBs). In a letter dated August 12 to FHFA general counsel Clinton Jones, CHLA expressed support for the FHFA's initiative to repeal regulations governing new FHLBank business activities, arguing that current rules are too prescriptive and limit the banks' flexibility.

CHLA outlined three key priorities for the FHFA: maintaining robust safeguards for significant new FHLBank activities, expanding membership and liquidity access to IMBs, and ensuring that continued FHLBank membership remains contingent on ongoing mortgage lending. The group specifically voiced concerns about potential expansions in FHLBank programs that could lead to the direct acquisition of residential mortgages, suggesting that repealing Part 1272 of the Code of Federal Regulations might facilitate such expansions without adequate risk assessment.

Currently, FHLBanks can acquire eligible mortgage assets through their Acquired Member Assets (AMA) programs, but CHLA believes the repeal of Part 1272 could ease this process. The trade group has historically opposed FHLBanks moving closer to direct loan purchasing functions, which are typically associated with government-sponsored enterprises like Fannie Mae and Freddie Mac.

CHLA reiterated its long-standing call for IMBs to be eligible for FHLBank membership, noting that current eligible members include commercial banks, thrifts, credit unions, CDFIs, and insurance companies, but explicitly exclude IMBs. CHLA contends this exclusion is outdated, as IMBs now account for approximately 84% of mortgage originations and a significant portion of government and agency lending. These institutions also serve underserved borrowers but rely on private warehouse funding instead of deposits. CHLA proposed that qualified IMBs should be permitted to join the FHLBank System, subject to appropriate capital, collateral, borrowing, and risk-management requirements. The group stated that granting IMBs access to FHLBank liquidity would better align the System's public benefits with the institutions actively engaged in the nation's mortgage lending. Additionally, CHLA urged the FHFA to consider strengthening the link between continued FHLBank membership and a member's ongoing mortgage lending activity, suggesting annual reviews to ensure benefits remain tied to the system's housing mission.