Washington, D.C. – The Coalition for FHLBank Reform (CFR), together with 50
additional undersigned national and local advocacy organizations, sent a letter to the
Federal Housing Finance Agency on Monday, outlining proposed reforms to the Federal
Home Loan Bank (FHLB) System. The letter was sent as a response to the Agency’s
Request for Input (RFI) on the FHLBs’ mission statement and the metrics for mission
achievement. This RFI follows the publication of last year’s report, “FHLBank System at
100,” an unprecedented review of the system’s potential to better fulfill its mission of
supporting affordable housing and community development.
Even as the nation is experiencing a severe housing affordability crisis, the FHLB
System no longer has a meaningful impact on housing. The current system is overly
focused on member profits. While the FHLBs’ spending on Affordable Housing
Programs amounted to around $390 million in 2023, the System spent 8.5x as much on
paying out $3.4 billion in dividends to its members. CFR advocates for reforms to help
the System once again become mission-driven and to fully leverage all its activities,
lending, and investments toward fair and affordable housing and community
development.
The Coalition outlines four major targets for reform:
1. FHFA should clarify the mission of the FHLBanks as providing liquidity for
fair and affordable housing and community development. Merely subsidizing
liquidity to support financial institutions’ profits and paying out dividends do not
count as mission activities.
2. Not all activities currently listed in the Core Mission Achievement (CMA)
regulation should qualify as core mission activities. Advances supported by
Mortgage-Backed Securities as collateral – an already highly liquid asset –
should not count towards mission. Investments that aid lower-income families,
rural areas, Native American communities, and communities of color should be
weighted more heavily.
3. The FHFA should review how the FHLBanks invest and leverage their
capital. Since 2008, the FHLBs have amassed significant profits, much of which
has been funneled into retained earnings: the System currently has $23 billion
above FHFA’s required capital standards. This shows that FHLBs had plenty of
capacity to fund more affordable housing initiatives if they had wished to do so.
4. The FHFA should develop membership-incentive programs that reward
members who are mission-consistent. Such programs could especially compel
large banks and life insurance companies, the biggest users of the FHLB’s
government-subsidized advances, to do more for housing.
“Sixty-three national and local advocacy organizations joined our call for Federal Home
Loan Bank reform,” said Sharon Cornelissen, Director of Housing at the Consumer
Federation of America. “As we face a national housing crisis, we cannot afford a
trillion-dollar government-sponsored enterprise (GSE) sitting on its hands. Our letter
articulates a vision for a truly mission-focused FHLB System, one that drives housing
supply, community investments, and access to fair and affordable housing across the
nation.”
Courtney Alexander from United Food and Commercial Workers International
Union Research Department said “Retail workers need Federal Home Loan Banks to
address the crisis in housing costs, not use its government subsidy to enrich big
insurance companies and banks.”
“Federal home loan banks must do more to meet the mission for which they were
created – providing liquidity to support fair and affordable housing and community
development financing to address unmet local and regional credit needs,” said Michael
Calhoun, president of the Center for Responsible Lending. “The FHLB system must
leverage its excess capital and government-conferred, taxpayer-supported funding
advantages to require member banks to do more to advance housing, instead of
focusing on increasing shareholder dividends.”
About the Coalition for Federal Home Loan Bank Reform:
The Coalition for Federal Home Loan Bank Reform is a non-partisan coalition of 14
national organizations dedicated to shaping reforms aimed at enhancing the ability of
the FHLB system to address the nation’s unmet affordable housing and community
development needs.