The FHFA Can Increase Federal Home Loan Bank Affordable Housing Investments

The Federal Housing Finance Agency (FHFA) has initiated a sweeping review of Federal Home Loan Banks (FHLBanks) Affordable Housing Investments as the system enters its 10th decade, focusing on, among other issues, how the system can return to its historical mission of providing liquidity to financial institutions across the country to expand mortgage lending in a changing marketplace and finding sensible ways to strengthen the “FHLBanks’ role in promoting affordable, sustainable, equitable, and resilient housing and community investment,” the subject of this brief.

Created in 1932, long before the widespread adoption of the long-term fully amortizable fixed-rate mortgage and a securitization-based secondary market, the national network of 11 FHLBanks (originally 12) was created as a for-profit, cooperatively owned system with a mission to increase liquidity and mortgage lending for its now 6,700 financial institution members who were once the dominant providers of mortgage finance to American households. Thanks to government sponsorship such as that received by its younger government-sponsored enterprise (GSE) siblings, Fannie Mae and Freddie Mac, the FHLBank system features an implied federal guarantee of its debt, enabling it to borrow at near-government rates.

Also Read: Implementing net zero affordable housing — towards a human-centred approach