ABA GSE REFORM
Government Sponsored Enterprise (GSE) reform remains one of the primary financial legislative issues Congress has indicated an interest in addressing. As we pivot to the back half of 2017, the contours of various reform proposals are beginning to take shape. With a series of hearings through the Spring, various stakeholders and lawmakers have started to release reform guidelines and priorities.
While progress remains gradual, the FHLBank System was recently highlighted in a white paper on GSE reform offered by the American Bankers Association:
“Any reform of the secondary mortgage market must consider the vital role played by the Federal Home Loan Banks and must in no way harm the traditional advance businesses of Federal Home Loan Banks or access to advances by their members.
The Federal Home Loan Banks (FHLBs) have provided mortgage financing in the form of collateralized advances to their member/owners for over 80 years. They have performed as intended, ensuring liquidity even in times of market crisis. Their crisis performance is traceable in part to mutual ownership status and relatively high statutory capital requirements. Changes to Fannie and Freddie may impact the FHLBs, even if unintended or indirect, and the impacts must be considered and accounted for, and preferably avoided before they are undertaken. Additionally, the FHLBs may have the potential to play an expanded role in a revised GSE system, but any expanded role must be separately capitalized and regulated in such a manner that it does not put at risk the traditional advance business of the Banks.”
The stability of the FHLBank cooperative business model, and our ongoing support for affordable housing and community development position us as a unique and valuable component of the housing finance system. As this discussion evolves, we remain pleased to offer support and feedback if your office would like more information on our perspective.