Skip to main content
Menu Icon

InfoBytes Blog

Financial Services Law Insights and Observations


Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CBO report outlines strengths and risks of the FHLBank system

    Federal Issues

    Recently, the Congressional Budget Office (CBO) released a report on the Federal Home Loan Banks’ (FHLBanks) role in the financial system, outlining their strengths and risks in the larger financial system. The CBO noted that FHLBanks are insulated from failure because their main activity, granting advances to members, was “overcollateralized and benefits from the banks’ super-lien position.” On accounting this year, the CBO estimated that in FY 2024, FHLBanks will receive $7.3 billion in subsidies, driven by new debts and reductions in debt-service costs. The CBO also estimated that in FY 2024, FHLBanks will issue $800 billion of debt and make advances of $560 billion. The CBO listed three potential risks FHLBanks could pose to the broader financial system: first was a risk to taxpayers in the event the FHLBank system failed and required government support; second was the risk that any FHLBank stress could spill over into other financial areas; and third was the risk of losses to the FDIC Deposit Insurance Fund from FHLBanks’ collateralized lending and their “super-lien positions.” However, the CBO’s report noted that FHLBanks pose less of a risk than Fannie Mae, Freddie Mac, or other commercial banks. Further, there have never been any credit losses on an FHLBank advance. Despite these strengths, CBO noted that FHLBanks could still fail in an economic crisis.

    Federal Issues FHLB Accounting

  • FHLBanks’ net income skyrockets in 2023 due to high volume of advances

    Federal Issues

    Recently, the FHFA released its annual combined operating highlights for 2023 which were prepared from the unaudited financial statements of the Federal Home Loan Bank system (FHLBank). Administered by the FHFA, the FHLBank system was created to provide lending institutions with liquidity. In 2023, FHLBanks' annual net income grew from $3.16 billion to $6.69 billion—a 111 percent increase—while advances increased from $13.2 billion to $48.5 billion, representing a 266 percent increase. This change in pace was due in part to the stresses placed on banking and financial markets in March 2023. The operating highlights follow FHFA’s comprehensive report on the FHLBank system published in late 2023, previously covered by InfoBytes here. More information on the FHFA’s operating statements can be found in its 8-K filing with the SEC.

    Federal Issues FHA FHLB

  • FHFA releases advisory bulletin for pilot and voluntary programs

    Agency Rule-Making & Guidance

    On November 13, FHFA released an advisory bulletin on the FHLBank Framework for Pilot and Voluntary Programs. The desire for FHFA to develop innovative pilot programs is to support “affordable housing, equity advancement, and community development for underserved and financially vulnerable populations.” The pilot programs would be implemented and then analyzed to determine if they should continue, be expanded, or stop altogether. Some pilot programs may be to “test and learn” while some end because they do not meet FHLBank objectives. What the FHFA disallows from its pilot programs are “[p]roducts, programs, and services implemented under established FHFA statutory and regulatory authorities.” However, voluntary programs have included “grants, down payment assistance programs, and special purpose credit programs.”

    The FHFA guidance recommends that FHLBank’s board of directors establish specific parameters for pilot and voluntary programs by March 29, 2024. This bulletin was a result of public input phases of the “FHLBank System at 100: Focusing on the Future” initiative, as previously covered by InfoBytes here. Stakeholder feedback claimed that “FHLBanks should do more to support the affordable housing and community development components of their mission, especially in addressing the needs of underserved or financially vulnerable populations.”

    Agency Rule-Making & Guidance FHFA FHLB Pilot Program Banking

  • FHFA releases comprehensive report of entire FHLBank system

    On November 7, the FHFA released a report titled “FHLBank System at 100: Focusing on the Future,” providing a comprehensive overview of the Federal Home Loan Banks (FHLBank) system in its entirety. The FHLBank system is comprised of domestic and small, community-focused lenders that are connected to the global capital markets, engendering lenders to “better support housing and community development” through liquidity. The FHFA’s report acknowledged that the banking sector volatility in March 2023 led to a “significant advance demand” and it “provided a record volume of advances” to their members.

    Furthermore, the report details the background of the FHLBank System, such as its history, member type, and business functions. The features from the FHLBank system’s mission are to provide liquidity to members, as well as support housing and community developments. The chapter on stable and reliable sources of liquidity confirms that the FHLBank system is not the lender of last resort due to its funding structure of bonds and short-term notes. In addition, the Moving Forward chapter offers a list of goals for the FHLBank system to adopt. Interestingly, Appendix 5 of the report highlights an analysis of four crises from the banking failures from March to May 2023.

    Special Alerts Federal Issues FHFA FHLB Banking Mortgage Lenders

  • FHA proposes to change lender and mortgagee requirements, clarify GSE definition

    Agency Rule-Making & Guidance

    On July 18, FHA announced a proposed rule for public comment that would revise requirements for investing lenders and mortgagees “to gain or maintain status as an FHA-approved lender or mortgagee.” The proposed rule would also “separately define Government-Sponsored Enterprises (GSEs) and the Federal Home Loan Banks (FHLB) from other governmental entities and align general FHA approval standards with current industry business practices.” The proposed changes are mainly aimed at accommodating more precise language and definitions concerning an investing lender or mortgagee's limited participation in FHA programs. According to FHA, these changes do not represent a significant departure from existing requirements for most lenders and mortgagees involved in originating, endorsing, or servicing FHA-insured loans. Through the proposed rule, HUD proposes to: (i) “separately define the GSEs and their approval requirements from other Federal, State, or municipal governmental agencies and Federal Reserve Banks”; (ii) include Freddie Mac, Fannie Mae, and the FHLBs in the GSE definition; (iii) add language to require investing lenders and mortgagees to comply with applicable audit and financial statement requirements; and (iv) “clarify that investing lenders and mortgagees must comply with FHA’s annual certification requirements.”

    Agency Rule-Making & Guidance Federal Issues FHA Mortgages FHLB GSEs Fannie Mae Freddie Mac

  • FHFA seeks to codify fair lending oversight

    Agency Rule-Making & Guidance

    On April 19, FHFA issued a notice of proposed rulemaking (NPRM) to codify several existing practices and programs relating to the agency’s fair lending oversight requirements for the Federal Home Loan Banks and Fannie Mae and Freddie Mac (GSEs). Intended to provide increased public transparency and greater oversight and accountability to the regulated entities’ fair housing and fair lending compliance, the NPRM seeks to also formalize requirements for the GSEs to maintain Equitable Housing Finance Plans, which are designed to address racial and ethnic disparities in homeownership and wealth and foster housing finance markets that provide equitable access to affordable and sustainable housing (covered by InfoBytes here). The NPRM will also codify requirements for the GSEs to collect and report homeownership education, housing counseling, and language preference information from the Supplemental Consumer Information Form (SCIF). Lenders are required to use the SCIF as part of the application process for loans with application dates on or after March 1, that will be sold to the GSEs (covered by InfoBytes here). Comments on the NPRM are due 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues FHFA Freddie Mac Fannie Mae GSEs FHLB Underserved Fair Lending Consumer Finance

  • FHFA issues model risk management guidance

    Agency Rule-Making & Guidance

    On December 21, FHFA issued guidance to Freddie Mac, Fannie Mae, the Federal Home Loan Banks (FHLBanks), and the Office of Finance on its model risk management framework. According to the bulletin, the purpose of the guidance—formatted as Frequently Asked Questions—“is to provide supplemental guidelines that will address some of the gaps in [FHFA’s 2013 Model Risk Management guidance] prompted by changes in model-related technologies and questions generated from the expanded use of complex models by the FHLBanks.” “The supplemental guidance also addresses model documentation, the communication of model limitations, model performance tracking, on-top adjustments, challenger models, model consistency, and internal stress testing.”

    Agency Rule-Making & Guidance FHFA FHLB Fannie Mae Freddie Mac GSEs Risk Management

  • GSEs issue Equitable Housing Finance Plans

    Federal Issues

    On June 8, Fannie Mae and Freddie Mac (GSEs) released their Equitable Housing Finance Plans for 2022-2024 (available here and here), affirming their commitment to addressing racial and ethnic disparities in homeownership and wealth. The plans were developed following FHFA’s September 2021 request for public input, which invited comments to help the GSEs prepare their first plans and to aid FHFA in overseeing the plans (covered by InfoBytes here). Among other things, the plans (which will be updated annually) include activities to (i) address future consumer education initiatives for renters and homeowners; (ii) help tenants build credit profiles and enable better access to financial services; (iii) expand counseling services to support housing stability; (iv) launch technology to increase access to sustainable credit and fair home appraisals; and (v) deploy Special Purpose Credit Programs to address barriers to sustainable homeownership, focusing particularly on consumers living in formerly redlined and underserved areas with majority Black populations. FHFA’s press release also announced the establishment of a new pilot transparency framework for the GSEs, which will require Fannie and Freddie to publish and maintain a list of pilot programs and “test-and-learn activities” on their public websites to help FHFA determine whether such activities address disparities identified in the plans.

    Earlier in the week, FHFA released its inaugural Mission Report describing housing finance activities taken in 2021 by the GSEs and Federal Home Loan Banks related to targeted economic development and affordable, equitable, and sustainable housing. The report highlighted, among other things, that the gap between mortgage acceptance rates for minority and white borrowers “remains persistent,” with Black and Latino borrowers representing 6.3 percent and 14.2 percent of all mortgages purchased by the GSEs, respectively, in the fourth quarter of 2021. The report also discussed fair lending geographical trends as well as data on multifamily and single-family loan acquisitions.

    Federal Issues FHFA Fannie Mae Freddie Mac GSEs Fair Lending Consumer Finance Mortgages Underserved Disparate Impact FHLB

  • HUD and FHFA announce fair housing collaboration

    Agency Rule-Making & Guidance

    On August 12, HUD announced a Memorandum of Understanding (MOU) with FHFA regarding fair housing and fair lending coordination. The MOU—a “first-of-its-kind collaborative agreement”—will expire in December 2025, and is intended to enhance enforcement of the Fair Housing Act and the agencies’ oversight of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. According to HUD, the agencies “anticipate that the MOU will lead to stronger oversight that will help advance vigorous fair housing enforcement that can begin to redress our nation’s history of discriminatory housing practices.”

    Agency Rule-Making & Guidance FHFA HUD MOUs Fair Lending Fair Housing Act Fannie Mae Freddie Mac FHLB

  • FHFA releases guidance on alternative reference rates

    Federal Issues

    On July 1, FHFA issued a supervisory letter providing guidance to the Federal Home Loan Banks (FHLBanks) regarding Division of Bank Regulation expectations on the use of alternative reference rates to ensure ongoing “safe and sound FHLBank operations.” According to the letter, FHLBanks should consider, among other things, whether the reference rate: (i) is based on actual daily market transactions; (ii) accurately correlates with the bank’s funding costs; and (iii) is considered the most robust or reflective option of market activity available. In addition, the letter advises FHLBanks to consider whether they have the “necessary information about the underlying transactions and methodology supporting a candidate reference rate to monitor its representativeness over time.” The letter advises that FHLBanks should avoid “rates that contain shortcomings that exist in LIBOR and other recently discontinued or soon to be discontinued reference rates.” FHFA also instructs FHLBanks to provide advance notice to their Examiners-in-Charge if they intend to use an alternative reference rate not already in use.

    Federal Issues FHFA LIBOR FHLB


Upcoming Events