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The FHFA tomorrow will wrap up its three-day public listening session on the Federal Home Loan Bank (FHLB) System, which kicked off last Thursday. The FHLB System has been an important source of liquidity and funding for housing finance and community investments for nearly a century, particularly during trying economic times and most recently during the COVID-19 pandemic.

The FHLB System also support low-income housing and community development initiatives, which NAFCU has long advocated for to better uplift underserved communities. During the sessions, FHFA sought feedback from the public on the FHLB System’s general mission and its operational efficiency and effectiveness. The agency also asked for feedback on the FHLB’s role in promoting affordable and equitable housing and community investments, as well as how effectively it addresses the needs of rural and financially vulnerable communities. The agency discussed the System’s member products and eligibility requirements, services, and collateral requirements.

NAFCU Senior Regulatory Affairs Counsel Aminah Moore provided remarks on day two of the listening session, offering NAFCU’s comments on the over 1,500 FHLB credit union members, which now account for nearly 25 percent of the FHLB System’s total membership. Several credit unions, including NAFCU members delivered remarks during the listening session as well.

Moore praised the success of the FHLB System, urging the FHFA to avoid disrupting the System and to maintain the ability to effectively serve credit union members. Moore also asked the FHFA to work with the NCUA as well as FHLBs to streamline the regulatory process to preserve existing member partnerships. 

Of note, Moore stated that in order to maintain reasonable risk in the FHLB System, any expansion of FHLB membership should exclude nondepository institutions such as underregulated fintechs, because they are not subject to capital requirements or regulated by a prudential regulator. NAFCU previously wrote to the FHFA in response to its request for input on FHLB membership, writing that any membership expansion should be limited to these entities which are subject to a regulatory scheme, and that the agency should, “prohibit the use of conduits as they inject significant serious risk to the system and cannot demonstrate a nexus to the FHLB’s public policy mission.”

NAFCU earlier this year wrote to the House Rules Committee urging the Committee to support an amendment filed by Rep. Ritchie Torres, D -N.Y., which would “expand the definition of Community Financial Institutions (CFIs) in the Federal Home Loan Bank (FHLB) Act to credit unions and Treasury-certified non-depository community development financial institutions.” This status would enable credit unions to pledge small business, small agriculture, and community development loans, not just housing loans as collateral within the FHLB System.

In addition, NAFCU plans on submitting written comments on the FHLBA system, to the FHFA by its October 21, 2022 deadline.

As a leader in housing finance reform efforts, NAFCU advocates for credit unions' ability to help provide safe, sustainable, and equitable housing for all communities.