New FHFA Proposal to Grant Flexibility, Reg Relief to FHLBs

The Federal Housing Finance Agency today issued a proposed rule intended to provide the Federal Home Loan Banks greater flexibility in how they manage their affordable housing programs. It would also seeks to provide regulatory relief by simplifying a number of duplicative regulatory requirements currently in place.

Under current law, each FHLB is required to establish an affordable housing program and contribute 10 percent of its earnings to it. FHLBs are authorized to operate a competitive application program and the homeownership set-aside program; generally, they are required to allocate at least 65 percent of annual AHP contributions to competitive application programs and up to the greater of $4.5 million or 35 percent to homeownership set-aside programs.

The proposed rule seeks to provide FHLBs with greater flexibility in how they can allocate their AHP contributions to the various programs based on the specific housing needs of their districts. FHLBs would also be authorized to allocate a portion of their total AHP funds to a maximum of three competitive target funds to address unmet housing needs. The American Bankers Association is currently reviewing the proposed rule and will provide comment. For more information, contact ABA’s Joe Pigg.