Removing Barriers Blog

CUNA-Opposed Provision on FHLB Membership Eligibility Removed from new FHFA Rule
Posted January 12, 2016 by CUNA Advocacy

Credit union members of the Federal Home Loan Bank (FHLB) in their jurisdiction can breathe a sigh of relief today, as the Federal Housing Finance Agency (FHFA), which oversees the FHLBs, finalized a rule which eliminated a proposed requirement that would have imposed significant burdens on FHLB members. FHLB membership offers useful liquidity and flexibility for eligible credit unions and other financial institutions to more effectively manage their mortgage portfolios.

Previous iterations of the rule, which also banned captive insurers from membership, would have required credit unions and other FHLB members to establish eligibility for membership on an ongoing basis by continuously demonstrating they were meeting minimum levels of investment in mortgage assets as a percentage of total assets. In dropping this provision, the FHFA noted that any purported benefits would not even remotely have outweighed the additional burden imposed, since 98 percent of members already meet the requirements. CUNA had pushed strongly for this provision to be removed.

CUNA continues to advocate for a statutory change to FHLB membership requirements that would bring parity between small banks (under $1 billion total assets), which are currently only required to hold 1 percent of assets in mortgages at time of initial application for membership, and small credit unions, which must hold 10 percent of assets in mortgages. We strongly support legislation in the House of Representatives, H.R. 2473, introduced by Representatives Randy Neugebauer (R-TX) and William Lacy Clay (D-MO), which would achieve this objective.