FHFA drops investment requirements for FHLB membership

Jan. 12, 2016 -- Credit unions and other financials would not have to hold a certain percentage of assets in mortgages in order to qualify for Federal Home Loan Bank (FHLB) membership, under new rules issued Tuesday.

Under the new rules issued by the Federal Housing Finance Agency (FHFA) Tuesday, each FHLB member would not be required to hold 1% of its assets in “home mortgage loans” on an ongoing basis, as originally proposed. Additionally, each member would not be required to comply, on an ongoing basis, with a requirement (for credit unions and non-community financial institutions) that it hold at least 10% of its assets in “residential mortgage loans,” also as originally proposed.

"The statutory requirements for members to continue their commitment to housing finance can be addressed by monitoring the levels of residential mortgage assets they hold and we, therefore, decided not to include the ongoing investment requirements in the final rule," said FHFA Director Melvin L. Watt in a press release.

NASCUS, in its comment letter early last year, argued that both of the requirements should be revisited by the FHFA before finalizing the rules. “In our view, the proposed requirements would hamper the ability of some institutions to manage interest rate risk and reduce the availability of liquidity in the credit union system,” NASCUS wrote.

NASCUS comment letter on Federal Home Loan Bank Membership

FHFA press release on new rules