The Federal Housing Finance Agency is asking the public to weigh in on whether certain banks and financial institutions are doing their part to support affordable housing.
The FHFA made its request for public input Wednesday as part of its biennial review of the Federal Home Loan Bank System's community support program. The examination determines whether members are eligible for the discounted credit provided by the 11 Home Loan banks.
"The FHLBanks' member institutions must meet community support standards in order to maintain access to long-term FHLBank advances," FHFA director Sandra L. Thompson said in a written statement Wednesday. "Today's announcement provides the public with the opportunity to tell us how these financial institutions are meeting the standards in their communities."
The request for public comment is a staple of FHFA's community support program review. Some of the Home Loan banks solicit letters of support year-round through their websites in anticipation of the every-two-years evaluation process.
Yet this year's review, which includes all 6,500-plus member organizations — banks, credit unions, thrifts and insurance companies — coincides with the FHFA's
It also comes amid growing questions about the use of Home Loan bank loans, known as advances.
Notably, San Diego-based Silvergate Bank used
Last month, Sens. Elizabeth Warren, D-Mass., Roger Marshall, R-Kan., and John Kennedy, R-La.,
Some in the bank regulatory and housing advocacy spaces have also questioned how much the Home Loan Bank System is doing to address the country's housing woes or whether it has stayed true to its founding purpose. Established under the Hoover administration in 1932, the Home Loan banks are private, member-owned institutions but they enjoy several
In exchange for these advantages, the banks must put aside 10% of their earnings toward supporting affordable housing, which they typically do through grant funding or loans to nonprofit organizations and community development financial institutions, or CDFIs.
Members, meanwhile, face a two-pronged test for eligibility to receive certain types of advances. They must actively support first-time homebuyers in some way and they must be in compliance with the Community Reinvestment Act — provided they are an institution subject to the CRA. Both criteria are checked during the FHFA community support program review.
Bruce Morrison, a former congressman from Connecticut and a onetime chief regulator for the Home Loan Bank System, said the review process is not very intrusive for the member institutions and the regulation itself was "easy for entities to comply with."
"The process was very much a check-the-box exercise for the banks," said Morrison, now
Morrison noted that making the community support program review more stringent is not one of the changes he is pushing. If the process were amended, he said, it would have to be done through a formal rulemaking process.
Ken Thomas, founder and CEO of Community Development Fund Advisors in Miami, said the current wording of the regulation means the review itself carries little sway in determining access to Home Loan bank advances.
"Even banks with failing CRA ratings have access to their window, since the wording of the 'restriction' for banks that fail their [community support statement] is so subjective. They 'may be unable' to access advances with terms 'greater than one year,' so they would just take one-year advances," Thomas said. "Also, such banks 'may' be prevented from participating in their [Affordable Housing] and [Community Investment Cash Advance] programs, but any bank failing CRA probably could care less about those programs."
