Amid growing pressure to bolster affordable housing initiatives, the Presidents and Board Chairs of the 11 Federal Home Loan Banks (FHLBanks) recently penned letters to the U.S. Department of Treasury, expressing concerns about the complexity of the current housing crisis.
The FHLBanks, government-sponsored entities that provide financial support to institutions for housing finance and community investment, offered recommendations on improving housing supply rather than simply increasing contribution thresholds. Some key suggestions include enhancing access for Community Development Financial Institutions (CDFIs) and reducing regulatory constraints on FHLBank programs.
The ongoing dialogue between the Treasury, FHFA, and the 11 FHLBanks involves a collaborative effort to address housing challenges. Following the FHFA’s recent review and a set of transformative goals for the future, stakeholders highlighted the need for increased FHLBank support. However, concerns were raised about conflicting policies that could hinder support for affordable housing and community development.
Established during the Great Depression in 1932, the FHLBanks serve as significant liquidity providers in the financial sector. Following the collapse of some major banks that relied on the system, their operations have been under scrutiny. Notably, the Affordable Housing Program (AHP) mandates a percentage of net income contribution for housing projects, with a recent voluntary increase from 10% to 15%.
In response to suggestions for further raising the contribution threshold to 20%, the Board Chairs emphasized the importance of maintaining capital reserves to uphold their mandate of financial liquidity and community support. With a history of investing billions in affordable housing and community development since 1990, the FHLBanks are committed to ongoing initiatives to address housing needs.
In addition to supporting regional housing efforts, the FHLBank Presidents proposed enhancing CDFI access, reducing administrative burdens on programs like AHP, and increasing support for state housing agencies. Streamlining processes and updating programs like CICA and CIP were also recommended to facilitate community investment and housing finance.
As the FHLBanks continue their commitment to affordable housing and community development, collaboration with government agencies and stakeholders remains essential to address the complexities of the current housing crisis and pave the way for sustainable solutions.
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