Banks to Congress: Don’t Mess with the FHLB System

As policymakers inch slowly toward reforming the housing finance system, the Federal Home Loan Banks and their allies have a simple message to Congress: leave the system alone.

Home Loan Bank representatives and community bankers urged lawmakers Wednesday to leave the Home Loan Banks out of any overhaul, arguing they have weathered the financial crisis well and are a key source of liquidity for financial institutions.

“In a time when so many of our institutions are in need of repair, we have a system that works,” said Lee Gibson, chairman of the Federal Home Loan Bank of Dallas. “It’s a structure that must not be changed.”

So far the administration has declined to offer a concrete proposal for the future of the housing government-sponsored enterprises, but it has suggested the Home Loan Banks should at least be addressed as part of a revamp.

Options range from placing restrictions on the types of lending that Home Loan Banks may support to forcing a consolidation of the 12 regional banks. Some have also called to restrict membership to small institutions and restricting investments in risky assets.

At a House hearing former GSE regulator and congressman Bruce Morrison floated the idea of requiring the FHLBs to pay for an explicit government guarantee on their debt. (See related story on this website.)

During the session some lawmakers suggested changes were necessary. “Do we need 12 Federal Home Loan Banks?” asked Rep. Randy Neugebauer, R-Texas, who chairs the House Financial Services oversight subcommittee.

Some bankers have acknowledged that consolidation within the system would save money, but believe there is still a benefit to having regional banks.

“The Federal Home Loan Bank of Des Moines has a different customer base, and they have different needs, than the Federal Home Loan Bank of Atlanta,” said Timothy Zimmerman, president of Standard Bank in Monroeville, Penn.

Daily Briefing | Wednesday, October 12, 2011

  • Ginnie Makes it Easier to Pledge Servicing for Warehouse Lines

    The Government National Mortgage Association is making it easier for MBS issuers to pledge their servicing rights to obtain financing from warehouse lenders.

  • Residential Applications Rise, but Not by Much

    Mortgage applications increased by just over 1% for the week ending October 7, with refinancings remaining steady at about 79% of all new business.

  • HUD Chief: Reworked HARP Just Weeks Away

    The Obama Administration expects to roll out a plan to lower barriers to refinancing in “the next couple of weeks,” HUD Secretary Shaun Donovan told mortgage bankers at their annual convention in Chicago.

  • Texas Bank Sees Strong Growth in Warehouse Volumes

    Community Trust Bank, Dallas, ended September with $288 million of warehouse commitments on its books, a three-fold increase from a year ago.

  • MBA Continues to be Bearish on 2012

    Mortgage bankers will fund just $900 billion in new loans next year, the industry’s lowest volume since 1997, according to a new forecast from the Mortgage Bankers Association.

  • Supreme Court to Clarify RESPA Provision

    The U.S. Supreme Court agreed to clarify the scope of a federal law aimed at protecting mortgage customers from being overcharged by companies that provide real estate settlement services.

  • FDIC Pegs Future DIF Losses at $19 Billion

    Federal Deposit Insurance Corp. officials are concerned that banks will continue to suffer in a slow growth economy, but have an even greater fear: that a recession could spur more bank failures.

  • CU Mortgage Lender Buys Realty Firm

    Pentagon Federal Credit Union, Alexandria, Va., said its PenFed Realty unit has acquired Prudential Carruthers Realtors, a leading real estate broker in the Washington metro area with more than 800 brokers.

Article source: http://www.nationalmortgagenews.com/dailybriefing/2010_452/dont-mess-with-fhlb-system-1026964-1.html

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