The Federal Housing Finance Agency asked for input on the Federal Home Loan Banks’ (FHLBs’) mission, membership, and affordability requirements. We offer our thoughts on the FHLBs’ mission and how their member and housing affordability requirements should be changed to better support that mission.

We argue that the FHLBs are an indispensable source of support for the housing finance system. They provide critical liquidity to many of the institutions on which the housing finance system depends and critical funding for affordable housing and community development efforts across the country. But the system can be improved in four important ways:

• Realigning the FHLBs’ membership requirements with today’s mortgage market by extending membership to independent mortgage bankers and real estate investment trusts and ensuring that those eligible for membership cannot wind down their support for housing finance once admitted.
• Increasing the support the FHLBs provide for affordable housing and community development by increasing the size, flexibility, and leverage of the FHLBs’ affordability commitments.
• Improving the FHLBs’ overall effectiveness by dedicating individual FHLBs to take on particularly complex housing finance challenges on behalf of the broader FHLB system.
• Deepening the reach of the FHLBs in their communities by retooling their legacy programs: the Community Support Program, the Mortgage Partnership Finance Program, and the Mortgage Purchase Program.

Making these changes would better align their membership and affordability requirements with their mission, vastly increasing their support of the nation’s housing finance system.