This brief examines the Federal Housing Finance Agency’s proposed rule to prohibit captive insurers from becoming Federal Home Loan Bank (FHLB) members, a move which will essentially ban Real Estate Investment Trusts (REITs) from becoming FHLB members. Our analysis reviews the proposal’s economic and practical considerations and concludes that any safety and soundness concerns pertaining to REITs and captive insurers can be effectively mitigated through existing regulation. Ultimately, we urge FHFA to take a more integrated view of the purpose REITs serve within the broader mortgage market, how captive insurers facilitate that purpose, and suggest alternatives for addressing the Agency’s concerns.