Brief Should Nonbank Mortgage Companies Be Permitted to Become Federal Home Loan Bank Members?
Karan Kaul, Laurie Goodman
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In response to the Federal Housing Finance Agency’s (FHFA) February 24, 2020 request for input on eligibility requirements for membership into the Federal Home Loan Bank (FHLB) System, this brief articulates the benefits of expanding FHLB membership to nonbanks.  It shows there is strong alignment between the nonbank business model and the mission of the FHLBs to provide liquidity to support housing finance and community development. However, nonbanks do pose some additional risk to the safety and soundness of the FHLB system. These risks can be mitigated through a combination of prudential nonbank regulation and enhanced FHLB lending terms. This brief discusses two other issues – collateral eligibility and the perfection of interest – which must also be addressed as part of FHFA’s evaluation.

Research Areas Wealth and financial well-being Housing finance Housing
Tags Federal housing programs and policies Asset and debts Housing markets Housing and the economy Single-family finance Homeownership Financial products and services Opportunity and ownership Finance
Policy Centers Housing Finance Policy Center