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FHFA Responds to the Powerful Voice of Community Banks

The Federal Housing Finance Agency (FHFA) has made a significant concession to community banks in its final rule regarding membership in Federal Home Loan Banks. The FHFA will not require members to maintain an ongoing minimum level of specified residential mortgages as a condition of eligibility for membership in Federal Home Loan Banks. This positive development was the direct result of the FHFA receiving more than 1,300 comment letters from primarily community banks (and their associations), all but a small handful urging the FHFA to not implement the harmful proposed rule.

CBAI advocated strongly on behalf of Illinois community banks in a January of 2015 comment letter to the FHFA stating, “It is clear that if the Proposed Rule is adopted it would have a profound impact on the FHLB system (“System”), FHLBanks and Members including but not limited to: increased regulatory burden and difficulties in Member balance sheet management; the stability of the System and its continued reliability as a funding partner particularly in times of economic stress; uncertainty about continuing Member access to liquidity; the future value of FHLBank membership and the implications for membership decisions; and the impact on housing and community development throughout the System.” CBAI concluded the letter by stating, “This harmful proposal does not need to be further delayed or studied but needs to be completely abandoned.” Read CBAI Comment Letter.

CBAI thanks the many Illinois community bankers who responded to our Action Alert to weigh-in with the FHFA regarding this important issue. This clear victory is further evidence that when community bankers respond in large numbers, together we can favorably impact regulation that affects community banks. 

January 14, 2016