On April 10, the FHLBanks submitted a letter to the FHFA’s director responding to the president’s March 13 executive order on “Promoting Access to Mortgage Credit” (covered by InfoBytes here) and requesting a follow-up dialogue with the FHFA. The letter puts forth a series of recommendations organized around four areas: (i) modernizing regulations governing long-term mortgage-tied advances and modestly increasing investment authority; (ii) targeting liquidity and Affordable Housing Program (AHP) resources toward entry-level housing, owner-occupied properties, and small builders; (iii) advancing FHLBank-Fed interoperability efforts; and (iv) simplifying AHP and Acquired Member Assets (AMA) program rules. The letter cites independent research estimating that FHLBank advances supported roughly $850 billion in additional residential real estate lending between 2002 and 2024 and urged the FHFA to treat the executive order as an opportunity to recalibrate its supervisory approach.

Among the specific recommendations, the FHLBanks asked the FHFA to increase the leverage ratio for mortgage-tied advances from one-to-one to two-to-one, raise the permissible investment cap to 400 percent of total capital, and modernize the AMA regulation to allow greater flexibility in managing credit risk on purchased mortgage loans. The letter also highlighted a proposal, formally submitted to the Fed on March 23, under which an FHLBank would issue a short-term letter of credit — fully secured by collateral already pledged by the member — to allow a member institution to borrow promptly at the discount window while underlying collateral transfers are prepared, serving as a bridge mechanism during periods of stress, including weekends and off-hours. The FHLBanks also urged the FHFA to revise or rescind several advisory bulletins that the FHLBanks characterized as imposing disproportionate complexity and cost. On AHP modernization, the FHLBanks recommended streamlining scoring and compliance requirements, removing the 35 percent cap on homeownership set-aside allocations, and permitting AHP funds to be used for rate-buydown and builder-support programs.