The Federal Home Loan Bank Act is very explicit regarding the activities in which the Federal Home Loan banks are permitted to engage, the activities in which they are required to engage, the activities in which they are prohibited from engaging and the structure within which they must operate. A fair reading of the Bank Act and the Housing and Economic Recovery Act of 2008 indicate that Congress has set a very clear mission for the Federal Home Loan Bank System — to provide liquidity to members and support housing and community development.

The Home Loan banks have made significant contributions in supporting both objectives.

The crucial liquidity Home Loan banks provide their members is collateralized primarily by loans secured by real estate. These are typically one- to four-family residential mortgage loans, along with other types of housing and real estate-related collateral. This strong link to housing supports mortgage lending and community economic development and allows members to confidently meet the borrowing needs of their customers, including providing access to competitively priced fixed-rate mortgages (such as the popular 30-year, fixed-rate mortgage).

Additionally, the Home Loan banks offer discount advances for housing and economic development through community investment programs, and most operate mortgage purchase programs that provide an additional avenue for liquidity, particularly for community lenders that do not have access to other secondary market outlets.

The Bank Act requires each Home Loan bank to contribute a minimum of 10% of annual earnings to the Affordable Housing Program, supporting the construction of multifamily housing and providing grants for the purchase and/or rehabilitation of single-family homes, including homes impacted by natural disasters. The banks have consistently exceeded the statutory minimum and last year they voluntarily committed to contributing 15% of net income to AHP and other discretionary housing and community development programs on a go forward basis.

Their second annual Impact Report showed that in 2023, the Home Loan banks supported over 20,500 housing units, over 10,700 first-time homebuyers and over 14,500 families through AHP funding. This includes nearly 200 projects with 20% of units dedicated to homeless households. They have also launched over three dozen new voluntary programs — programs that are making a real difference in communities across the country — and last year they delivered over $180 million through discretionary programs designed to address specific needs within each bank district.

Since the inception of AHP in 1990, the Home Loan banks have contributed more than $8 billion toward the program, supporting over one million households. Today, the banks stand as the largest privately capitalized contributor to affordable housing initiatives in the country and in 2024 they expect to contribute approximately $1 billion toward affordable housing and community development efforts.

As the rulemaking process moves forward, what must remain top of mind for all interested parties is that fulfillment of the Home Loan banks' mission flows from their primary purpose as a provider of liquidity. Liquidity is the lifeblood of the system and the driver of all that the banks do in terms of supporting housing finance and affordable housing and community development. Any changes that diminish the value proposition of their liquidity mission will necessarily impact their activities in the affordable housing and community development space.

FHFA has the authority and responsibility to ensure the Home Loan banks can continue to meet their members' liquidity needs safely, soundly, efficiently and responsibly in all economic conditions. However, it must also ensure the banks retain the regulatory flexibility necessary to address the current and future challenges to America's housing finance system; consider local and regional housing market differences and allow more flexibility in housing markets that have unique circumstances that support high- or low-cost markets around the country; and avoid any changes that would impair or reduce their discretionary programs. Importantly, the Home Loan banks caution against making changes to the system that could result in a contraction of the nation's availability of credit.

The Federal Home Loan banks are a foundational component of the U.S. economy and financial system and, by any measure, they have fulfilled, and are fulfilling, the mission Congress has given them. What's more, they have long been innovators in the affordable housing and community development arena, working through their members and within the confines created for them by Congress to develop programs and initiatives designed to respond to acute local challenges. Additional changes to the system are welcome, provided they increase the flexibility of the banks to be responsive to member needs, broaden participation in the system, reduce administrative burdens and do not disrupt what has served members, communities and borrowers so well over the last century.