On May 16, 2024, the Federal Housing Finance Agency (FHFA) issued a Request for Input (RFI) on the Federal Home Loan Banks’ (FHLBanks’) core mission activities and mission achievement. The RFI builds on the November 2023 FHLBank System at 100: Focusing on the Future report (FHLBank at 100 Report), which indicated that clarifying the FHLBanks’ mission, and how achievement of that mission is measured, is a key area of focus.

The RFI seeks input on:

1. Revising the mission statement for the FHLBank System to strengthen the ties to housing finance and community development;
2. Measuring mission achievement using multiple approaches and metrics; and
3. Creating a member incentive program to encourage greater levels of engagement in housing and community development.

Additionally, the RFI indicates that the FHFA is also considering ways to meaningfully incorporate mission achievement in its FHLBank examination processes, including the potential inclusion of a stand-alone mission and public interest examination rating. This RFI follows the recent reorganization and consolidation of mission achievement and fair lending examinations under a new Division of Public Interest Examination created in April 2024.

The RFI poses important questions about how to articulate the connection between the liquidity provided by FHLBanks and their housing finance and community development mission. The FHFA’s Core Mission Activities (CMA) regulation currently includes nine FHLBank activities, such as advances, acquired member assets, and debt and equity investments in affordable housing programs, and may be revised pending the FHFA’s proposed rulemaking.

The RFI also indicates that proposed measurements of mission achievement will more expansively consider the CMA regulation using multiple metrics and establishing achievement thresholds, particularly metrics that assess support for housing and community development activities. The RFI asks for input on which CMA activities should be measured, as well as what else should be measured.

Finally, the RFI requests input on an FHLBank at 100 Report recommendation to establish a member incentive program. The incentives are intended to provide a lower cost of funds for members who demonstrate a meaningful commitment to housing and community development activities. The FHFA is seeking input on what factors should determine members’ commitment to housing finance and community development, and what metrics should be used to categorize the extent of members’ commitment to the FHLBank mission. These factors would then be used to determine benefits to members (e.g., lower cost of funding). The RFI also requests input on defining provisions to ensure safety and soundness regarding any new incentive structure.

FHLBanks and FHLBank’s members, particularly insured depository institutions, should review the RFI’s questions carefully and consider the implications of the questions posed relative to their current engagement in the FHLBank system. Changes in FHFA requirements that may come about as a result of input received by FHFA in response to the RFI have the potential to impact how the FHLBanks provide services to their members and may also impact how a member may choose to engage with the FHLBank system.

Comments are due to the FHFA by July 15, 2024.

Put Patomak’s Expertise to Work

As the FHFA continues to progress against goals articulated in the FHLBank at 100 Report, Patomak stands ready to be your trusted advisor. Our deep expertise in housing finance and regulations enables us to help you navigate complexities and mitigate risks. Whether you are seeking to submit a comment letter, ensure compliance, or stay ahead of the curve, Patomak’s suite of services can provide the support you need to succeed. If you would like to learn more about how Patomak can partner with you, please reach out to Heather Espinosa at hespinosa@patomak.com.