What We Do: Our Mission
Providing Liquidity
The essential mission of the FHLBanks is to provide liquidity to their members to support housing finance and community development through all economic cycles. The FHLBanks fulfill this mission by providing billions of dollars of advances (loans) to their roughly 6,500 members each year. The liquidity provided by FHLBanks helps their members meet the lending needs of communities throughout America and maintain adequate balance sheet management. The FHLBanks have fulfilled their liquidity mission successfully for over 90 years.
The Office of Finance issues bonds in the debt markets on behalf of the entire System. The proceeds of those bond sales are made available to the FHLBanks and are then used for advances to members. The 11 FHLBanks are jointly and severally liable for every bond issued by the Office of Finance, meaning each FHLBank bears responsibility for paying the debts of the entire FHLBank System. If a single FHLBank is unable to contribute to a debt payment, the other 10 FHLBanks would be responsible for paying the debt in full.
Principal and interest from all FHLBank System debt is backed by the financial strength of the entire System, which provides assurance to investors that they will be repaid. The significant level of private capital supporting the System, the FHLBanks’ robust credit underwriting and collateral standards, and the joint and several liability of all the FHLBanks, provides protection to bondholders and supports the lower cost of borrowing from the FHLBank System.
While only financial institutions may belong to a FHLBank, people everywhere benefit from them. The lower-cost liquidity provided by the FHLBanks allows financial institutions to provide lower-cost loans to consumers and small businesses. A recent University of Wisconsin study highlights that the FHLBank System saves borrowers $13 billion in mortgage interest payments every year and leads to a more than 16 percent increase in mortgage originations.
Supporting Affordable Housing
A secondary mission of the FHLBanks is to support affordable housing. On an annual basis, each FHLBank must set aside at least 10 percent of its prior year’s income to fund its Affordable Housing Program (AHP). Collectively, the FHLBanks must meet an annual minimum allocation of $100 million toward AHP funding. Since 1990, the FHLBanks have collectively awarded over $7.6 billion in affordable housing program grants, helping more than one million households purchase or preserve a home.
Additionally, the FHLBanks have a number of individual programs, above and beyond their 10 percent AHP contributions, aimed at supporting housing, economic development, job growth, and disaster recovery in their districts. Collectively, the FHLBank System’s AHP represents one of the largest sources of private sector grants for affordable housing and community development in the country.