Aquired Member Assets
Through the AMA programs, FHLBanks acquire and hold on their balance sheets conforming loans and loans guaranteed by a department or agency of the U.S. government (typically residential 1-4 single-family mortgages). Regulations governing the AMA programs establish eligible parameters for such purchase programs, which include various credit enhancement requirements that take the form of collateralization or premium hold-backs that serve to align the interests of members and their FHLBank operating the AMA program.
The principal benefits to members of the AMA programs arise from allowing members to:
- Sell loans to their FHLBank thereby receiving funding;
- Avoid interest rate risk to their balance sheet;
- Remove prepayment risk;
- Reduce credit risk;
- Retain servicing income and connection to the borrower;
- Get compensated for credit quality; and
- Increase returns to members.
The AMA programs are structured such that the FHLBank manages a loan’s interest rate risk, while the participating member manages a substantial portion of the risks associated with originating the mortgage loan, including a significant portion of the credit risk. AMA programs also provide a substantial benefit to mid-size and smaller mortgage originators by reducing complexity, minimizing hedging risk, and providing a competitive capital markets execution, which allows them to be competitive with larger market participants.
The FHLBanks held $61.4 billion of mortgage loans on their balance sheets as of December 31, 2023, up from $56.1 billion at year-end 2022.