FHLBank System at 100: Focusing on the Future
Statement of
Ryan Donovan
President and Chief Executive Officer
Council of Federal Home Loan Banks
Before the
Federal Housing Finance Agency
Listening Session on
Federal Home Loan Banks at 100: Focus on the Future
Sept. 29, 2022
Good afternoon. Thank you for the opportunity to present at today’s listening session.
The Federal Home Loan Bank System is a mission driven, community centered, and member focused system that works.
For 90 years the home loan banks — 11 regionally based, independently operated, cooperatively owned, and privately capitalized wholesale liquidity providers — have fulfilled a critical mission: to provide on-demand liquidity to support housing finance and community investment in all economic cycles and operating environments.
Fulfillment of this mission has supported housing, jobs, and economic growth across the country – and underpins the stability of the financial system. We do this through our 6,500 members – the banks, credit unions, insurance companies and CDFIs that are critical to local communities.
Over the course of this listening session and subsequent roundtables, you will hear from these members about the impact they’re able to have because of their participation with their regional home loan bank as well as their concern regarding the impact potential changes would have on them. Their story is an exciting story of relevance and impact.
Mission Driven
The activities of Federal Home Loan Banks serve our overarching goal to encourage homeownership and community development by providing liquidity to the U.S. financial system through our member institutions.
This liquidity principally comes in the form of collateralized loans, or “advances”, available to our members, a critical service the Banks have been able to deliver without fail or loss in 90 years of history.
Our members can use this funding to support housing and mortgage finance, small business and job growth, community and economic development, and general balance sheet management.
Currently, the System has over $500 Billion outstanding – and it is designed to be elastic – to grow and shrink based on our members’ needs. This strengthens the nation’s financial system by ensuring that financial institutions of all sizes have access to reliable liquidity in all market conditions.
Participation in a regional home loan bank empowers our members to do what they do best – serve their customers, members and communities in all parts of the country.
Community Centered
Successful execution of our mission allows the home loan banks to do more to support affordable housing in their regions.
Each home loan bank is required by law to contribute 10% of its earnings to the Affordable Housing Program – and most home loan banks make voluntary contributions in addition to the statutory requirement, and they may also engage in other community investment programs as well. Meaning AHP is a floor, not a ceiling, on our commitment to addressing housing affordability.
AHP supports low, very low, and extremely low-income households as well as vulnerable populations, including the homeless, people with disabilities and special needs, and people recovering from substance or physical abuse.
Since 1990, AHP has delivered more than $7 billion in grants and subsidized loans to affordable housing initiatives across the country, supporting the creation, rehabilitation, or purchase of nearly 1 million affordable housing units, as of 2020. To maximize the impact of every dollar invested through AHP, approximately 2/3 of the funds are used in concert with federal or federally subsidized affordable housing activities.
As a result of our efforts, communities across the country benefit from financial investment, permanent jobs and expanded revitalization efforts.
The AHP and other programs mean that Home Loan Banks don’t just have an impact through their members; they have a direct impact on the communities within the regions they serve.
Member Focused
As member-owned cooperatives, the Banks are restricted to serving their members and they have a fiduciary responsibility to treat all members equally regardless of size.
Our services help level the playing field by providing a vital link to the capital markets for thousands of financial institutions of all sizes – all vital to the wellbeing of their communities and many of which rely on advances as the only way to manage interest rate and liquidity risks.
Our regional structure benefits our members and enables local communities because it allows the home loan banks to know their members and communities well, to understand their needs, and deliver relevant products, services, and support.
Conclusion
Concurrent with this process, the home loan banks are taking time to consider and develop a vision for the future. We do this bearing in mind a few guiding principles:
- The regional nature of the home loan banks is essential to our continued success serving our members and communities, and it must be maintained;
- Current members should have continued access to their regional home loan bank; and
- Any changes to membership or structure should enhance the value and impact of the home loan banks without adding unmitigated risk to the home loan bank system.
As you move forward, it’s critical to keep in mind that the members of the home loan banks, the people and communities they serve will be the most impacted by any changes the agency or Congress makes to the system. We are excited that so many have signed up to participate and we look forward to their stories of why they are members of their home loan bank, how they use the bank and the impact they are able to have because of their participation in the bank.
Thank you for holding this listening session and considering our views.