The Federal Home Loan Banks (FHLBanks which is also known as FHLBank System) are 11 U.S. government-sponsored banks that offer liquidity to banks’ members in order to help with the financing of housing and investment in communities.
The Federal Home Loan Banks System was chartered by Congress in 1932 in the midst of the Great Depression. Its primary function is of offering member financial institutions financial products and services that help improve the financing of community and housing lending. Its 11 FHLBanks are all structured as cooperatives, owned and controlled by their financial institutions. These today comprise savings and loan associations (thrifts) commercial banks as well as credit unions, insurance companies and companies. Each FHLBank is required to file at the very least one equity class with the SEC however their debt isn’t recorded with the SEC.
The one of the benefits that comes with Federal Home Loan Banks membership is the ability to access liquidity via secured loans, referred to as advances. They are financed by FHLBanks through the capital market through the issue of discount notes or term debt, which are collectively called the consolidated obligations (COs). COs are the joint and numerous obligations of the FHLBanks i.e. every debt issued by the one FHLBank is the sole responsibility of all FHLBanks to repay and the issuing FHLBank being the one with primary responsibility. Its Office of Finance (OF) is the fiscal agent of the FHLBanks which is accountable for introducing, issuing, COs, and servicing them and creating the financial reports for the entire system. 1 Although all FHLBanks are SEC registered However, the Federal Home Loan Banks System isn’t. Therefore reports of the FHLBank System financial reports are “combined” rather than “consolidated.”
History Of Federal Home Loan Banks
Due to the Great Depression the FHLBanks were created through the Federal Home Loan Bank Board (FHLBB) as a result of the Federal Home Loan Bank Act of 1932. The purpose was to offer the funds needed for “building and loan” institutions by providing liquidity and providing mortgages.
At first in the beginning, the Federal Home Loan Banks provided direct loans to homeowners however, they transferred this responsibility over to the Home Owners’ Mortgage Corporation after it was formed in the following year.
In the wake of the crisis of savings and loans of the 1980s , the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) repealed FHLBB. FHLBB in 1989 and assigned oversight for FHLBanks to the Federal Housing Finance Board (FHFB). FHLBanks into the Federal Housing Finance Board (FHFB) and the regulatory accountability over the FHFB to that of the Office of Thrift Supervision (OTS) which is part of OTS, which is
part of the Department of the Treasury. FIRREA also permitted all depository institutions insured by the federal government to be part of the FHLBank System which includes commercial banks and credit unions.
Due to the financial crisis in the latter half of 2000, due to the financial crisis of late 2000s, Housing and Economic Recovery Act of 2008 (HERA) substituted FHFB. FHFB by FHFA. Federal Housing Finance Agency (FHFA). In the Secretary’s office, Treasury had the authority to buy FHLBank debt securities of any value up to December 31st, 2009, after which the limit would be reduced to the original amount of $4 billion. The 7th of September, 2008 the U.S. Treasury announced a new credit facility for three government-sponsored enterprises in the housing sector. The secretary of the Treasury to acquire Federal Home Loan Banks debt of the amount of any value subject to pledge of advances and various other collateral assets. The authorization for this facility ended on December 31, 2009.
Due to the recession in the latter part of 2000 Section 312 of Dodd-Frank Wall Street Reform and Consumer Protection Act mandated merger of OTS with the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC) as well as The Federal Reserve Board of Governors as well as the Consumer Financial Protection Bureau (CFPB) on July 21, 2011.
Ownership Of Federal Home Loan Banks
The 11 banks that comprise the Federal Home Loan Banks System are owned by more than 7,300 financial institutions regulated from the 50 states, U.S. possessions, and territories. Capital in FHLBanks is owned by the members and owners, and is not publicly traded. Institutions have to purchase shares to be members. Members receive access to financing and receive dividends on the basis of their ownership of stocks. The Federal Home Loan Banks are self-capitalizing , meaning that, when members wish to borrow more money however, they have to first buy additional shares to fund the borrowing. FHLBanks have no tax burdens federal state, local, and federal taxes, with the exception of local real estate taxes. Capital investments made in FHLBanks are granted a preferential risk-weighting exclusion treatment under those who follow the Basel II rules (which would normally require equity investments that are not traded to be risk-weighted to 400%, however the exemption permits only 100 percent). The FHLBanks are required to pay an annual assessment that is 10% of their annual income for low-cost housing programmes. The purpose of the FHLBanks is a public good (increase accessibility to housing and assist communities by providing credit to members of financial institutions) However, all eleven are privately capitalized, and apart of tax benefits they don’t receive any taxpayer aid.
Financial results and the condition Of Federal Home Loan Banks
Since August 2006 All 11 Banks are accredited with the United States Securities and Exchange Commission and all financial statements as well as other filings are accessible to the public through the SEC website (EDGAR).
On the 5th of August on the 5th of August, 2011, The Federal Housing Finance Agency announced that the FHLBanks have fulfilled their obligation to make the payments for RefCorp bonds. Resolution Funding Corporation (RefCorp) bonds. RefCorp bonds were issued by the Banks are required to make 20% of their net earnings (after making payments towards the Affordable Housing Program) toward the RefCorp bond repayments. Each Bank currently pays 20 percent of their net earnings into its own , separate, reserved earnings account, which is not refunded until the amount of money in the account is one percent of the Bank’s outstanding consolidating obligations.
As of 31 December, 2014 all of the FHLBanks were in compliance with the legal minimum capital requirements, in addition to all of the FHLBank System as a whole was in compliance with its minimum capital requirements.
In March of 2015 The FHLBanks Office of Finance released the 2014 combined financial Report.For 2014 the FHLBanks reported net earnings at $2,245 million. The financial assets for the FHLBanks totaled $913.3 billion at the time on December 31st in 2014. The total of advances reached $571 billion. Investments were second in part with $267 billion. The portfolio of mortgage loans were worth $44 billion. The FHLBanks contributed to affordable housing of $269 million during 2014.
The main assets of FHLBanks comprise advance (secured loan to its members) as well as mortgage loans that are held as portfolio loans and other investment. These FHLBanks must be required through law to keep collateral over of the amount actually lent for any borrower. These FHLBanks are funded by the daily sales of bonds in the world’s capital markets. The eleven FHLBanks have the capacity of being jointly and jointly accountable for the obligations of each FHLBank.
Read More About Home Owners’ Loan Corporation
Q&A For Federal Home Loan Banks
Here You will Get All Queries Which People’s ask And Finding About Federal Home Loan Banks.
Is Federal Home Loan Bank a government agency?
The Federal Home Loan Bank System was established by The Federal Home Loan Bank Act as a federally-sponsored enterprise to help mortgage lending and community investment. … Each FHLBank is a separate, government-chartered, member-owned corporation.
What did the Federal Home Loan Bank Board do?
The Federal Home Loan Bank Act was enacted in the Hoover administration in 1932. It was designed to promote homeowners to buy homes by providing low-cost money for banks that were members to make mortgage loans.
Who are the 11 Federal Home Loan Banks?
- Federal Home Loan Bank of Atlanta
- Federal Home Loan Bank of Boston
- Federal Home Loan Bank of Chicago
- Federal Home Loan Bank of Cincinnati
- Federal Home Loan Bank of Dallas
- Federal Home Loan Bank of Des Moines
- Federal Home Loan Bank of Indianapolis
- Federal Home Loan Bank of New York
- Federal Home Loan Bank of Pittsburgh
- Federal Home Loan Bank of San Francisco
- Federal Home Loan Bank of Topeka
How many Federal Home Loan Banks are there?
The Federal Home Loan Bank system is comprised of 12 Federal Home Loan Banks (FHLBs) which are state-sponsored businesses engaged in housing and community economic development.
Is Federal Home Loan FDIC insured?
The federal government cannot guarantee or guarantee the consolidated obligations. However, FHLBs status as a federallyowned enterprise allows the FHLBs the ability to raise funds at rates that are slightly higher than similar obligations issued by U.S. Department of the Treasury.
What is the FHLB rate?
FHLB Rate refers to an interest rate fixed set by Lender in accordance with the Amortizing Rate of Advance offered through FHLB. Federal Home Loan Bank of New York for instruments that have an amortization period of five years or five years (or for the remaining amortization) that was recently made offered on the date that comprises two (2) business days …