Magazine article American Banker

Home Loan Bank Proposal Would Widen Mission, Let Thrifts Quit

Magazine article American Banker

Home Loan Bank Proposal Would Widen Mission, Let Thrifts Quit

Article excerpt

Voluntary membership in the Federal Home Loan Bank System would be open to any insured institution under legislation expected next week from Rep. Richard Baker.

The Louisiana Republican also would rename the 12 home loan banks and broaden their mission to include funding business loans in rural or underserved areas. Currently, the banks only fund medium- and long-term residential mortgages.

Rep. Baker has scheduled a hearing for his bill on March 14 and plans a subcommittee vote on March 21.

With voluntary membership and no residential lending requirements, members of the newly named Enterprise Resource Banks would be treated equally, said Bruce Morrison, chairman of the Federal Housing Finance Board, which oversees the Home Loan banks. "We think there are a lot of positive things in this legislation," he said.

Rep. Baker's plan also has drawn the early support of the commercial bank and thrift industries. Industry lobbyists said Wednesday that other government sponsored enterprises, such as Fannie Mae, provide adequate capital for housing lenders, while rural and poor areas lack sufficient credit.

The legislation would eliminate the current 30% cap on advances to commercial banks and broaden the types of assets that can be used as collateral for borrowing from the system.

It would also drop a requirement that members hold 10% or more of their assets in mortgage lending or mortgage-backed securities.

Membership has been voluntary for banks since they were allowed to join the system in 1989. …

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