Magazine article American Banker

FHFB Chief Eyes Multiple-District, Disclosure Rules

Magazine article American Banker

FHFB Chief Eyes Multiple-District, Disclosure Rules

Article excerpt

The beleaguered chairman of the Federal Housing Finance Board has laid out an ambitious near-term agenda that includes action on disclosure requirements for Home Loan Bank debt issues and membership in multiple districts.

In a Finance Board meeting Wednesday, Chairman John T. Korsmo promised that at a public hearing early next month he would propose a disclosure regime that would include requirements for Home Loan Bank-issued mortgage-backed securities.

"The staff is working hard to draft a proposed regulation for consideration at our next meeting that will establish a state-of-the-art disclosure program for debt issued by the system and for any mortgage-backed securities issued by the banks if -- and I stress the word 'if' -- the Finance Board were at some point to approve such a request," Mr. Korsmo said Wednesday.

None of the Home Loan banks currently issue mortgage-backed securities, but many industry observers say the success of efforts such as the Federal Home Loan Bank of Chicago's Mortgage Partnership Finance program may eventually require them to do so.

There are, however, roadblocks, not the least of which is the difficulty the banks would have making such a move profitable.

According to a Sept. 10 draft report authored by the chief financial officers of eight of the 12 Home Loan banks, the structure of the Chicago Bank's MPF program and a similar program at the Federal Home Loan Bank of Seattle are such that securitization would "not provide sufficient economic value to create a profit."

The announcement of Mr. Korsmo's plans comes as he and his staff are facing investigations by the General Accounting Office and the Finance Board's inspector general. The inquiry, initiated by Senate Banking Committee Chairman Paul Sarbanes, D-Md., grew out of Mr. Korsmo's participation in a political fundraiser to which the bankers he regulates were invited. …

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