Federal Housing Finance Board Delays Affordable Housing Ruling
The Federal Housing Finance Board said it won’t adopt at this time a rule that would have required more of the Federal Home Loan Banks’s capital to come from their profits.
The rule, which was proposed in March, would have forced the 12 Home Loan Banks to cut dividend payments to members in half until reaching a minimum amount of retained earnings. The Washington-based regulator announced the decision in a statement on its website, according to the Allentown Morning Call.
“The approach to retained earnings and the timetable for the proposed actions both were troubling,” Kurt Pfotenhauer, a senior vice president at the Mortgage Bankers Association, said in a letter this month to finance board Chairman Ronald Rosenfeld.
The banks lend money to thrift, credit union, insurance company and commercial bank members at below-market rates to finance their home loan holdings. Members were concerned a cut in the dividend would hurt their efforts to provide lower-income housing.
Fred Banuelos, President and CEO of the Alliance for Building Communities in Allentown, said in November that the FHLB has been instrumental in providing funding for its affordable housing projects.
The Alliance has two projects under way that involve FHLB grants. One is a knitting mill in Hamburg it is turning into 27 units of senior housing, the other a warehouse in Tamaqua it’s converting into 14 townhouses for low- to middle-income families.
“It would be very disappointing if in the future projects like that were jeopardized because of the rule change,” Banuelos said.
The Home Loan banks also buy and hold home mortgages and related assets. They raise money as a group in the so-called agency bond market just like publicly traded government-chartered mortgage finance companies Fannie Mae and Freddie Mac, and are the biggest borrowers in the United States.
The board put off acting because “it has become clear that almost every bank has sought to comply” with a 2003 request that they increase their retained earnings and that they’re currently committed to meet the objectives, finance board member Geoff Bacino said in a statement.
“For those reasons, there is no need for the board to consider a retained earnings proposal at this time” he said. The board may revisit the retained earnings issued with a planned update of its risk-based capital rule.
The board also adopted a rule creating a maximum amount of “excess stock,” or stock held by members that isn’t required to do business with them. It also voted to reappoint 25 “public interest directors” for an additional year.