“I really think that it’s in the best interest of the members to jump forward here … because the members get a lot of benefit from the home loan bank system.” George Collins, former chief risk officer for the FHLBank of Boston, agreed, citing an annual government subsidy of $5-$6 billion for the FHLBs shifting the burden of progress onto member banks. He stressed that the role of government is not recognized and that a 50/50 partnership is in order. Luis Cortes, founder and CEO of Esperanza and a former member of the FHLBank of Pittsburgh’s board of directors, asserted that FHLB provisions do not go far enough, stating that the current rate of 10% of profits for AHP amount to “getting gamed by the membership,” given the value the FHLBs provide to their members. Those advances generate profits and the FHLBs have long been required to pay a share of their profits toward affordable housing through the Affordable Housing Program (AHP) they administer. The conversation highlighted that the FHLBs focus on the type and quality of collateral for their advances rather than the purpose for which the banks use those advances. Panelists brought up the case of Silvergate Bank, a bank that primarily supports cryptocurrency actors which borrowed heavily from the FHLB system, particularly in recent times of stress, as an example of how the FHLB system’s focus has strayed far from housing. Goldschmid Professor of Law and vice dean at Columbia Law School, called this an “exciting moment” for rethinking the role of the FHLBs. Rice urged “bold,” not “incremental,” change for the FHLBs while Kathryn Judge, Harvey J. She cited small mortgage loans (under $150,000) and special purpose credit programs as models to be promoted. At nearly 30 points, the racial homeownership gap is higher today than it was in 1960. In the second quarter of 2022, the homeownership rates for white households was 75%, compared to 45% for Black households, according to the Department of Treasury. Lisa Rice, president and CEO of the National Fair Housing Alliance, described the mortgage market system’s problematic institutionalized preference toward white Americans, noting that mortgages were not “made universally available to people… systematize the association between race and risk in our financial markets that is still with us today.” She called on the FHLBs and the broader housing finance system to prioritize reducing the racial disparity in homeownership. Supporting housing finance is the original purpose of the FHLB system, but there is no requirement that members use FHLB advances to promote housing. The homeownership rates for white households was 75%, compared to 45% for Black households Are the Federal Home Loan Banks focused on their mission to promote housing? Here are four key take aways from the event, which can be watched in full here. We heard from a wide range of experts, including current FHFA Director Sandra Thompson, former FHLB regulators, affordable housing advocates, and leading academics and researchers. The Brookings Institution’s Center on Regulation and Markets, Boston University’s Review of Banking & Financial Law, and Boston University School of Law co-hosted a forum to discuss and debate how the FHLB system is working, what its mission should be, and what reforms, if any, should be undertaken. Executive Editor for the Symposium - Review of Banking & Financial Law
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