Despite recent improvements in the 12 Federal Home Loan Banks’ ability to manage their interest rate risk, several of the FHLBanks continue to maintain large mortgage asset portfolios and that poses “ongoing challenges” due to their large portfolios, according to the Federal Housing Finance Agency’s official watch dog. A white paper issued this week by the FHFA’s Office of Inspector General found that seven of the FHLBanks’ mortgage portfolios are greater than 25 percent of their total assets. “FHFA has expressed concern over the fact that certain assets in these portfolios, such as [non-agency] MBS and [agency] MBS, which are classified as ‘non-core’ mission activities, do not materially contribute to the FHLBanks’ housing mission and, over the years, have increased risks within the FHLBank system,” said the OIG white paper.