The Federal Housing Finance Agency is toying with the idea of “grandfathering” the membership of captive insurance affiliates in the Federal Home Loan Bank system, while blocking out others, according to industry observers tracking the matter. Such a final rule would benefit MBS-investing real estate investment trusts that gained entry through a captive. A few years back, several REITs found a loophole in the FHLBank membership rules and exploited it before the FHFA put a moratorium on new captives joining the system. The moratorium expired...

The Federal Housing Finance Agency is toying with the idea of “grandfathering” current captive insurance affiliates in the Federal Home Loan Bank system, while blocking out others, according to industry observers tracking the matter.If the FHFA does so, it would benefit mortgage-backed security investing real estate investment trusts that gained entry through a captive. A few years back, REITs found a loophole in the FHLB membership rules and exploited it before the FHFA put a moratorium on captives joining the system and requested industry comments on the captive angle and other membership rules. The moratorium expired in early 2015 and the 11 regional FHLBs once again began allowing REITs and others – via their captives – to join the system.

Access to advances from the Federal Home Loan Banks have helped Redwood Trust operate its jumbo conduit, including adding to portfolio capabilities, according to officials at the real estate investment trust. Like other REITs, Redwood gained access to FHLBank advances via a captive insurance subsidiary. RWT Financial was approved as a member of the FHLBank of Chicago in the second quarter of 2014. In July, the FHLBank advance financing capacity for Redwood’s subsidiary increased by $400 million to $1.4 billion. “We’ve been able to more efficiently finance

Real estate investment trusts that have gained access to Federal Home Loan Bank advances don’t seem particularly worried that they will be kicked out of the system, at least not anytime soon. As for when the Federal Housing Finance Agency will issue a final membership rule that addresses the thorny topic, that’s a different matter. The FHFA formally proposed changes a year ago that would ban captive insurance companies, the vehicle through which all REITs have gained membership. Even though public comments were taken, no final rule has appeared. In some circles, the “no action” stance is being read...

Industry groups stepped up their pressure on Congress to block a proposed rule that would alter membership requirements in the Federal Home Loan Bank system. The latest letter came this week and was signed by the Mortgage Bankers Association, National Association of Real Estate Investment Trusts, Independent Community Bankers of America and Habitat for Humanity International. The Federal Housing Finance Agency proposed...

The amount of collateral securing advances at the Federal Home Loan Banks increased by 12 percent, to $688 billion, at the end of 2014, according to a newly released report by the Federal Housing Finance Agency. The report provides details of the levels of collateral pledged to the FHLBanks securing advances. Listing was the most used form of collateral as of the end of 2014, and accounted for 49 percent of collateral pledged. This was followed by blanket pledges, a lien on all or specific categories of a member’s assets, which was 39 percent of collateral pledged. Both were up 2 percent from the previous years. The report noted that FHLBanks typically give members greater borrowing capacity when...

It has been a full year since the Federal Housing Finance Agency proposed sweeping changes to the Federal Home Loan Bank membership rules and the agency said as recently as this week that the proposal remains under review. With the membership rules up in the air, last week the American Bankers Association penned a letter to the Senate urging that it adopt legislation requiring the FHFA to withdraw the proposal. In September 2014, the FHFA proposed changes that would require members to hold 10 percent of their assets in residential mortgages on an “ongoing” basis and ban captive entities from the definition of insurance companies. The revised asset test was especially controversial among community banks.

No More Adverse Market Charge. Fannie Mae and Freddie Mac retired their “adverse market delivery charge” on Sept. 1. The loan-level price adjustments are removed from their loan matrixes. Former Freddie SVP Joins Collingwood. Paul Mullings, former Freddie Mac vice president of single-family business, joined The Collingwood Group as managing director, the group announced this week. FHLB NY Denied Lawsuit Trim. This week a bankruptcy judge denied the Federal Home Loan Bank of New York's bid to trim a lawsuit, according to Law 360. The suit alleges that the FHLB NY cheated Lehman Brothers Holdings Inc. out of more than $150 million by undervaluing interest rate swaps. GSEs Update State Foreclosure...

FHLB Will Stay in Topeka. After mulling a move to places like Kansas City and Denver, the Federal Home Loan Bank of Topeka said it would stay put and build a new headquarters there. Construction on the $26 million, 80,000 square foot building will begin next year and employees anticipate a move to the new building in 2018. The bank needed a more modern and larger space than its current 60,000 square foot location offers. Freddie Prices $471 Million K-Deal. Freddie Mac priced a new offering of Structured Pass-Through Certificates backed by fixed-rate multifamily mortgages with seven-year terms. The company plans to issue more than $471 million in K-719 Certificates, which is expected to settle around Aug. 19. This is Freddie’s 15th K Certificate offering this year.

The Federal Home Loan Bank system earned $678 million in the second quarter of 2015 and attributes the 32 percent year-over-year increase to higher gains on litigation settlements and derivatives as well as hedging activities. Total net income for the first half of the year was even higher than the previous year, according to figures compiled by the system’s Office of Finance. Net income for the first six months witnessed a 58 percent jump, to $1.69 billion. Litigation settlements accounted for $143 million in the second quarter, driven by FHLBank of Boston’s $135 million settlement. Those claims came directly from investments in non-agency mortgage-backed securities. Total FHLB assets for the first half of the year were pretty much flat at $916.9 billion, representing...