Despite the Federal Housing Finance Authority’s proposed rule that would block real estate investment trusts from joining a Federal Home Loan Bank through captive insurance units, the Indianapolis FHLBank approved a new REIT member. An insurance subsidiary of Five Oaks Investment Corp. was admitted on Feb. 24, according to the REIT’s 2014 annual report released this week. A handful of other REITs, including Two Harbors, Redwood Trust and Invesco ...

A moratorium of real estate investment trusts gaining membership in the Federal Home Loan Bank system ended recently when the captive insurer of Five Oaks Investment was approved as a member of the FHLBank of Indianapolis. The REIT revealed this week that Five Oaks Insurance gained FHLBank membership on Feb. 24. “FOI is currently negotiating agreements for advances with the FHLBank and, although no assurance can be given, FOI anticipates ...

With the jumbo MBS market slow to rebound, Redwood Trust has put an increased emphasis on agency mortgages, its commercial mortgage business and risk-sharing transactions with the government-sponsored enterprises. On the residential side, Redwood has continued to work on issuing jumbo MBS, but the real estate investment trust usually finds better execution in whole-loan sales. Redwood obtained approval as a seller to the GSEs at the end of 2013 and completed $4.0 billion in conforming mortgage correspondent business last year. During the fourth quarter, Redwood delivered...

The 12 Federal Home Loan Banks saw modest gains in net interest income in 2014, but other factors led to declines in total income, according to preliminary data released by the Office of Finance. The FHLBanks earned a combined $2.246 billion in net income last year, down 11.0 percent from 2013. Their fourth-quarter income, $550 million, was down 12.3 percent from the previous quarter. Results varied significantly among the FHLBanks, however. Chicago was the most profitable, reporting $392 million in net income for the year, up 14.3 percent from 2013. New York had $315 million in net income in 2014, up 3.3 percent from the previous year. The two steepest declines were at Indianapolis and Dallas, both of which saw [with one exclusive chart] ...

The Federal Housing Finance Agency recently updated its regulatory guidance for the Federal Home Loan Banks on the reporting of fraudulent financial instruments. The new guidance instructs the FHLBanks to implement policies and procedures for complying with the reporting requirements regarding anti-money laundering and suspicious activity that the Financial Crimes Enforcement Network published Feb. 25, 2014. The FinCEN regulation takes some of the provisions of the Bank Secrecy Act and applies them to the FHLBanks, and delegates examination responsibility to the FHFA to determine compliance. “Generally, the FinCEN regulation requires that each regulated entity develop an anti-money laundering program and file suspicious activity reports (SARs), among other requirements,” the FHFA said. The FinCEN reg took effect April 28, 2014. The ...

The Federal Housing Finance Agency isn’t providing a timetable on when it might decide the thorny issue of captive insurance companies becoming members in the Federal Home Loan Bank system. In a recent press briefing, FHFA Director Mel Watt also clarified that he is not presuming that any current members or applicants want to “abuse” their membership benefits, but said the agency must still go through the process of fielding comments on a proposal that would effectively ban captives from joining the system.Roughly 18 current members of the FHLBanks are affected by the proposed ban, seven of which are affiliated with real estate investment trusts. Captives do not write coverage outside of their own company. Traditional insurance companies that ...

“Obviously we’ve touched a nerve,” Mel Watt, director of the Federal Housing Finance Agency, said of the FHFA’s proposal to revise standards for membership in the Federal Home Loan Bank System. At a hearing this week by the House Financial Services Committee, a number of Congressmen raised concerns about the proposed rule the FHFA issued in September. Rep. Frank Lucas, R-OK, was skeptical of the FHFA’s intentions, asking what problem the FHFA was trying to fix. “There are some potential problems that we are trying to fix, to make sure that the FHLBanks meet the statutory purposes that have been set,” Watt replied. “First of all, you don’t want anybody to be a member of the FHLBank system and get ...

The Federal Housing Finance Agency’s proposal to prohibit captive insurers from joining the Federal Home Loan Bank system included generalizations and inaccuracies, and it overstepped rulemaking boundaries, according to real estate investment trusts. The FHFA issued a proposed rule in September that would prohibit captive insurance companies from joining the FHLBank system. At least seven REITs have used captive insurers to gain access to ...

The Federal Home Loan Banks have mounted strong opposition to a proposal from the Federal Housing Finance Agency that would revise standards for membership in the FHLBank system. “The proposed rule, if finalized, will fundamentally alter the FHLBanks’ relationship with their members and impair the FHLBank system’s ability to advance its congressionally-mandated mission of providing liquidity to support housing finance markets and the U.S. financial markets generally,” said John Bowman, a partner at the Venable law firm, in a comment letter submitted on behalf of the Council of FHLBanks. The FHFA issued the proposed rule in September and the comment deadline closed this week. More than 1,200 comments were submitted with community banks, real estate investment trusts, state regulators and ...

The Federal Housing Finance Agency overstepped its authority when it proposed excluding captive insurers from obtaining membership in the Federal Home Loan Bank System, according to captive insurance companies. Real estate investment trusts – including Redwood Trust and Two Harbors Investment – have used captive insurance companies to gain access to FHLBank financing. “The proposed membership regulations would needlessly exclude an entire category of statutorily permitted members that can further the FHLBank System’s mission as the mortgage finance market continually evolves,” Redwood Trust said in a comment letter to the FHFA. The FHFA issued...