The final rule issued last week banning captive insurance companies from joining the Federal Home Loan Banks ruffled feathers in the mortgage industry and has some pointing to Congress for future guidance on the issue. FHLBank members that joined the system by way of their captive insurers before the Federal Housing Finance Agency’s proposed rule issued in September 2014 have five years to relinquish their membership. Many are real estate investment trusts that would otherwise be ineligible for membership if it weren’t for finding a loophole in the system. Captive insurance members that obtained membership after the FHFA announced the proposed rule have a year to exit the system and unwind their advances.

FHFA FHLB Classification Guidance. The Federal Housing Finance Agency put out guidance this week on the classification of investment securities at the Federal Home Loan Banks. It is adopting the 2013 Uniform Agreement for FHLBank supervisory purposes. Where FHFA’s rule and guidance and the 2013 Uniform Agreement may conflict, the FHFA said its rules and guidance will apply. The agreement included FHLBanks using sound and conservative assumptions as they pertain to upgrades and it provides classification approach examples that provide boundaries for upgrading classified securities. Freddie Prices $1 Billion STACR Offering. As the first out of eight Structured Agency Credit Risk offerings planned through October 2016, Freddie Mac...

The Federal Housing Finance Agency published a final rule this week that will prevent real estate investment trusts from gaining access to financing from the Federal Home Loan Bank system via captive insurance companies. REITs are not allowed direct membership in an FHLBank. However, in recent years a number of REITs have formed captive insurance companies that were granted FHLBank membership because insurance companies were allowed to ...

Officials at the Federal Housing Finance Agency provided some advice to real estate investment trusts along with the announcement this week that REITs will lose their access to funding from Federal Home Loan Banks: ask Congress to make some changes. “Congress has amended the Federal Home Loan Bank Act in the past to allow additional entities to become members of a Federal Home Loan Bank and it can certainly do so again if it wants some of these entities to ...

Despite receiving hundreds of comments against the proposed rule to ban captive insurance companies from membership in the Federal Home Loan Bank system, the Federal Housing Finance Agency forged ahead this week and issued a final rule banning them from the FHLBanks, upsetting many in the mortgage industry. The decision forces FHLBank members that had used their captive insurers to join the system prior to the FHFA’s proposed rule, many of which are ...

The Federal Housing Finance Agency issued a final rule last week to make the process a bit clearer when it comes to ending relationships with fraudulent businesses and individuals. The Suspended Counterparty Program final rule has been in the making for a few years and parts of the interim rule, published in October 2013, have been revised. The final rule, which goes into effect Jan. 22, addresses comments made by Fannie Mae and 11 Federal Home Loan Banks. The program was put in place to help mitigate risk to Fannie, Freddie Mac and the FHLBs. One of the changes made in the final rule is that it allows more time for Fannie and Freddie to...

Freddie Announces New Alliance with Lenders One. Freddie Mac has teamed up with Lenders One Mortgage Cooperative, based in St. Louis, to give Lenders One members who are Freddie seller/servicers pricing and execution benefits, enhanced access to mortgage products, and professional training and development opportunities. Freddie did not provide additional details on specific pricing benefits .Chris Boyle, senior vice president of single-family sales and relationship management at Freddie, said Freddie Mac is pleased to “help its members reach more eligible borrowers, achieve new efficiencies in the origination process and build strong, competitive businesses.” In related news, Lenders One is still...

The mortgage industry has notched one modest victory on Capitol Hill and continues to hope for more as lawmakers try to wrap up a spending bill for the government’s 2016 fiscal year. The victory is a new process for banks and others to petition the Consumer Financial Protection Bureau to designate an area as “rural” or underserved for the purposes of the CFPB’s ability-to-repay rule. More flexible mortgage products, such as balloon loans, are permitted in such markets. The change was included...

The Federal Home Loan Bank system introduced a new servicing-released option from Nationstar Mortgage as part of its Mortgage Partnership Finance program. The program lets member lenders sell their fixed-rate government loans into the secondary market. and the new option is expected to be ready sometime in December. The MPF government mortgage-backed security product already had a servicing-retained option, in which the lenders service their own loans, but with the new product, FHLB bank members can use the full service options without the infrastructure or expertise needed to service the loans. John Stocchetti, executive vice president of the MPF program, which operates out of the Chicago FHLBank, said the new option is another step in the FHLBank system becoming a “one-stop shop” for its members.

The Federal Home Loan Banks reported a modest decline in outstanding advances during the third quarter, but the complexion of the system’s customers continued to shift, according to a new Inside The GSEs analysis of bank call reports and Office of Finance disclosures. Total advances outstanding declined just 0.2 percent from the end of the second quarter, but commercial bank usage was down 8.2 percent. Banks were still the biggest borrowers of FHLBank advances, with a 58.9 percent share of the total $586.2 billion (par value) of advances outstanding at the end of September. Meanwhile, advances to insurance companies surged a whopping 14.6 percent during the third quarter, replacing thrifts as the second-largest class of FHLBank advance users.