Washington Report | June 21, 2024
The Federal Housing Finance Agency (FHFA) this week held a daylong symposium to explore how Federal Home Loan Banks can — and why they should — work more with Community Development Financial Institutions (CDFIs).
The session was part of FHFA’s continuing review of the effectiveness of the Bank system and its assessment of what else its members can and should do to support affordable housing and community development. It was a useful discussion.
Now, FHFA should devote similar attention to another national network of mission-focused financing institutions with even broader reach: state housing finance agencies.
In fact, the Banks and HFAs have worked together for decades. At least 20 HFAs have received Bank advances to provide liquidity to their affordable homeownership housing bonds and mortgage-backed securities. Bank Affordable Housing Program funds often support multifamily housing development financed by HFAs, too.
Last month, the Des Moines FHLBank and one of its member institutions, BND Capital, jointly invested in the North Dakota HFA’s proven statewide delivery system, because as BND President Todd Steinwald said, “Rather than creating a new grant funding mechanism, it made good sense to partner with NDHFA so they could serve more people through their established programs.”
In February, the FHLBank of Chicago coordinated greater support for housing counseling organizations serving minority and low-income home buyers through the Illinois Housing Development Authority and Wisconsin Housing and Economic Development Authority. The Topeka FHLB pioneered its innovative electronic note transfer process in partnership with the Colorado HFA. There are lots of similar examples.
Still, the Banks as a system are barely scratching the surface of what they could accomplish with HFAs. FHFA should actively encourage and provide for greater collaboration as HFAs continue their direct engagement in their regions.
For instance, FHFA wants the Banks to establish “mission-oriented” collateral programs that would enable CDFIs and credit unions to secure advances on a similar basis as conventional banks. The agency should also give the Banks more flexibility to accept new forms of collateral from HFAs and to price the collateral in a manner that reflects both their mission impact as well as their demonstrably stellar underwriting , strong balance sheets , and high independent financial ratings .
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Likewise, every Bank supports local efforts providing down payment assistance to aspiring lower-income buyers, almost always in the form of grants to member institutions and community-based groups. HFAs, which generate more than $1 billion in DPA annually , could offer channels to achieve greater scale through financing partnerships with the Banks.
Unlike FHFA’s worthwhile efforts to explore how some mission-focused organizations might gain better access to the vast resources of the FHLB system through new policies, and perhaps new regulations, around a broader framing of its mission, state HFAs are already there .
According to the agency, “FHFA regulations define the mission of the FHLBanks as providing to their members and housing associates [emphasis supplied] financial products and services that assist the financing of housing and community lending.” HFAs are, by law and regulation , the Banks’ housing associates.
It’s time to activate the full potential of that relationship.
Stockton Williams | Executive Director
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