The Federal Home Loan
Bank System
The 12 regional FHLBanks are cooperative wholesale banks
created by Congress in 1932. Their mission is to provide
liquidity to support housing finance and community lending
for over 8,000 local financial institutions.
What are the FHLBanks?

Mission is to facilitate increased homeownership and economic
development, but different than Fannie Mae and Freddie Mac.

Federal Home Loan Bank System
 Provides liquidity to financial institutions through various types of
funding for residential and community development.
 Some FHLBanks compete with Fannie and Freddie by
purchasing mortgages through their own mortgage programs.

Fannie Mae and Freddie Mac buy large volumes of residential
mortgages, bundle them into securities, and sell mortgage backed
bonds and securities to investors.

Implicit (not explicit) government guarantee on debt issues; AAA
rated.

Federal Home Loan Banks, Fannie Mae, and Freddie Mac are
regulated by the Federal Housing Finance Agency.
FHLBank Membership
Composition
Savings Banks
& Thrifts
Commercial
Banks
1990
2009
2,779
1,139
55
5,706
Share Ownership by
Industry Type
12/31/09
Commercial
Banks
Thrifts
Credit Unions
Credit Unions
3
1,003
Insurance
Companies
4
209
Insurance
The FHLBank System: How It
Works
FHLBanks
Office of Finance
Homes
Investors
Member Institution
Community
Investment
Why the FHLBanks Work

The Federal Home Loan Banks' cooperative structure gives
members access to funding that enables them to advance
credit to businesses in all economic cycles.

Many large and small institutions are financing their
community lending through low-cost funds from a regional
Federal Home Loan Bank.

For a majority of members, the Federal Home Loan Banks
are the only source of access to the global credit markets.

Each Federal Home Loan Bank is regionally focused and
controlled, allowing it to be responsive to the specific credit
needs of the communities it serves.
FHLBanks’ Affordable Housing
Program

The Affordable Housing Program (AHP) is the largest source of
private sector funds for housing and community development in
the country.

Funded with 10% of the Federal Home Loan Banks' net income
each year.

Allows for funds to be used in combination with other programs
and funding sources, like the Low-Income Housing Tax Credit.

Funded projects serve seniors, the disabled, homeless families,
first-time homeowners and others with limited resources

Since 1990, AHP has awarded over $3 billion to help fund more
than 623,000 housing units have been built using AHP funds,
including 391,000 units for very low-income residents.
Community Lending
Bank’s public service mission is to create a range of products and
services to benefit its members and the communities they serve
thereby fostering partnerships
Grant Programs
Members
Outreach and
Technical
Assistance
8
FHLBanks
Credit
Programs
Communities
Initiatives
Community Lending
The FHLBanks accomplish that objective through:
Affordable Housing Program—10% Bank’s profits
 Competitive
 Set-Aside (WISH and IDEA)
Access to Housing and Economic Assistance for Development
(AHEAD) Program—FHLBSF Initiative
Discounted Credit Advances and Letters of Credit
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Community Investment Program (CIP)
Advances for Community Enterprise (ACE)
Non-Housing Tax-Exempt Letters of Credit
Community Lending
Grant Programs
Competitive AHP:
Since 1990 the FHLBanks have nearly $4 billion, helping to
create more than 623,000 units of quality affordable housing
Since 1990, FHLBSF has awarded $632 million in grants helping to fund
over 95,000 units in CA, AZ, NV, and other areas served by our members
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Scored on a 100-point system
Two annual competitions
Only for low- & moderate income housing; beneficiaries earn <
or = 80% of area median income
Rental: monitoring for 15 years
Owner-occupied: 1-time monitoring, 5 year retention
Community Lending
Grant Programs
Homeownership Set-Aside Programs – IDEA & WISH:
Since the year 2000, $22 million to 2,200 households served
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$15,000 per household
Members may reserve up to $1 million annually per
program
Non Competitive
Offered once a year
1 year term limit for use with grant
All monitoring done at time of disbursement of subsidy to
the member
5 year retention
Community Lending
Grant Programs
Homeownership Set-Aside Programs:

IDEA -- Individual Development & Empowerment Account
• grants matched to IDA or FSS program

WISH -- Workforce Initiative Subsidy for Homeownership
• grants leveraged by homebuyer’s contribution
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Community Lending
FHLBSF Affordable Housing Programs
2010 Allocations
Competitive $58.8 mm*
Homeownership Set-Aside $14.6 mm
(IDEA: $4.345 mm, WISH: $10.25 mm)
*estimated allocation including de-obligated subsidy from
previous year’s set-aside and competitive programs
13
Community Lending
Homeownership Set-Aside Programs – IDEA & WISH typical financing:
Conventional
Mortgage
Conventional
Mortgage
Homebuyer
Contribution
Savings in IDA
IDEA Match
WISH Grant
Other Grants
Mortgage
Assistance
Programs/Other
Grants
14
Community Lending
Access for Housing and Economic Assistance for Development
(AHEAD Program):

Provides predevelopment funds

Supports traditional housing projects as well as innovative
economic development projects

$2,519,000 awarded from 2004 to 2009
15
Community Lending
Credit Programs
HPA Advance
 Advances to modify or refinance
loans of targeted homeowners
potentially at risk of default on
primary residence
CIP and ACE Advances:
 Advances and LCs offered below regular rates
 CIP - Mainly to support residential lending
 ACE - Mainly to support small business and economic
development lending
 Member limit combined $200 million
16
Community Lending
Standby Letters of Credit (LOC’s)
Housing Letters of Credit
Non-Housing Related Tax-Exempt LOC’s (HERA)

Public Purpose and Industrial Development projects
Project Examples
– FHLBank of Dallas

Kenner Theatres, LLC Project, New Orleans, LA


Member Bank: First NBC Bank
Bond Issuer: Louisiana Local Government Environmental Facilities Community
Development Authority
Letter of Credit: $ 3.65 Million
FHLBank of Pittsburgh

University Student Housing, LLC Project - West Chester University of PA
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Member Bank: Citizens Bank of Pennsylvania
Bond Issuer: Chester County Industrial Development Authority
Letter of Credit: $ 100.34 Million
Community Lending
Standby Letters of Credit (LOC’s)
Project Examples – FHLBank of San Francisco

McGarry Street, LLC / Green Farms Inc. – Los Angeles, CA
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Guy Evans Inc. – Indio, CA
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Member Bank: California Bank & Trust
Bond Issuer: Industrial Development Authority of the City of Los Angeles
Letter of Credit: $ 3 Million
Member Bank: California Bank & Trust
Bond Issuer: County of Riverside Variable-Rate Demand Empowerment Zone Facility
Revenue Bonds
Letter of Credit: $ 6 Million
2 Projects expected to retain or create approximately 325 jobs in Southern
California

> $28,000 per job

Smallest = $1.2 million

Total LOC’s Issued by FHLBanks: $ 4,097,791,031 for 158 Projects
18
Largest = $308.5 million
Legislative Update
In May, Rep’s Pascrell (D-NJ), Boustany (R-LA), and Kanjorski (D-PA)
introduced H.R. 5311, the Community Development Financing Act of 2010
 Amend the Internal Revenue Code of 1986 to make permanent the
treatment of municipal bonds guaranteed by Federal Home Loan Banks
as tax exempt bonds.

Wall Street Reform Bill is currently in Conference

Senate and House Conferees are working out
differences between the two versions

Plan to have President sign before July 4th Recess
19
Treasury’s Seven Questions
1) How should federal housing finance policy objectives
be prioritized in the context of broader objectives of
housing policy?
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20
The Treasury added: “The commentary could
address: policy for sustainable homeownership;
rental policy; balancing rental and ownership; how to
account for regional differences and affordability
goals.”
Treasury’s Seven Questions
2) What role should the federal government play in
supporting a stable, well-functioning housing finance
system and what risks, if any, should the federal
government bear in meeting its housing finance
objectives?
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21
The Treasury added: “The commentary could address:
level of government involvement and type of support
provided…role of private vs. public capital…role of any
explicit government guarantees; role of direct
subsidies…how to balance the retention and distribution of
risk…and mechanisms for dealing with episodes of market
stress.”
Treasury’s Seven Questions
3) Should the government approach differ across
different segments of the market? And if so, how?
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22
The Treasury added: “The commentary could address:
differentiation of approach based on mortgage size or
other characteristics …differentiation in mechanisms
to convey subsidies.”
Treasury’s Seven Questions
4) Should the current organization of the housing
finance system be improved?

23
The Treasury added: “what aspects should be
preserved…optimal general organizational design
and market structure, capital market functions,
sources of funding…the role of existing government
sponsored enterprises.”
Treasury’s Seven Questions
5) How should the housing finance system support
sound market practices?
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24
The Treasury added: “The commentary could
address…how best to balance risk and access; and
extent to which housing finance systems that
reference certain standards and mortgage products
contribute to this objective.”
Treasury’s Seven Questions
6) What is the best way for the housing finance system
to help ensure consumers are protected from unfair,
abusive or deceptive practices?
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25
The Treasury added: “The commentary could
address level of consumer protections and
limitations, supervising agencies…and role of
consumer education.”
Treasury’s Seven Questions
7. Do housing finance systems in other countries offer
insights that can help inform U.S. reform choices?

Comment Period Closes July 21, 2010

TREAS-DO-2010-0001-0012.1
This is comment on PROPOSED RULE: Public Input on
Reform of the Housing Finance System
Docket ID:
TREAS-DO-2010-0001
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26
Poised for the Future

The Federal Home Loan Banks are the
critical liquidity source that fund our
financial institutions so our communities
have access to credit.

In a restructured financial system, the
Federal Home Loan Banks will continue to
function as steady and reliable funding
mechanisms for housing, jobs, and
economic development.
For more information:
Council of Federal Home Loan Banks
www.FHLBanks.com