Federal home Loan Bank


Presentation of the Senate Act to Reintroduce FHLB Captive Member Senator Tammy Duckworth (D-IL) enacted the Housing Opportunity Management Expand ation (HOME) Act ('p. 2361') on 30 January 2018, an amendment to the Federal Home Loan Bank Act ('the Act') which, before 19 January 2016, allowed capital insurers who had previously been members of the Federal Home Loan Bank ('FHLB') to maintain or re-establish their FHLB memberships, thereby giving them free entry to finance through the FHLB system.

The Senators Tim Scott (R-SC) and Ron Johnson (R-WI) have teamed up as co-orponors of S. 2361, who was directed to the Senate Committee on Banking, Housing and Urban Development. FHLB consists of 11 federal home loan institutions and a tax authority governed by the Federal Housing Agency (FHFA).

Founded under the Federal Law on the Home Loan Bank to, among other things, increase the accessibility of home loan financing, the ULBs are held by more than 8,000 member cooperatives. ULBs offer members cost-effective advance payments that are fully collateralised by certain types of security, which include traditional construction financing, certain types of property lending, agent RMBSs and non-agency RMBSs that comply with certain lending benchmarks.

As of January 2016, the FHHFA published a definitive scheme (the'definitive scheme') amending the rules on FHFLB affiliation. Under the definitive rules, captive insurers, even those linked to a number of listed gin undertakings, are prevented from acquiring and retaining FLB memberships and from gaining and retaining financing through the FLB system.

2361 would stipulate that the capped insurers be under the same title and under the same supervision of the company which was directly or indirectly controlled by the capping company at the time of the adoption of p. 2361. Subject to the wording of the bill adopted by Congress, businesses may need to consider how this would affect those insurance captives that are inactive or have been liquidated under state laws.

Furthermore, as previously established, p. 2361 would restrict the amount of advance payments made by FHA to cover capital assurance firms independent of the covered depositories to a maximum amount not exceeding 50 % ofthe capital asset holdings of the latter, unless FHA had provided a guaranty with the captive's mother company.

Introducing p. 2361 and referring the matter to the Senate Committee on Banks, Housing and Urban Development is a highly encouraging first move for those firms, as well as listed German REITs, that have had previous experience with the FHLB development platforms before the final scheme.

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