The Community Home Lenders Association has called for independent mortgage banks to gain eligibility for Federal Home Loan Bank membership while cautioning against expanded mortgage purchasing by these institutions.
CHLA leadership argues that modernizing FHLBank membership rules would strengthen the mortgage market and provide IMBs with better access to liquidity. Current regulations restrict many IMBs from joining the 11 regional FHLBanks, which offer advances and other tools that larger lenders use routinely.
The group's position carries a caveat. CHLA warns the Federal Housing Finance Agency against loosening restrictions on what mortgages FHLBanks can purchase. Broader eligibility for mortgage acquisitions could destabilize these government-sponsored enterprises and create moral hazard, the association contends.
Instead, CHLA recommends annual lending reviews for any IMBs granted membership. These assessments would ensure member banks maintain adequate lending volumes to community borrowers, particularly low-income and underserved populations. The proposal aims to prevent FHLBank membership from becoming a liquidity tool divorced from actual mortgage origination and community development.
IMBs originate roughly 35 percent of residential mortgages nationally. Yet many operate at a competitive disadvantage compared to bank mortgage operations, which automatically qualify for FHLBank access. Restricted liquidity options force IMBs to rely more heavily on warehouse lines of credit and capital markets, driving up borrowing costs that ultimately reach borrowers.
For buyers and borrowers, IMB access to FHLBank membership could mean tighter spreads and lower rates on mortgages. For IMBs themselves, membership would unlock cheaper funding sources and operational flexibility during market stress. Sellers benefit when a wider lender base competes for originations.
However, landlords and investors should note that CHLA's caution about expanded mortgage purchases reflects legitimate concerns