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  • Comment Detail

  • Date: 12/18/14
    First Name: James
    Last Name: Engel
    Organization: Aquesta Bank
    City: N/A
    State: N/A
    Attachment: N/A
    Number: RIN-2590-AA39

  • Comment

    December 15, 2014

    Alfred M. Pollard, General Counsel
    Attention: Comments/RIN 2590-AA39
    Federal Housing Finance Agency – Fourth Floor
    1700 G Street, NW
    Washington, D.C. 20552

    Re: Notice of Rulemaking and Request for Comments – Members of Federal Home Loan Banks (RIN 2590-AA39)

    Dear Mr. Pollard:

    I appreciate the opportunity to comment on the Federal Housing Finance Agency’s proposed rule RIN 2590-AA39 Members of the Federal Home Loan Banks. As a community bank and FHLBank member, we appreciate your desire to ensure the FHLBanks remain focused on the housing portion of their mission. However, we believe the proposed rule directly conflicts with permissible uses of FHLBank advances as defined by Congress and undermines the valuable role the FHLBanks serve in supporting community financial institutions.

    Aquesta Bank is a small community bank started in August of 2006. While the “great recession” was difficult, Aquesta Bank managed to remain profitable, well capitalized, growing and supporting our local economy. This support of the local small businesses, home owners, charitable entities etc., would not have been possible without the Federal Home Loan Bank of Atlanta. I am deeply concerned that the proposed rules will restrict the very lifeblood of community banks and, consequently, the small towns that we serve.

    Over the past 25 years, Congress has broadened access to FHLBank funding and liquidity by expanding both membership eligibility and the ways in which member institutions can use advances.
    Since 1999, community financial institutions (CFIs) have been able to use long-term FHLBank advances for residential housing finance, small business loans, and small farm and small agri-business purposes. While we recognize the importance of a healthy housing finance system and the FHLBanks’ statutory obligation to support housing finance, we have experience first hand how strong local businesses directly impacts availability of housing, housing starts and the willingness of families to move to secure both housing and jobs. We also believe that any changes to the statutorily established uses of FHLBank advances, in particular changes that would narrow the FHLBanks’ mission as the proposed rule appears to do, will negatively impact housing starts and job creation by limiting small bank lending to the small business people at the heart of both housing starts and job creation.

    We are concerned that the proposed rule would significantly increase FHLBank membership requirements for existing and prospective members and reduce the availability and reliability of liquidity on which we depend. Ongoing compliance with membership requirements of the proposed rule would impose additional regulatory burdens on FHLBank members and add uncertainty to FHLBank membership. FHLBank members are currently subject to ongoing requirements that demonstrate commitment to housing finance. When a member borrows an advance, it must provide eligible collateral to secure the advance. Nearly all eligible types of collateral, which are determined by Congress, are related to housing. In addition, current members must certify their active support of housing for first-time homebuyers to the FHFA every two years through the Community Support Statement. Again, as a small bank, increased regulatory burden must be paid by somebody….usually that mean reduced lending or higher rates or both. There simply has to be a balance between regulatory needs and community needs.

    As a community bank, we are enormously proud of the work we do to build a stronger community through providing access to credit for a broad range of our local customers’ needs. That is exactly what our membership in our FHLBank enables us to do.

    Under the current membership structure established by Congress, the Federal Home Loan Banks have proven to be a safe and sound business model that reliably supplies liquidity, through all market cycles, to a broad range of cooperative members for a variety of uses. The proposed rule would fundamentally change a vital part of the U.S. housing finance system that has and continues to perform well. It will restrict CFI’s ability to serve their customers, result in the termination of FHLBank membership for some members in good standing, and ultimately reduce housing and economic development credit available to families, small businesses, and communities.

    For these reasons, we request that the proposed rule be withdrawn and that the FHFA instead engage in a series of public hearings, workshops, and roundtables to solicit a variety of viewpoints from diverse stakeholders that may be impacted by this wide-ranging proposal. Thank you for the opportunity to submit a comment.

    Sincerely,

    Jim Engel
    President & CEO
    Aquesta Bank