Comment Detail

Comment

Alfred M. Pollard, General Counsel
Attention: Comments/RIN 2590-AA39
Federal Housing Finance Agency
400 Seventh Street SW
Washington, DC 20024

RE: Notice of Proposed Rulemaking and Request for comments-Members of the FHLBanks (RIN 2590-AA39

Dear Mr. Pollard;

I am a member of the Federal Home Loan Bank of Des Moines (FHLB Des Moines) Advisory Council. I also am Executive Director of Grow Iowa Foundation, a nonprofit and certified community development financial institution (CDFI) that provides capital to small business and affordable housing projects in 21 counties in southwest Iowa. Grow Iowa is based in Greenfield, a town with a population of 1982, and serves primarily small rural communities.

I appreciate the opportunity to comment on the proposed rule “Members of the Federal Home Loan Banks” (NPR).

Strong local banks have been one of the pillars of small, rural communities like Greenfield for decades. The FHLB Des Moines works side-by-side with these banks to help them finance both housing and community lending by providing a steady, reliable supply of liquidity. It also provides a direct path to the secondary market through FHLB Des Moines purchase programs, an important resource for even the smallest lenders.

The key to any strong local bank and community is financing options for its entire economic infrastructure. In rural communities, this encompasses small businesses, small farms, small agribusinesses, and community development activities – in addition to home mortgages.

The proposed regulation would require small banks under $1.01 billion in assets (CFI) for the first time to be subject to a quantifiable and on-going requirement for membership under the “makes” long-term home mortgage loans test. The proposal would require every CFI member to hold on its balance sheet a specified amount (1%, and possibly up to 5%) of these mortgage assets as a condition for continued membership, in spite of the fact that Congress has authorized and encouraged the FHLBs to make advances to CFIs to support funding for expanded activities in other asset categories involving small businesses, small farms, small agribusinesses, and community development activities.

Some CDFIs, banks and credit unions are not primarily mortgage lenders, especially the smaller banks and credit unions, which could put them at risk of either not becoming a FHLB Des Moines member or being severely penalized with the loss of membership. These new tests of membership introduce an uncertainty that has not previously existed in the FHLB system.

The reality is that the impact is not in financing more housing but in creating uncertainty of liquidity and potentially eliminating members that sell mortgages rather than hold them. Eliminating banks from membership (or causing them to withdraw membership because of the uncertainty) to the strong network of FHLB cooperatives across the United States would have a direct impact on my town and the area that Grow Iowa works in because excluded institutions will lose access to FHLB liquidity. The resulting FHLB system will be weakened by their absence. Members will lose access to one of the world's best mechanisms of funding for local financial institutions.

Rural communities in Iowa and other states need the kind of access to capital and credit that only the FHLBs and their member institutions provide. We need strong local lenders to help build and maintain strong local economies.

Because of this uncertainty, this proposed change to the FHLB membership rule is unfair to the FHLBs, their members and the communities they serve. I respectfully request that you withdraw this proposed regulation and begin a dialog with the FHLBs on these issues.

Sincerely;

Debra Houghtaling
405 SW 2nd Street
Greenfield, Iowa 50849