Comment Detail

Comment

Thank you for the opportunity to provide comments in connection with the FHFA's review of the future of the Federal Home Loan Bank system.
My comments are written from two perspectives. First of all, I am the CEO, Chairman and General Counsel of Legends Bank, a community bank founded by my grandfather in 1913. We serve mostly rural communities in central Missouri and are under a half a billion dollars in assets.
We consider the Federal Home Loan Bank of Des Moines ("FHLBDSM") to be an integral part of our community banking model. As a privately held entity, we do not have access to the capital markets to address any liquidity needs nor to access longer term funding. Instead we utilize the FHLBDSM for these purposes. I have been at the bank long enough to remember when we were not members of the FHLBDSM, and in those days there would be times we would have to restrict lending altogether, or at least significantly limit interest rate locks, because of a shortage of funding or our inability to match funding terms to loan terms. Consequently we were not able to fully meet the loan needs of the communities we serve.
Utilizing the products and services of the FHLBDSM, we have been able to develop liquidity plans and utilize longer term funding options that have allowed us to offer expanded lending options to match the loan demands of our customers. For instance we are now able to fund and keep on our books some longer term fixed rate residential mortgages for customers who do not qualify for the secondary market. This advances our mission to provide for expanded housing options for individuals who we believe are qualified borrowers but do not fit the cookie cutter model required by Fannie and Freddie. The availability of advances also allows us to scale our lending to meet seasonal demands, such as for agricultural needs or during periods of heavy construction activity.
As a member of the FHLBDSM, we also participate in several AHP Programs. We are most heavily involved in the HomeStart Program, which has been an invaluable asset toward our efforts to put low to moderate income families in their own homes. We also often sponsor customers as they apply for the competitive grant funds available from the FHLBDSM, and have been successful on several occasions in being awarded funds to upgrade multifamily facilities that are available for rent to low to moderate tenants.
Secondly, I am writing as a board member of the FHLBDSM who currently chairs the Risk and Compliance Committee. As such, I am very familiar with the extreme care the bank takes to assure that advances are fully secured and perfected so that the bank's capital is not put at risk by an under secured default by a member. I realize that there are a number of different kinds of entities that would like access to membership in the FHLB System, but for most if not all of those I am aware of, their membership and ability to draw advances would substantially compromise the safety and soundness of the System in that they have no prudential regulator, they have little or no adequate collateral to pledge and/or their connection to the financing of the housing industry and to community investment is tenuous at best. Thus I would suggest extreme caution in entertaining any request for membership from any industries not presently eligible for such. Alternatively, I believe that current membership requirements are adequate to protect the system and advance its housing and community development mission and thus current members should not be subjected to additional membership requirements.
Once again, thanks for the opportunity to comment. Please feel free to reach out to me if I can provide additional information to you from the perspective of a rural community banker and a FHLBDSM board member.