Comment Detail
Date: 10/28/22 First Name: Megan Last Name: Marsick Email: mmarsick@enterprisecommunity.org Organization Type: other Organization: Enterprise Community Loan Fund Inc Comment
We offer the following comments with respect to the questions posed by FHFA in its request for public comment to FHFA’s comprehensive review of the Federal Home Loan Bank System:
1. Two of the biggest challenges for CDFIs is providing collateral that FHLBs will accept, and when acceptable, that it receives a substantial haircut to the CDFI’s advance rate. We understand that CDFIs are not regulated. That said, if the same collateral were provided by a bank member, the haircut would be substantially lower. We recommend that FHLBs be encouraged to look at each CDFI’s financial strength individually rather than grouping and treating CDFIs according to general standards for the industry. CDFIs vary significantly in their organization and credit strength. One specific defining factor that should be considered is whether a CDFI is rated by one of the big three public rating firms. Collateral for a rated CDFI should be treated the same way as other members with the same rating. Additionally, we encourage the FHFA to allow member organizations to provide third-party collateral for their advances. CDFIs work with other FHLB members, such as banks and credit unions, along with other community development investors, such as foundations. These organizations and are strong partners for CDFIs in supporting the investments we make. Allowing these third-party partners to provide collateral for CDFIs would provide significantly greater access to the FHLB advance window while at the same time providing another avenue for banks and credit unions to meet their CRA targets and foundations to meet their charitable objectives.
2. Currently, ten percent of a FHLB’s net income goes towards products and/or advances to support community development in low-income communities. We think this percentage should be higher. Since FHLBs are not subject to corporate taxes, we suggest at a minimum matching the 15% Minimum Corporate Tax rate, which is a conservative and highly defensible threshold.