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On January 12, 2016, The Federal Housing Finance Agency (FHFA) finalized the Federal Home Loan Bank (FHLB) Membership rule. NAR had written in support of an expanded, ongoing mortgage asset test, however, FHFA determined that 98% of FHLB members met the ongoing test and that it implementation would be burdensome to capture the other 2%. With this rule, banks can remain members of the FHLB system without holding any mortgage related assets.
In addition, FHFA also moved forward with a rule to prevent Real Estate Investment Trusts (REITs) from gaining access to the FHLB system by creating “captive” insurance companies, or a insurance company that serves just one single, related entity. Though insurance companies that serve the public at large can still become members of the FHLB system, FHFA defined “insurance companies” to exclude these “captive” insurers. Though companies have five years to wind down membership. NAR comments raised concerns that completely eliminating REIT eligibility could remove liquidity in the mortgage system.