Earlier this year, I wrote in these pages of the continuing relevance of the Federal Home Loan Bank System and its housing finance mission. I noted that the system combines the strength of product flexibility; a readiness to support community development with both advances and technical assistance; and, through its members, a local delivery network without peer in the U.S. housing finance system.
These characteristics have enabled the system to play a major role in housing finance for more than six decades, and they will be the basis for an expanded role in the future. That is the consensus after more than two years of studies and reports by government agencies, private-sector analysts, Home Loan bank stockholders, and the banks themselves. Recent trends support these conclusions:
Membership in the system has topped 5,000 - a milestone that marks a net gain of nearly 1,800 new member institutions during the past five years. Moreover, commercial banks, which became eligible for membership only in 1989, now outnumber thrift members 2,670 to 3,112.
Meanwhile, the system's specialized programs for affordable housing and community development are meeting a variety of housing finance and development needs.
The affordable-housing program now has $277 million in subsidized advances and grants outstanding, financing nearly 73,000 housing units, mostly for lowincome households. The system's contribution to the program this year alone will be $75 million.
The community investment program, often used to provide long-term fixed-rate financing for housing and community development projects, is also setting new records. Already this year, $1 billion in advances has been issued, bringing total community investment advances to nearly $5.6 billion in only five years.
To help the system meet the challenges of the coming century, the Federal Housing Finance Board is working to decentralize and streamline decision making.
For example, last year, with the adoption of revisions to the finance board's membership regulation, we authorized the district banks to approve certain applications for membership.
As a result, nearly half of all membership applications this year have been handled at the district level instead of in Washington.
The finance board also has given the Home Loan banks authority to approve modifications to previously approVed affordable-housing programs. With applicants already conforming to the maturing program's regulations, this change will ensure that there will be no disruption in assistance to affordable-housing projects.
Recently, the finance board asked the 12 Home Loan banks to conduct roundtable meetings in each district by the end of September. The purpose of each of these meetings is to address fundamental questions abut the system's future. Among them are questions about the system's contribution to community development through its existing network of community-based lenders. Also at issue is the impact of the system's changing membership base. Other topics for discussion include the acceptability of certain types of lending and collateral, options for supporting community lending through the system's regular advances program, and proposed changes in the way the system is governed.
These issues are critical to the future of the system. It is up to each bank to determine how it can best discuss them. But whatever the format of the district forums, the Home Loan banks will be helping to set the stage for hearings that the finance board will conduct later in the fall.
Our hearings are expected to concentrate on the contribution of the system and its members to housing finance and community development; the capacity for the system to support community lenders and community-based lending; and an appropriate corporate and regulatory governance structure for the system.
We expect that the hearings will confirm that a consensus on the system's future is taking shape, something that the administration intends to build upon when it submits a comprehensive legislative reform package to Congress early next year.
It is essential that the dialogue includes the best thinking about the system's principal issues. By ensuring the system's continued contribution, we will be helping to meet the country's housing finance and community lending needs prudently and responsively for decades to come.
