FHLB Proposal Could Boost Liquidity
The Federal Home Loan Bank of Seattle has petitioned its federal regulator to begin buying and selling mortgage-backed securities from its members, a proposal which, if adopted by others of the 12 regional FHLBs, could add significant liquidity to the market for MSBs.
Under the proposal, submitted to the Federal Housing Finance Board, regulator for the FHLBs, the Seattle bank would hold some securities and sell others to institutional investors.
It would also give credit union members of the FHLBs another market for the MSBs. The proposal would put the Seattle bank in greater competition with Fannie Mae and Freddie Mac, which currently dominate the market for MSBs.
The FHLBs have come into increasing competition with the Fannie and Freddie in recent years with the advent of their own secondary mortgage market program, known as Mortgage Partnership Finance.