SEATTLE – The Federal Home Loan Bank of Seattle, which reported a $93.8 million loss for the third quarter, remains "undercapitalized," a move that will prevent it from paying dividends or repurchasing capital stock, regulators said Friday.
"I am taking this action today to promote the longer-term financial stability of the Federal Home Loan Bank of Seattle," said Edward DeMarco, acting director of the Federal Housing Finance Authority, which regulates the 12 FHLBs. DeMarco took the action because of uncertainty concerning collateral values and potential for future losses on the Seattle Bank’s private-label mortgage-backed securities portfolio, the FHFA said.
The Seattle Bank is one of several FHLBs to report large losses for the third quarter related to its private-label mortgage-backed securities holdings. FHLB Boston had a $105.4 million third quarter loss. FHLB Chicago reported a $150 million third quarter loss. FHLB San Francisco reported an $85 million loss for the third quarter. Pittsburgh FHLB had a $40 million loss for the period.
Problems at the FHLBs, which provide low-cost mortgage funding and liquidity for banks and credit unions, are similar to the problems at many corporate credit unions, which are also saddled with large amounts of private-label MBS.
