FHLBs Proposal Could Add Liquidity ToAgency Markets

September 01, 2004, 1:00 a.m. EDT 1 Min Read

WASHINGTON - (09/01/04) The Federal Home Loan Bank ofSeattle has petitione dits federal regulator to begin buying andselling mortgage-backed securities from its members, a proposalwhich, if joined by others of the 12 regional FHLBs, could addsignificant liquidity to the market for MSBs. Under the proposal,submitted to the Federal Housing Finance Board, regulator for theFHLBs, the Seattle bank would hold some securities and sell othersto institutional investors. It would also give credit union membersof the FHLBs another market for the MSBs. The proposal would putthe Seattle bank in greater competition with Fannie Mae and FreddieMac, which currently dominate the market for MSBs. The FHLBs havecome into increasing competition with the Fannie and Freddie inrecent years with the advent of their own secondary mortgage marketprogram, known as Mortgage Partnership Finance.

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