PITTSBURGH-The Federal Home Loan Bank of Pittsburgh reported that mounting losses on its mortgage backed securities could push it up against regulatory risk-based capital limits.
The warning comes after FHLBs in Seattle and Indianapolis made similar disclosures to members in recent days. Several other FHLBs in Boston, Chicago, Atlanta and San Francisco are expected to issue gloomy financial reports in the coming days.
The FHLB Pittsburgh estimated the market value of its $8.8 billion portfolio had declined by almost 30% at year-end, doubling its risk-based capital requirement to $4.24 billion.
The FHLBs have run into the same problem as corporate credit unions, that is, the fall in the market value of their mortgage backed securities has created billions of dollars in unrealized losses.
The FHLBs, like the corporates, hope to be able to hold the distressed s ecurities to maturity in order to regain some of the market value of the holdings.
The Federal Home Loan Banks have become an important source of liquidity for credit unions, especially for the corporates, which have tapped into the FHLBs for almost $10 billion over the past year.
Almost 1,000 natural person credit unions also use one or more of the FHLBs to provide them with low-cost funding for mortgages lending.
