Some FHLB Chiefs Push for Securitizing Mortgages

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Some Federal Home Loan Bank executives say the 12 banks should be able to securitize their mortgages in a move that may bring secondary market competition to Fannie Mae and Freddie Mac, The American Banker said.

According to copies of his prepared testimony before a Senate Banking Committee, Paul Clabuesch, chairman of the Federal Home Loan Bank of Indianapolis, argued that securitization is necessary to promote safety because the banks "cannot continue to hold all of the mortgage purchases on their balance sheets."

If securitization is implemented by the FHLBanks, it would "increase secondary mortgage competition and lower mortgage costs for consumers," he added.

But George Engelke, chairman of the FHLBank of New York said that the issue needs to be studied more.

"In a $925-billion...system with $41.8 billion of member lenders' capital at stake...it would be very dangerous to tinker with new authorities and new programs," he wrote.

The FHLB systems says on its web page that it contributes to help communities prosper by helping organizations like community banks, credit unions and thrifts grant more affordable mortgage loans.

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