By ROBYN MEREDITH

WASHINGTON -- Walking a careful line between providing credit for low-income communities and ensuring that the Federal Home Loan Bank System remains sound, the Clinton administration laid out its plans Monday to overhaul the $178 billion-asset enterprise.

In its long-awaited report on the system, the Department of Housing and Urban Development said the government-sponsored enterprise should add permanent capital - perhaps by a selling stock to the public - as it increases its efforts to serve low-and moderate-income households.

As the system gains nonwithdrawable capital, its 1,656 mandatory thrift members would win the right to leave the system if they wished. Also under the plan, other membership requirements for commercial bank and thrift members would be equalized.

More than 4,500 financial institutions belong to the system, which issues debt at rates just above Treasury bonds, then lends the money it raises to its members: 2,442 banks, 2,145 thrifts, 61 credit unions and 19 insurance companies.

Those member institutions hold dividend-paying stock in their district Home Loan Banks, and are then alowed to borrow on advantageous terms. Members, in turn, use advances from the Home Loan Banks to make loans to their customers.

Nicolas P. Retsinas, who serves as HUD's representative to the bank system's regulator, the Federal Housing Finance Board, stressed that, "We see the 4,600 lenders that make up the Home Loan Banks as partners."

The report drew mixed reviews from trade groups.

SCBA Likes Plan

Savings and Community Bankers of America President Paul A. Schosberg said his group favors, "HUD's endorsement of voluntary membership in the FHLB system, a rationalization of its capital structure, strong safety and soundness regulation, and an enhanced role for stockholders in the governance and business oversight of the FHLBanks."

Mr. Schosberg said, "The department wisely refrained from seeking to deploy the system to address all unmet needs in housing finance," and noted that SCBA was drafting proposals of its own for reforming the system.

Ann M. Grochala, director of bank operations at the Independent Bankers Association of America, said the report prompted, "mixed feelings."

"We are very supportive of their recommendations to open up access to the system," Ms. Grochala said. The IBAA is, "A bit concerned about the social flavor of the proposals."

But the community bank trade group objects to a proposal in the report that would no longer allow members to count their mortgage-backed security holdings towards the requirement that 10% of their assets must be mortgage-related. That provision, "would be a hurdle to membership in some instances," she said.

Looking Ahead

Mr. Retsinas said Monday's report is part of the "formulation of a legislative initiative" to overhaul the system. While Congress may hold hearings, the administration would not seek legislation this year, he said.

For that reason, Mr. Retsinas said, the report lays out HUD's broad views on the changes it wants made, but does not endorse specific ways to achieve them.

The HUD report is the last of the five Congressionally mandated studies on the system, and comes 362 days after its Capitol Hill-set deadline expired.

If Congress approves such an overhaul, the system would more closely resemble the nation's other two housing-related GSEs, the Federal National Mortgage Association, or Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac.

While HUD did not suggest that the system should securitize loans, it did recommended that the three housing enterprises share the same regulator, the Office of Federal Housing Enterprise Oversight.

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