The Federal Home Loan Bank System could be on the verge of playing a bigger role in the $4 trillion U.S. mortgage finance market.

The system's regulator, the Federal Housing Finance Board, wants Home Loan banks to move beyond advancing money to private mortgage lenders and to create a new form of mortgage financing for banks and thrifts. A controversial proposal calls for the 12 Home Loan banks to pool mortgages and share the credit and interest risks with originators.

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