Nonbank Joins Home Loan System
WASHINGTON - The Federal Home Loan Bank System signed its first nonbank bank as a member, marking the latest milestone in its campaign to add members from outside its traditional thrift constituency.
The new member, Boston-based Massachusetts Co., joined the Federal Home Loan Bank of Boston last week. The company has $1.6 billion in assets and is a subsidiary of the Travelers Corp., the Hartford, Conn.-based insurance company.
Nearly 250 commercial banks have joined the Home Loan Bank System since Congress expanded its potential membership base in 1989. The system was originally set up as a liquidity source for thrifts, but other depository institutions that have more than 30% of their assets in mortgages are eligible to join.
"We're beginning to see some depth and breadth in the types of new members we draw," said a senior official of the Federal Housing Finance Board, the agency that oversees the 12 regional Home Loan banks.
The Massachusetts Co. invested $13 million in capital stock to join the Boston Home Loan Bank. Membership entitles the bank to borrow up to $230 million to fund mortgages.
"It's a very, very good deal," said Eugene M. Tangney, chairman and chief executive of Massachusetts Co. "It's a source of liquidity for us at a very reasonable cost." He said the bank, which has no branches, will use Home Loan Bank loans, known as advances, to replace funds it now gathers through brokered deposits.
The company said it will also participate in Home Loan bank affordable-housing programs to fulfill its Community reinvestment Act obligations.
|There's certainly a good fit between the services we offer and their ability to make use of them," said Ann Eggleston, a spokeswoman for the Boston Home Loan Bank. "They are a major mortgage lender."
80% of Assets in Mortgages
The Massachusetts Co. is the 33d commercial bank - and the largest - to join the Boston Home Loan Bank. About 80% of the Travelers Corp. unit's assets are home mortgage loans.
The institution is one of 16 multibillion-dollar banks that have joined the Home Loan Bank System in the past year. Other significant recruits include Dominion Bank, Roanoke, Va., with $8 billion in assets; and AmSouth Bank, Birmingham, Ala., with $7.6 billion. Both joined the Atlanta district bank.