Rural banks would have an easier time joining the Federal Home Loan Bank System under a government proposal issued Wednesday.
The Federal Housing Finance Board proposed to allow all loans secured by farm or business property to count toward system membership requirements as long as there is a residence on the property.
By law, banks and thrifts must have at least 10% of their assets in residential property loans to become members of the Home Loan bank system.
Currently, loans secured by farm and business property may count toward this test if there is a home on the land. However, the value of the residence must equal at least half the appraised value of the whole property. The proposal would drop this requirement.
The plan also would allow community development loans that meet the requirements of the system's Community Investment Program to count toward the membership eligibility test.
"These proposed changes recognize the fact that rural banks operate in a unique economic environment, which is reflected in their asset portfolios," said Finance Board Chairman Bruce A. Morrison.
The plan will be open for comment for 30 days after publication in the Federal Register.