WASHINGTON More than two dozen Senate lawmakers signed a letter this week that urges the Federal Housing Finance Agency to drop its proposal to tighten Federal Home Loan Bank membership rules.
A letter co-authored by Sens. Joe Manchin, D-W.Va., and Mark Kirk, R-Ill., and signed by 27 other senators, urged the FHFA to reconsider its proposed mortgage asset test.
The FHFA issued a proposal earlier this year that would require large institutions to have at least 10% of their assets in mortgages in order to maintain membership with a FHLB. Small banks and credit unions with less than $1 billion in assets would have to maintain at least 1% of their assets in mortgages.
The senators noted that banks could be expelled from membership if they cannot meet the "new and unprecedented" mortgage asset tests.
"The consequences are harsh and the terms of the proposed rule are inconsistent with the express terms of the FHLBank Act," the Manchin-Kirk letter says.
A FHFA spokesman said the agency has "received the letter and will respond."
Industry groups claim the mortgage asset test is unnecessary and will reduce liquidity in the Home Loan Bank System. The American Bankers Association, Independent Community Bankers of America, National Association of Federal Credit Unions have raised objections to the FHFA proposal. The Mortgage Bankers Association has called on FHFA to "abandon" the membership rule.
The banking lobby has been successful in getting lawmakers to push back. In mid-November, 68 House lawmakers sent a letter to the FHFA that points out Congress reviewed the FHLB membership rules four years ago and "chose not to narrow eligibility in the system."
The House letter urges the FHFA to reconsider the membership proposal and consult with "Congress where these important policy decisions should be made."
Like their House counterparts, the senators that signed on to the Manchin-Kirk letter also suggest that FHFA is over-stepping its role as a regulator. "We urge you to reconsider this proposal and consult with Congress, where these important decisions should be made," the Senate letter says.