Visions of Growth for Home Loan System

At least one sector of the bank world is hungrily pursuing new loans. It's the Federal Home Loan Bank System, which is looking to reassert itself as a big player in the mortgage market.

The system, which provides low-cost funds to its members for the purpose of originating home mortgages, has seen its outstanding loans cut in half over the past two years.

The primary reason: Hundreds of thrifts - its primary source of members - have vanished.

A Stabilizing Year Foreseen

But the system's overseer, the Federal Housing Finance Board, is predicting that 1992 will bring a reversal of the trend.

Outstanding loans should rise about 7.5% in 1992 to about $85 billion from $79 billion this year, board officials said, and then steadily increase for several years.

They cited stabilization in the thrift industry, increasing membership in the system by commercial banks, and redoubled marketing efforts by the system's 12 district banks.

Pay Incentive for Presidents

The board also has devised a scheme to ensure that the district banks do their part.

In a departure, the salary of the president of each bank will be tied in part to the system's success in meeting market-share targets.

For 1992, the board wants the banks to fund at least 12% of the mortgage-related assets that members hold, up from about 11% now. By 1995, the share is supposed to be 17%.

"It's going to be a bit of a reach," conceded J. Stephen Britt, the board's executive director, in an interview. "But we want to keep the banks thinking and focused on the primary product."

The board maintains that a lending buildup is consistent with the system's chartered goal of easing the availability of low-cost mortgage credit.

But Bert Ely, a financial consultant in Alexandria, Va., said he worries that the system may become too aggressive in its loan pricing.

That could hurt profits and lead to reduced dividends that the system pays to its member thrifts and banks.

"I don't think they ought to be out there aggressively hustling for business," Mr. Ely said.

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