The Federal Home Loan Banks (FHLBs) stopped purchasing private-label MBS in 2008, but losses on those bad investments have been a major drag on earnings ever since. But that may be changing.

Due to passage of time and the recent stabilization on the housing market and home prices, PLS losses are rapidly shrinking. Credit-related losses on private-label MBS totaled just $31 million in the first quarter, compared to $275 million a year ago.

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