A bipartisan quartet of House lawmakers introduced a bill Friday that would stop the Federal Housing Finance Agency from moving forward with its rule to establish new membership requirements for the Federal Home Loan Banks.
Reps. Blaine Luetkemeyer R-Mo., Denny Heck, D-Wash., Patrick McHenry, R-N.C., and John Carney, D-Del., said the FHFA has overstepped its authority in proposing a bill that would kick certain entities out of the system.
"Congress, not the Federal Housing Finance Agency, has historically decided the membership requirements of Federal Home Loan Banks," Luetkemeyer said in a press release.
The bill would also require the Government Accountability Office to study the impact the FHFA membership provisions would have on the Home Loan Bank system and its members.
"This system plays an important role in our economy, and while conversations around membership in the system are valuable, decisions should not be made in a vacuum. They should be made by Congress and based on public input and extensive analysis," said Luetkemeyer, who chairs the House Financial Services subcommittee on housing and insurance.
An FHFA spokeswoman declined to comment on the bill. The agency issued the proposal a year ago, but FHFA Director Mel Watt recently told a Mortgage Bankers Association conference that the agency has not completed its review of the 1,300-plus comment letters it received on the plan. The overwhelming majority of those comment letters oppose the membership changes.
"We are making a concerted effort to finalize the final rule by the end of this year and, if not, certainly within the first quarter of 2016," Watt said Oct. 19 at the MBA annual convention in San Diego.
The plan would exclude captive insurance companies and real estate investment trusts from FHLB membership while requiring all financial institutions to maintain a certain amount of assets in mortgage-related activity in order to remain members.
Industry groups which opposed the plan praised the House bill.
"This legislation would preserve today's membership and prevent costly disruption by ensuring community banks and captive insurers remain members of their regional Home Loan Bank," said David Stevens, president of MBA.
The bill would also require the GAO to review FHFA's legal authority to exclude any "class or category" of insurance company from FHLB membership.
"Captive insurers facilitate substantial investment in the housing finance market, including by financing the origination and purchase of mortgages and mortgage-backed securities by Real Estate Investment Trusts. Mortgage REITs represent a growing and necessary segment of the housing finance market, and their access to the Federal Home Loan Bank System facilitates greater credit availability while simultaneously reducing financial risk to the taxpayer," Stevens said in a statement Friday.
Shortly after FHFA issued the membership proposal last year, 68 members of Congress signed a letter that urged the FHFA to withdraw it. On the Senate side, 29 senators signed a similar letter in mid-December.