[Federal Register Volume 62, Number 68 (Wednesday, April 9, 1997)]
[Proposed Rules]
[Pages 17108-17110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9049]


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FEDERAL HOUSING FINANCE BOARD

12 CFR Chapter IX

[No. 97-35]


Mission Achievement by the Federal Home Loan Banks

AGENCY: Federal Housing Finance Board.

ACTION: Advance notice of proposed rulemaking (ANPRM).

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SUMMARY: The Federal Housing Finance Board (Finance Board) is 
requesting public comment on ways in which the Federal Home Loan Banks 
(Banks) can further achieve their statutory mission to support housing 
finance and community investment and ways in which the Finance Board, 
as regulator of the Federal Home Loan Bank System (Bank System), could 
measure and ensure that the Banks achieve their mission.

DATES: Comments must be received in writing on or before May 9, 1997.

ADDRESSES: Comments should be mailed to: Elaine L. Baker, Secretary to 
the Board, Federal Housing Finance Board, 1777 F Street, N.W., 
Washington, D.C. 20006. Comments will be available for public 
inspection at this address.

FOR FURTHER INFORMATION CONTACT: Jonathan Curtis, Senior Financial 
Analyst, Office of Policy, (202) 408-2866, or Brandon B. Straus, 
Attorney-Advisor, (202) 408-2589, Office of General Counsel, Federal 
Housing Finance Board, 1777 F Street, N.W., Washington, D.C. 20006.

SUPPLEMENTARY INFORMATION:

I. Background and General Issues

A. Introduction

    The Finance Board has a statutory mandate to supervise the Banks in 
order to ensure that they carry out their housing finance mission. See 
12 U.S.C. 1422a(a)(3). The Federal Home Loan Bank Act (Bank Act) 
authorizes, and in some instances requires, the Banks to make advances 
and other credit products available to member and nonmember borrowers 
to support both housing finance and community investment. See id. 
sections 1430, 1430b. For instance, section 10(a) of the Bank Act 
authorizes the Banks to make advances to provide members with a source 
of funding to support housing finance. See id. section 1430(a). 
Sections 10(i) and 10(j) of the Bank Act require the Banks to establish 
two specific advances programs, an Affordable Housing Program (AHP) and 
a Community Investment Program (CIP), to promote affordable housing and 
community investment finance. See id. section 1430(j), (i). Section 
10(j)(10) of the Bank Act authorizes the Banks to establish community 
investment cash advance programs in addition to the AHP and CIP. See 
id. section 1430(j)(10). In sum, the Finance Board believes it is clear 
from the Bank Act that the mission of the Banks is to support and 
promote housing finance and community investment.
    The Finance Board is in the process of devolving to the Banks 
functions currently performed by the Finance Board in a number of areas 
that are more appropriately viewed as Bank

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management and governance functions. As part of that process, the 
Finance Board has established clear regulatory standards within which 
the Banks must operate in making management decisions. The Finance 
Board believes this approach may be appropriate for regulation of the 
Banks' achievement of their mission. Comments are requested on whether 
the Finance Board should define and measure mission fulfillment for the 
Banks through a regulation. Could the goals of the Finance Board in 
promoting more focused mission activities by the Banks be fully 
achieved through some means other than a regulation, such as a policy 
statement including a non-exclusive list of activities that the Banks 
may undertake in order to achieve their statutory mission?
    Should the Banks establish annual plans setting out their goals for 
identifying and implementing mission-focused activities, including the 
identification of unmet credit needs in the Bank's district? Should 
such plans serve as the benchmark for determining whether or not a Bank 
is fulfilling its mission? Are there other possible options for the 
identification and achievement of mission by a particular Bank and the 
Bank System, as a whole?
    The Banks currently fulfill their mission, in part, through many of 
the advances the Banks make and through their activities under the AHP 
and the CIP. As further discussed below, the Finance Board believes 
that the Banks have an obligation to use their statutory powers to 
assist member and nonmember borrowers in meeting housing finance and 
community investment needs through means other than advances, the AHP, 
and the CIP. Several of the Banks have made efforts to fulfill this 
obligation through the establishment of pilot programs under the Banks' 
investment and incidental authorities, with the approval of the Finance 
Board, designed to assist members in meeting unmet credit needs in 
specific segments of the housing finance and community investment 
market. These initiatives are important first steps towards fulfillment 
of the Banks' broader mission, and the Finance Board continues to 
encourage the Banks to bring innovative programs to the agency. In 
addition, the Finance Board wishes to facilitate all of the Banks' 
establishing additional programs to support affordable housing and 
community investment finance by member and nonmember borrowers through 
community investment cash advance programs, through the Bank's 
investment and credit activities, and by providing technical 
assistance. The Bank's efforts should focus on assisting member and 
nonmember borrowers in meeting the housing and community investment 
needs in their communities, including the credit needs of low- or 
moderate-income families and small businesses.
    The Finance Board recognizes that housing and community investment 
credit needs may be different in each Bank's district, and the Banks 
are in the best position to identify those needs. Furthermore, each 
Bank may have proven and innovative strategies to help member and 
nonmember borrowers meet those needs. Consequently, the Finance Board 
does not intend to substitute its judgment for the Banks on these 
matters. Among the purposes of this notice is to solicit comments, 
generally, on: (1) How the Banks could identify and meet unmet credit 
needs, and (2) how the Finance Board shall ensure that the Banks 
identify and meet those unmet credit needs.

B. Defining Mission-Focused Activities

    There are five broad categories of activities through which the 
Banks carry out their mission. The Finance Board requests comments on 
the following questions related to these five categories of activities.
1. Regular Advances
    Many of the Banks' regular advances support our nation's housing 
finance system in ways not otherwise provided by the mortgage markets. 
These regular advances further the Banks' mission. While the Finance 
Board wishes to find ways beyond regular advances for the Banks to 
focus their housing and community investment mission, there are special 
programs or products that may be offered through the traditional 
advances mechanism, such as discounts or rebates for members meeting 
certain affordable housing or community investment goals or advance-
related donations to affordable housing providers. What kinds of 
special programs structured using regular advances, including letters 
of credit, should qualify as mission-focused activities?
2. AHP
    Because the income limits (80 percent of area median income, or 
AMI) and the annual subsidy amount of the AHP are fixed by statute and 
full participation is required by all of the Banks, the Banks' AHP 
activities are by definition mission-focused activities. See 12 U.S.C. 
1430(j). It is the Finance Board's belief that the Banks' statutory 
mission responsibilities cannot be satisfied solely by participating in 
the AHP.
3. CIP
    The general parameters of the CIP, including income-targeting (115 
percent of AMI) and pricing benefits, are also set by statute and are 
by definition a minimum standard of mission achievement, which the 
Finance Board seeks to expand beyond. See id. section 1430(i). The Bank 
Act does not prescribe the volume of CIP credit that the Banks must 
extend on an annual basis. The Finance Board specifically requests 
comment on whether and how the CIP could be used more aggressively in 
mission fulfillment.
4. Investments
    The Banks may have the greatest flexibility for increased and more 
focused financial support of housing and community investment 
activities through their investment authority. The Finance Board has 
revised the Financial Management Policy for the Bank System to permit 
double-A investments, such as state housing finance agency bonds, that 
further the Banks' mission. In addition, the Finance Board recently 
approved three pilot programs that allow several Banks to purchase 
participations in targeted mixed-use and multifamily project loans and 
to purchase whole single-family loans from member institutions. The 
Finance Board specifically requests comment on what other types of 
investments the Banks could make that would be mission-focused and what 
types of housing and community credit needs are not being met that 
could be assisted through investment, rather than advance, products.
5. Other Activities
    The Finance Board wishes to promote opportunities for the Banks to 
achieve their mission in non-financial or non-balance-sheet activities, 
for example, by offering technical assistance, educational programs and 
business development for affordable housing, or by offering grants or 
awards out of earnings to housing organizations. The Finance Board 
specifically requests comments on whether--and if so, what kinds of--
non-financial, charitable or other non-balance sheet funding could be 
considered as mission-focused and included in determining a Bank's 
mission fulfillment.

II. Issues For Consideration

A. Specific Characteristics of Mission-Focused Activities

    There are a variety of activities that the Banks might engage in as 
a means of carrying out their mission. The following is only a partial 
list of

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alternatives from which the Banks might choose. Should the following 
activities be considered ways in which the Banks achieve their mission: 
(1) Providing products that are targeted to meet multiple policy 
objectives, such as low-income housing and mixed-income community 
revitalization; (2) pricing Bank products to encourage member 
institutions to be active in affordable housing and community 
revitalization; (3) developing strategies to encourage partnerships 
among and between members, nonmembers, housing and community 
development organizations, and government agencies; (4) providing 
technical and educational assistance to members and affordable housing 
and community development organizations?
    The Finance Board also requests comment on how the Banks could use 
their cooperative structure to assist members in acquiring, developing, 
and implementing emerging technologies.

B. Measurement of Mission Achievement

    The Finance Board requests comment on ways in which the Banks' 
mission achievement can or should be measured. One option would be for 
the Finance Board to establish, or require the Banks to establish, 
quantitative targets for specific mission-related activities undertaken 
by the Banks. However, the Finance Board understands that the efficacy 
of some mission-related activities, such as promoting public-private 
partnerships, may be difficult to measure quantitatively. Therefore, 
comments are requested on what other methods of measurement, such as 
qualitative measurements, may be appropriate for these kinds of 
activities. Comments also are requested on whether and through what 
medium the results of a Bank's performance in achieving its mission 
should be communicated to the public.

C. Role of Advisory Councils

    Comments are requested on what role the Banks' Advisory Councils 
should play in achievement of the Banks' mission. Under statute, it is 
the role of the Advisory Council to provide guidance to a Bank on the 
low- and moderate-income housing programs and needs in the Bank's 
district and on the utilization of advances to meet these needs. See 
id. section 1430(j)(11). If the Banks were required to establish 
mission achievement plans, as discussed above, one option would be to 
require each Bank to provide its Advisory Council a reasonable period 
of time to review the mission achievement plan and provide its 
recommendations to the Bank's board of directors.
    Comments received in response to this ANPRM will be reviewed and 
considered by the Finance Board in preparation of further action in 
connection with the issues discussed in this ANPRM. In addition, the 
Finance Board expects to hold a public hearing on these issues in the 
near future.

    Dated: April 2, 1997.

    By the Board of Directors of the Federal Housing Finance Board.
Bruce A. Morrison,
Chairman.
[FR Doc. 97-9049 Filed 4-8-97; 8:45 am]
BILLING CODE 6725-01-U