United States Government Publishing Office publisher pbl distributor dst United States Government Accountability Office author aut Government Organization text government publication eng GAOREPORTS Legislative Agency Publications gao legislative 2010-08-12 U.S. Government Printing Office 2001-07-20 monographic deposited born digital 66 p. GA 1.13:GAO-01-873 https://www.govinfo.gov/app/details/GAOREPORTS-GAO-01-873 P0b002ee18038c741 f:d01873 DGPO 2010-08-12 2011-03-28 GAOREPORTS-GAO-01-873 machine generated eng fdlp REPORT GAOREPORTS-GAO-01-873 GAO-01-873 Capital Financial institutions Risk management Mortgage loans Government sponsored enterprises Other Written Product A01422

The Federal Home Loan Bank (FHLBank) System is currently establishing a new capital structure that, if properly implemented, is likely to be an improvement over the historic structure. Capital will become more permanent and new risk-based and leverage capital requirements will also be implemented. The new capital structure has the potential to address the risks associated with advances as well as the direct acquisition of mortgages. However, it is too early to assess the overall adequacy of the structure, because the capital plans and risk management practices to be implemented by the FHLBanks and capital supervision practices to be followed by the Federal Housing FInance Board (FHFB) are not yet known. Based on activity to date, direct acquisition appears to provide regional diversification of mortgage acquisitions and incentives to member institutions for sound mortgage underwriting and servicing through the sharing of credit risks. However, risks could be affected if changes are made in the level of mortgage acquisition activity and in the risk-sharing agreements that are currently present between the FHLBanks and their member institutions. Such changes might also increase the importance of risk-based capital requirements compared to FHFB leverage requirements. Going forward, risks in the FHLBank System will increase due to expanded collateral provisions in the Gramm-Leach-Bliley Act and direct mortgage acquisition activity. Effective mitigation of that risk will depend on risk management by the FHLBanks, the adequacy of capital structure, and oversight by FHFB. In addition to the FHLBanks, the acquisition activity could also generate additional risks for the enterprises. Although currently the FHLBank System and the enterprises primarily engage in different business activities, these differences may decrease if direct mortgage acquisition activity grows dramatically. Having one housing government sponsored enterprise (GSE) regulator for safety and soundness and mission compliance would provide greater independence and objectivity, greater prominence, improved ability to assess the competitive impact of new initiatives on all housing GSEs, and improved ability to ensure consistency of regulation of GSEs that operate in similar markets. https://www.govinfo.gov/content/pkg/GAOREPORTS-GAO-01-873/html/GAOREPORTS-GAO-01-873.htm https://www.govinfo.gov/content/pkg/GAOREPORTS-GAO-01-873/pdf/GAOREPORTS-GAO-01-873.pdf GAO-01-873 https://www.govinfo.gov/app/details/GAOREPORTS-GAO-01-873 Other Written Product GAO-01-873; Federal Home Loan Bank System: Establishment of a New Capital Structure; Capital Financial institutions Risk management Mortgage loans Government sponsored enterprises Title 12 Section 4611 12 U.S.C. 4611