By Sylvan Lane - 01/12/16 01:44 PM EST
The Federal Housing Finance Agency (FHFA) released a new rule Tuesday limiting who can join a network of government-sponsored home loan banks.
The rule excludes so-called captive insurers from membership in the Federal Home Loan Bank, which gives financial institutions access to cheaper capital to finance home loans. These insurers, which largely exist to cover risks of their parent companies, will be phased out of the network over 12 months.
The rule also scraps a proposed requirement for members to invest at least 10 percent of their assets in certain residential mortgages. FHFA officials found that only two percent of current bank members would be affected by the requirement, and that the costs of implementation outweighed the benefits.
"The statutory requirements for members to continue their commitment to housing finance can be addressed by monitoring the levels of residential mortgage assets they hold and we, therefore, decided not to include the ongoing investment requirements in the final rule," said FHFA Director Melvin L. Watt in a release.
The National Association of Federal Credit Unions (NAFCU) opposed the 10 percent requirement, and praised the FHFA’s change of heart in a statement.
“NAFCU firmly believes that credit unions should have the flexibility to manage their mortgage portfolios with the best interest of their members in mind, rather having to manage to meet an arbitrary standard,” said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt.
"Extending the 10 percent standard on an ongoing basis would have unnecessarily restricted a credit union’s ability to provide the mortgage financing needed by their members and the communities that they serve.”
The FHFA said it received more than 1,300 letters in response to the proposed rule.