How a Government-Sponsored Enterprise Turned Away From its Housing Mission

Members of the Coalition for Federal Home Loan Bank Reform argue that the Federal Home Loan Bank (FHLB) system has strayed significantly from its housing mission, prioritizing profits over affordable housing development. In a new Shelterforce article, authors Sharon Cornelissen, Jared Gaby-Biegel, and Brian Stromberg of the Coalition for FHLB Reform detail how the system's public subsidies ($7.3 billion in 2024) primarily benefit large financial institutions rather than supporting housing initiatives.

“Federal Home Loan Banks have gone astray. But they could once again return to their housing mission,” write the authors, pointing to a troubling shift in the system's priorities. The analysis reveals that while the FHLB system paid $3.4 billion in dividends to member banks in 2023, only $752 million was allocated to affordable housing programs.

The authors highlight a stark example of this mission drift: advances to companies with “little discernible link to housing,” like insurance companies. One such company is Athene Annuity. “Athene had $11.9 billion in outstanding advances from the Federal Home Loan Bank of Des Moines through June 2024.” Such practices raise questions about the system's current priorities, especially given that as of 2022, 42 percent of FHLB members hadn't originated a single mortgage in the past five years.

The Coalition for FHLB Reform proposes several reforms:

1. Tie FHLB membership to concrete housing and community development activities
2. Increase affordable housing contributions from 10% to 20% of net income
3. Expand access for community development financial institutions
4. Support innovative models like shared-equity homeownership

“Millions of Americans, many of them Black, Latino and/or of younger generations, feel they may never own a home," they note. “We can no longer allow this trillion-dollar GSE to sit on its hands, while housing costs continue to rise.”

These recommendations align with recent calls for reform from the Federal Housing Finance Agency, U.S. Treasury, and members of Congress.

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