The FHFA has returned to a 2010 proposal, reopening the question of how strictly membership in the Federal Home Loan Bank System (FHLBS) should be limited to financial institutions focused principally on mortgage finance and how tightly advances from the FHLBs must be linked to a firm’s ongoing mortgage-finance operations.  The proposal takes a tough stand, especially with regard to captive-insurance companies that would be banned from membership, seeking to return the Home Loan Banks to their mission of funding long-term residential mortgages  on an ongoing  basis – not simply upon membership – at banks, credit unions, and the primary insurance companies that FHFA would allow to remain in the System.

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