In this analysis, we address a question many of you are asking: could the Home Loan Banks quickly provide liquidity to nonbank servicers or MREITs? In short, the FHLBs could do whatever FHFA decides to allow within whatever expansive view of the law FHFA is willing to tolerate. However, a flood of short-term liquidity could pose risk of even systemic proportions through the FHLB transmission channel. As a result, we think this will be a last resort.
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