WASHINGTON—CUNA has sent a letter calling on the Federal Housing Financial Authority saying it is “adamantly opposed” a proposed regulation it said will limit access to Federal Home Loan Banks by credit unions and could lead to future liquidity problems in the event of a crisis.
In the letter, signed by CUNA Deputy General Counsel Mary Dunn, the association said the proposed membership requirements for FHLBs need to be withdrawn, and that the proposal lacks “sufficient analysis as to why the proposed membership requirements are needed. Most important, we are concerned the proposal would require FHLB-member credit unions to make business decisions that may not be in their members' overall best interests. If this proposal does move forward, at a minimum, we urge FHFA to correct the disparate treatment between banks and credit unions as discussed in this letter.”
The proposal would require all financial institutions that are FHLB members to hold 1% of their assets in “home mortgage loans” on an ongoing basis. The proposed regulation suggests that FHFA is considering raising this requirement to as high as five percent in the future. “While financial institutions currently must meet a one percent-of-assets threshold to become FHLB members, there is no current requirement that FHLB members must maintain the threshold,” said CUNA’s Dunn.
Dunn further noted that all FHLB-member credit unions—but only certain FHLB-member banks—would also be required to hold 10% of assets in “residential mortgage loans” on an ongoing basis.
CUNA went on to cite other issues, including that CUs already make sufficient “mission-related” loans, that “unintended harm” will be caused to credit unions, that it will force CUs to “needlessly alter business practices,” that it would harm the “FHLB Stem and result in higher-cost mortgages,” that it could “curtail” credit union mergers, that it is inconsistent with other federal financial institution regulations, and that it could create numerous problems in the event of any liquidity crisis.