WASHINGTON — A new Urban Institute research report finds that the Federal Home Loan Bank System is a key driver of lending growth for credit unions, with access to advances and system membership leading to higher total and real estate lending, particularly since the 2008 financial crisis.
The findings also show the system plays a broader role in expanding lending by banks across housing, small business, and community development as policymakers reassess the FHLBanks’ mission and structure.
The study, which analyzes more than two decades of national data from 2002 to 2024, concludes that increases in FHLBank advances—the collateralized loans provided to members—are consistently associated with higher overall lending. The relationship strengthened after the 2008 financial crisis, with researchers estimating that advances boost total bank lending by roughly $76 billion to $97 billion annually.
For credit unions, the report finds that both access to advances and FHLBank membership itself lead to meaningful lending growth. Credit unions that increase their use of advances expand total and real estate lending, with stronger effects after 2008.
Housing-related lending shows the strongest response across the system. The report finds that greater use of advances is closely tied to higher levels of residential real estate lending, mortgage originations, and mortgage-related activities such as warehouse lending and mortgage-backed securities holdings. Smaller institutions, in particular, show outsized gains, and lending to low- and moderate-income borrowers also increases, suggesting advances help expand access to mortgage credit.
Advances are also linked to higher levels of small business, small farm, and community development lending, though the effects are more modest than in housing. Small and midsize banks appear to rely more heavily on advances to support business lending, while community development lending shows a positive relationship when pandemic-era volatility is excluded from the analysis.