America's Community Bankers, which represents a majority of the Federal Home Loan Banks' shareholders, has turned its back on a legislative proposal that would allow the 12 FHLBanks to guarantee and issue mortgage-backed securities.However, the Indianapolis FHLBank board of directors has unanimously endorsed it and supports the addition of an MBS provision to a GSE bill that Congress will be working on this year. The Mortgage Bankers Association and the National Association of Home Builders are pushing the MBS proposal to increase competition in the secondary mortgage market that is dominated by two other government-sponsored enterprises -- Fannie Mae and Freddie Mac. ACB says it is concerned that an MBS amendment would shift FHLBanks away from their traditional advance business and add controversy to the GSE bill, which will create a new regulatory agency for Fannie, Freddie, and the FHLBanks. "It is not ripe for consideration, and the need for the amendment has not been demonstrated," ACB executive vice president Robert Davis told MortgageWire. Indianapolis FHLBank spokesman Rick Roesch said the MBS provision is too important to leave out of the GSE bill. Without securitization, the bank's mortgage purchase program will eventually be hampered by capital restraints, he said. "Securitization would allow us to really manage our capital and manage our interest rate risk so that we can continue to fulfill our statutory housing finance mission," Mr. Roesch said.

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