The Federal Housing Finance Agency is receptive to the idea of Federal Home Loan Bank mergers, according to the agency's director.

Mel Watt told attendees at the American Mortgage Conference in Raleigh, N.C., on Monday that the FHFA is playing a consultative role in discussions over the proposed merger of the Federal Home Loan banks in Des Moines and Seattle. "We are not opposed to the merger," Watt said in response to an audience question following his prepared remarks.

"We believe the merger will make a stronger Federal Home Loan Bank, which will make for a stronger FHLB system," he added.

Still, Watt made it clear that the FHFA, which has approval authority, wants to gather more information before signing off on the merger. He said a key meeting will take place in a few weeks when the boards for both Home Loan banks meet in St. Louis that will also include Watt. "We're being very careful," he said.

"It is conceivable that we will be setting the benchmarks and precedents for potential future mergers of Federal Home Loan banks," Watt added. "We are very much involved in the process. We are watching them, but we're not dictating the terms.... We are very protective of the system because it serves a very useful purpose."

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