U.S. Federal Housing is seeking to remove regulatory barriers for
The agency, previously known as the Federal Housing Finance Agency, proposed a complete repeal of Title 12 of the Code of Federal Regulations part 1272, which currently requires FHLBanks to submit formal notices before engaging in new business activities that carry previously unmanaged risk.
The motion aligns with an
"The new business activities regulation is an example of unnecessarily duplicative oversight, and its repeal will promote innovation and allow the Federal Home Loan Banks to more efficiently develop products and services that support their statutory mission and serve their members," FHLBanks President and CEO Ryan Donovan told National Mortgage News.
Very few of the new business activities in which the banks are allowed to engage rise to the risk level that would trigger an official notice, which are only required if a new business activity involves risks not previously managed by the FHLBank, the FHFA said in the proposal filed in the Federal Register earlier this month.
FHLBanks have only submitted two notices over the past five years, both of which the FHFA determined the respective bank to be capable of
Additionally, removing the requirements would save the FHFA and FHLBanks time and money. The agency expends staff resources when reviewing notices, which require a prescriptive, uniform review process, regardless of their complexity. This results in staff members sometimes engaging in a duplicative paperwork review to ensure compliance with the regulation, according to the proposal.
This process is time consuming and adds little value, as most of the work had already been done prior to the formal submission, the FHFA argued. When a bank begins work on a new business activity that would require a notice, the FHFA is typically involved in the development process. By involving the agency early, the bank ensures it will not waste resources on a product the FHFA would later determine to be unsafe, unsound or unauthorized under the Federal Home Loan Bank Act, the agency said.
The FHFA requests comment on whether the repeal will impact the banks, and what specific economic benefits it could provide. The agency is also interested in whether the motion could lead to FHLBanks creating more innovative programs that address housing and community development issues, as well as any considerations for how it could impact the safety and soundness of the banks.
The FHFA will be accepting comments on the repeal until Aug. 12.
