The Seattle Federal Home Loan Bank has received regulatory approval to use existing excess stock to capitalize advances so that member banks and thrifts don't have to purchase additional stock in the troubled FHLBank.As approved by the Federal Housing Finance Board, members can tap a shared pool of about $350 million in excess stock when borrowing from the FHLBank during the next two years. Members are generally required to meet a stock purchase requirement when borrowing advances. But the Seattle bank is having a hard time selling stock (with a five-year redemption period) since it suspended dividend payments. By using excess stock, the Seattle bank hopes to increase its advance business and rebuild its earnings. Since the start of the year, advances increased by $5.5 billion to $26.9 billion as of June 30. The Seattle FHLBank has been operating under a supervisory agreement since December 2004.

Subscribe Now

Authoritative analysis and perspective for every segment of the mortgage industry

30-Day Free Trial

Authoritative analysis and perspective for every segment of the mortgage industry