June 07, 2024

Warren Pushes to Reform Federal Home Loan Bank System to Address Affordable Housing Crisis

Text of Letter (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.) sent a letter to the Federal Housing Finance Agency (FHFA) urging the agency to address our country’s affordable housing crisis by reforming the broken Federal Home Loan Bank (FHLB) System. In particular, she urged the FHFA to move forward with two proposed rulemakings on the FHLBs’ mission and membership.

In 1932, Congress created the FHLB system to address the housing crisis created by the Great Depression. In return for tax exemptions, regulatory benefits, and an implied government guarantee, the FHLBs were to provide liquidity to their members to support housing and community development. However, in recent decades, the FHLBs have not held up their end of the bargain.

This March, the Congressional Budget Office (CBO) released a report quantifying, for the first time, the public subsidies received by FHLBs. That report estimated that the FHLBs will receive $7.3 billion in public subsidies in this year alone.

“While these subsidies were meant to address our nation’s housing needs, they mostly supported bank executives and shareholders instead,” wrote Senator Warren. “Last year, the FHLBs paid $3.4 billion to their members in dividends and only $395 million to Affordable Housing Programs (AHP)—a staggering 8.5 to 1 ratio.” 

FHFA is the primary regulator for the FHLBs and is responsible for ensuring the FHLBs are accountable to their mission and that they are operating in a safe and sound manner. Last November, FHFA released a report documenting areas of improvement for the FHLB system as well as recommendations for FHFA and Congressional action.

“Congress should pass legislation to reform the FHLBs. For instance, Congress can increase the FHLBs’ mandatory AHP contributions, address exorbitant executive compensation practices, and redefine what entities are eligible to be FHLB members,” wrote Senator Warren. “But as the primary regulator of the FHLBs, FHFA has the authority to act now.”

Senator Warren called on FHFA to take two specific actions. First, the FHFA should issue a rule clarifying the mission of the FHLB as “(i) providing stable and reliable liquidity to their members, and (ii) supporting housing and community development,” not simply to prop up failing banks. Second, the FHFA should use its regulatory authority to change the membership requirements for the FHLBs, ending the current absurd state of affairs where, in recent years, nearly half of FHLB members have not originated a single mortgage.

“With the ever-growing housing crisis, Congress and federal regulators must work together to improve our housing finance system,” concluded Senator Warren. “Therefore, I ask that FHFA immediately move forward with proposed rulemakings to clarify the FHLBs’ mission statement and membership, and request a briefing on your efforts to do so no later than June 20, 2024.” 

Senator Warren is a long-time advocate for safe, quality affordable housing for American families: 

  • In May 2024, Senator Warren reintroduced the Public Housing Emergency Response Act to address the estimated $70 billion backlog of maintenance and repairs in our nation’s public housing.
  • In April 2024, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, U.S. Senator Warren called out FHLBs for failing to deliver on their mission to provide affordable housing as the country faces a housing crisis. Senator Warren called on FHFA to take action as the primary regulator of the  FHLBs. 
  • In April 2024, Senator Warren called out the Federal Home Loan Banks (FHLBs) for failing to deliver on their mission to provide affordable housing as the country faces a housing crisis. Senator Warren also called on the Federal Housing Finance Agency (FHFA) to take action as the primary regulator of the FHLBs.
  • In January 2024, Senator Warren led a letter to Federal Reserve (Fed) Chair Jerome Powell, calling on the Fed to reverse its troubling interest rate hikes that have driven mortgage rates to 20-year highs and have put affordable housing out of reach for too many Americans. 
  • In March 2023, at a hearing of the Senate Finance Committee, Senator Warren called out Wall Street real estate investors for exploiting tax breaks to buy up affordable housing, raise fees and rents, and evict families across the country. 
  • In May 2021, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren made the case for her American Housing and Economic Mobility Act, which would create a new housing innovation grant program to reduce exclusionary local zoning laws. 
  • In March 2021, Senator Warren again reintroduced Senate companion to the Public Housing Emergency Response Act.
  • In November 2019, Senator Warren led the introduction  of the Senate companion to the Public Housing Emergency Response Act, to create a one-time, $70 billion appropriation into the Public Housing Capital Fund to address the estimated $70 billion backlog of maintenance and repairs in public housing. 
  • In March 2019, Senator Warren led the reintroduction of the American Housing and Economic Mobility Act to help bring down costs for renters and buyers, level the playing field so working families everywhere can find a decent place to live at a decent price, and takes the first step to address the effects of decades of housing discrimination on communities of color. 

###