Captive Insurance Companies To Lose Federal Home Loan Bank Membership
January 12 2016 - 12:00PM
Dow Jones News
A top federal housing regulator on Tuesday shut the door on
mortgage investors who had been using a loophole to access
low-cost, government-backed financing.
The Federal Housing Finance Agency said so-called captive
insurance companies, which insure the risks of the companies that
own them, no longer will be eligible for membership in
government-backed federal home loan banks.
The 11 regional federal home loan banks advance loans to
commercial banks, savings banks, insurers and credit unions to help
fund mortgages and community investments.
The FHFA, which proposed the change in September 2014, said
captive insurers that joined before the proposal would have their
membership sunset over five years, while those that joined between
the proposal and final rule would have one year.
The move is likely to disappoint mortgage real-estate investment
trusts, their investors and others in the real-estate industry who
had argued the investment firms help promote mortgage lending by
buying loans as other big mortgage investors, such as the Federal
Reserve and mortgage-finance companies Fannie Mae and Freddie Mac,
wind down or prepare to wind down their portfolios.
On Tuesday, the FHFA also said it would withdraw two other
provisions related to FHLB membership that would have required
members to maintain a minimum level of investment in mortgage
assets.
Write to Joe Light at joe.light@wsj.com
(END) Dow Jones Newswires
January 12, 2016 11:45 ET (16:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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