For the 2017 examination cycle, the Federal Housing Finance Agency recently issued an advisory bulletin for new classifications of adverse findings for the GSEs and the Federal Home Loan Banks. Three designated classifications were established to help examiners define the issues more effectively with hopes of a faster remediation plan. When communicating adverse examination finds to the regulated entities and Office of Finance, the FHFA said the examiners will classify them as either “matters requiring attention, recommendations or violations.” MRAs are broken down into two separate categories: critical supervisory matters and deficiencies. The difference boils down to the nature and severity of the issues requiring corrective action, according to the bulletin.

Member institutions of the Federal Home Loan Bank system had outstanding advances of $563.3 billion at Dec. 31, a quarterly increase of 4.0 percent, according to an analysis by Inside The GSEs. But, the year-over-year increase was greater with a 13.8 percent growth from the fourth quarter of 2015 when advances were at $495.0 billion. JP Morgan Chase continues to lead among borrowers with $79.5 billion worth in advances, the same as the previous quarter. Chase was followed by Wells Fargo, which reported $77.1 billion in advances, up 12.3 percent from the previous quarter. Wells had the largest quarterly advance increase among the top five borrowers.

The Federal Housing Finance Agency issued an interim rule last week that changed some of the components of its Freedom of Information Act regulation, including the fee categories. The interim rule gives notice about the circumstances in which the FHFA can extend its response time to the FOIA request and tells when it should notify the person requesting the information about their right to seek dispute resolution services. In the new FOIA rule, the agency is required to provide a minimum of 90 days for requestors to file an administrative appeal and must notify requesters about available dispute resolution services.

The Federal Home Loan Bank System increased its earnings by 6 percent in the fourth quarter and saw an 18.7 percent increase for all of 2016. Earnings rose in the last three months of the year to $913 million, from $861 million in the third quarter, rounding out the year with a net income total of $3.408 billion. The FHLBank Office of Finance noted that the quarterly net income increase was primarily due to higher gains on derivatives and hedging activities. Moreover, higher gains on litigation settlements helped grow both the quarterly and yearly increase. Additionally, the yearly earnings growth was due to gains on trading securities, partially offset by lower gains on derivatives and hedging activities, said the OF.

The Federal Housing Finance Agency is reviewing individual members of the Federal Home Loan Banks to help gauge their level of support to the community as part of their membership requirement. This includes making sure those banks are lending to first-time homebuyers.Every two years the FHFA reviews FHLBank members and invites the public to comment on how they help support their communities. Nonprofit housing developers, along with community and advocacy groups, are asked to submit comments to the FHFA by March 31.In order to maintain access to long-term advances, the banks must meet the community support requirements and criteria established by the FHFA.This means that the FHFA will examine the...

The Federal Home Loan Banks Office of Finance announced changes this week to some of their debt programs and said they will allow more securities dealers to participate in their diversity and inclusion program. The FHLBank is planning to incorporate other aspects of diversity, beyond what’s already been established, in order to help expand the scope of dealers eligible to participate in the program. The first change went into effect Jan. 10 when the minimum new issue par amount for negotiated callable bonds decreased. That number will drop from $15 million to $10 million when diversity and inclusion dealers participate in the underwriting group.

A recent audit showed that the Federal Housing Finance Agency needs to do a better job at managing nonbank risks such as mortgage servicing transfers. In response, the FHFA said it will finalize a risk-based proposal to examine how well the GSEs manage that and other risks by the end of this month. The FHFA’s Inspector General said that the agency has not made sure that both Fannie Mae and Freddie Mac are tackling potential risks. The IG noted that out of three advisory bulletins issued that addressed nonbank servicer risk, one of the GSEs only complied with one of the bulletins.The heavily redacted report doesn’t mention which GSE failed to comply with the bulletins, but a...

The Federal Housing Finance Agency late last month issued two final rules that will give the Federal Home Loan Banks somewhat more flexibility in setting collateral requirements for advances and managing their acquired member assets (AMA). A new AMA rule was necessary because the Dodd-Frank Act requires financial regulators to remove references to ratings, which had been used in setting limits on their AMA programs, most of which involve purchases of mortgages from member institutions. Under the new rule, the FHLBanks will be able to choose their own models to determine credit enhancement requirements. The FHFA also deferred...

Member institutions of the Federal Home Loans Bank system had outstanding advances of $541.8 billion at Sept. 30, a slight sequential decline, but a 19.0 percent improvement from the same period a year ago, according to analysis by Inside The GSEs. The FHLBs said the growth in advances was primarily driven by higher demand from larger members. The megabanks, not surprisingly, continued to be the biggest clients of the system with JPMorgan Chase leading the pack at $79.5 billion worth of advances, followed by Wells Fargo ($68.7 billion), Citibank ($31.5 billion), PNC Bank ($17.1 billion) and Capital One ($16.3 billion).

The Federal Housing Finance Agency published a final rule this week allowing the Federal Home Loan Banks to transfer mortgage servicing rights on Acquired Member Assets to any institution, including a nonmember and nonbank. The Dec. 19 final rule reorganizes much of the current regulation governing the FHLBanks’ AMA programs and makes it easier for the banks to take on new business activities. The change was made, in part to recognize the evolving market landscape where a good amount of servicing is being done by nonbanks. The provision noted that any such transfer cannot result in the AMA loan failing to meet any other AMA requirement, including the credit enhancement.