Housing Opportunity Mortgage Expansion Act

Mr. President, as chairman of the Senate Banking Subcommittee on Housing, Transportation, and Community Development, today I wish to engage in a colloquy to discuss legislation that I introduced, the Housing Opportunity Mortgage Expansion, HOME, Act, with several of my colleagues to address an issue involving the Federal Home Loan Bank, FHLB, system. The FHLB system is a cooperative organization of 11 banks that support a mission of ``helping American families realize the dream of home ownership, stimulate the creation of affordable housing, and improve the local business environment.'' FHLBs are privately capitalized by their 7,300 members and are subject to strict oversight by the Federal Housing Finance Agency, FHFA. The HOME Act is designed to correct the FHFA's perceived statutory limitation in the FHL Bank Act that does not permit captive insurers to be considered a class of the eligible insurance companies for membership in FHLBs.

In 2016, the FHFA determined that captive insurance firms were not insurance firms for purposes of the FHLB Act. In making this determination, the FHFA abruptly terminated the membership of approximately four dozen captive insurance entities, including mortgage real estate investment trusts, REITs, that were active and responsible members of the FHLB system. These insurance captives greatly contributed to the affordable housing mission of FHLBs through the use of private capital versus taxpayer dollars, something that we should always encourage. I thank Senators Duckworth, Johnson, and Baldwin for their support of this legislation, which I am hopeful will receive favorable consideration by this body in the future.

I yield to my friend from Illinois.

Mr. President, thank you. I thank the chairman and my colleagues from Wisconsin for their support of this bipartisan legislation, which I introduced in January and filed as an amendment to S. 2155. As the chairman stated, as a result of the 2016 regulation, many of the FHLB system's captive insurance members have had or will soon have their membership terminated. Our legislation seeks to ensure that captive insurer affiliates of institutions that are active providers of private capital in the mortgage market are eligible to restore or continue their membership.

Their membership is crucial to reliable access to low-cost funding for home mortgages and affordable housing initiatives in Illinois. For the Federal Home Loan Bank of Chicago, these members serve as an important source of private capital in the mortgage market. Their membership broadens access

to credit to financial institutions that would otherwise not be able to access credit through their local markets and creates a reliable source of liquidity for affordable housing initiatives.

Our bipartisan bill only seeks to redress those captives that were previously granted FHLB membership prior to February 19, 2016. By allowing captive insurers to continue to invest in mortgages and mortgage-related securities through the FHLB system, they can continue to provide both credit and liquidity to the market. Such sources of private capital are critical to the long-term financing of the FHLB system, and therefore, eligibility in the system should be preserved. Our legislation will achieve this purpose. I wish to turn to my friend from Wisconsin, Senator Johnson.

Mr. President, I agree with the comments of my colleagues on the need to pass S. 2361 during the 115th Congress. The legislation is narrowly tailored such that it would provide the opportunity for reapplication or continuation of FHLB membership only for those captive entities that meet a series of criteria pertaining to the mission of their parent companies to serve the residential mortgage market. These captive members have proven track records of responsible membership, have contributed to the system, and have invested their capital in the respective FHLBs. Moreover, each and every captive that would be affected by our bill are subsidiaries of financial institutions that are aligned with the overall mission of the FHLBs.

I yield to my colleague from Wisconsin, Senator Baldwin.

Mr. President, unfortunately, including this legislation in the recently passed S. 2155 was not possible due to a number of procedural objections that could not be overcome. However, it is our understanding that the substance of our bill has the support of several FHLBs, and we intend to work with our colleagues, the administration, and FHFA to find sustainable ways for housing-focused entities such as relevant captive insurance companies to participate in the FHLB system.