New FHFA rules would kick REITs out of home loan system

by Ryan Smith02 Sep 2014
The Federal Housing Finance Agency is proposing new rules that would keep real estate investment trusts, or REITs, out of the Federal Home Loan Banks system.

The new rules would keep investment firms and lenders without customer deposits out of the system, according to a Bloomberg report. The FHFA has had concerns about firms using specialized insurers to join Federal Home Loan Banks, Bloomberg reported. The proposed rule would restrict the banks to insurers dealing primarily with “nonaffiliated persons.” Those FHLB members who are “captive insurers” – who offer insurance to their owners or customers of parent companies – would be phased out over five years.

REITs using captive insurers have turned more and more to FHLBs reently for funding that offers better terms than banks or bond markets, Bloomberg reported. But the FHFA contends that the REITs could affect the safety of the FHLB system, which operates with $815 billion of taxpayer-backed debt.


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