S. 1439 — Federal Home Loan Banks' Mission Activities Act

This section states the purpose of the Act to reaffirm and improve Federal Home Loan Bank System members' participation in financing short- and long-term housing (including affordable housing), agricultural, small business, and community economic development needs of the communities they serve, including rural, urban, low-income, and Tribal communities. The Act seeks to achieve this by (1) expanding Federal Home Loan Banks' support for such activities of their members (including credit unions, community development financial institutions, insurance companies, and housing finance agencies); (2) clarifying that the Federal Home Loan Bank Act permits a broad range of member-supporting activities (e.g., grants, subsidized financing and advances, and credit enhancement); and (3) simplifying executive compensation and aligning it with mission achievements.

This section revises the definition of "community financial institution" under the Federal Home Loan Bank Act (i.e., smaller institutions eligible for reduced stock purchase requirements to join a Federal Home Loan Bank) by replacing prior eligibility criteria in subparagraph (A) to include (1) institutions with deposits insured under the Federal Deposit Insurance Act or Federal Credit Union Act (or qualifying under specified provisions as insured for membership purposes) that have average total assets of less than $1,000,000,000 over the preceding three years, or (2) community development financial institutions certified by the Secretary of the Treasury (previously limited to certain FDIC-insured depository institutions); it also updates a cross-reference in subparagraph (B) from "(A)(ii)" to "(A)(i)(II)."

This section revises the Federal Home Loan Banks' Affordable Housing Program (AHP)—which subsidizes member advances for low- and moderate-income owner-occupied housing and rental projects—by (1) authorizing grants in addition to interest rate subsidies on advances (with pass-through requirements for member-issued loans), (2) limiting prior contribution requirements through 2025 and establishing for 2025 and subsequent years a minimum of 30% of the preceding year's net income or $200 million in aggregate across all banks (from 10% of net earnings previously), permitting up to 15% of such amounts for the banks' other community investment programs (e.g., non-competitive grants or below-market investments benefiting low-income households), (3) streamlining eligible uses to the purchase or rehabilitation of housing (from three categories previously), (4) authorizing the Federal Housing Finance Agency (FHFA) Director to temporarily suspend income targeting and other requirements following a presidential, federal, state, or Tribal disaster declaration to aid recovery (including leasing vacant AHP units to displaced households regardless of income), and (5) making conforming and technical changes (e.g., updating the section heading to "Advances and grants" and replacing references to the FHFA Board with the Director).

This section revises compensation requirements for executive officers of Federal Home Loan Banks by (1) renaming subsection (l) to "Compensation of Executive Officers" (from "Withholding of Compensation"), designating its withholding provision as paragraph (1), and adding paragraph (2) requiring the Federal Housing Finance Agency (FHFA) Director to establish reasonable and comparable compensation relative to regional Federal Reserve Banks or similar publicly subsidized financial institutions—considering specific mission investments (e.g., community investment advances, affordable housing programs, advances to community financial institutions, and municipal/housing agency bonds)—and authorizing higher pay than at regional Federal Reserve Banks for achievement of FHFA-established mission goals, notwithstanding FHFA compensation restrictions at 12 U.S.C. 4518(d); and (2) striking a second subsection (l). (Thus, FHLBank executive pay is newly tied to housing and community investment performance.)

This section directs the Director of the Federal Housing Finance Agency to annually report to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services on collateral pledged to the Federal Home Loan Banks, including an analysis of such collateral by type and by Bank district. (As background, the 11 Federal Home Loan Banks make secured advances to member financial institutions primarily for residential housing finance and community development lending, requiring collateral such as mortgages and government securities.)