I’m Cornelius Hurley, academic, lawyer, 14-year director of a Federal Home Loan Bank. Ask me anything about the FHLBs.

Submitted by ProfBU t3_zk409u in IAmA

Thank you everyone for writing in – this has been a great discussion! Unfortunately, I am not able to reply to every question right now. If scheduling allows, I hope to be able to revisit the conversation in the coming days. If you are interested in learning more about my work please follow me on Twitter @ckhurley, DM me on Reddit, or visit my BU profile: https://www.bu.edu/law/profile/cornelius-k-hurley/.

I teach financial services at Boston University School of Law. I served as a bank executive and a senior bank regulator. From 2007–2021, I was an independent director of the Federal Home Loan Bank (FHLB) of Boston. Taxpayers’ money is at stake. They guarantee FHLBs’ debt, exceeding $1 trillion today, a $6.3 billion annual subsidy. FHLB members gain access to cheap funding and dividends, but taxpayers receive very little benefit.

The FHLBs’ regulator, the Federal Housing Finance Agency (FHFA), has taken note of this misallocation of resources and has launched a “comprehensive review” of the FHLBs. Now is the opportunity to reform the mission, operations, and purpose of the FHLBs.

-What are the FHLBs? Why were they created? How are they governed? Who owns them? -How relevant are the FHLBs today? -Should the FHLBs be required to do more to support affordable housing? -Are there other public purposes that could benefit from this unique funding model? -How can increased access to the FHLBs, a unique form of subsidized funding, benefit other sec tors? Think: climate change remediation, infrastructure businesses, the housing supply-chain.

Proof: Here's my proof!

1,788

Comments

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defnotasysadmin t1_izxno4x wrote

What question do you think new home owners should ask more often and what question do you think people should ask less?

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ProfBU OP t1_izxpgf4 wrote

Question to ask more: How many years am I going to own the home.

Question to ask less: None...ask as many questions as you can.

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Seen_Unseen t1_j0049sc wrote

To me what's baffling how few questions people have (and on the same term how little the CS from banks know). I have a whole bunch of mortgages and I read each and everyone of them. For many people these are defining moments in their life yet few seem to even take notice of what they are about to sign. I have always questions, banks often don't mind tailoring small adjustments accordingly. These agreements strangely enough also don't seem to be standardized, I get sometimes from the same bank a couple mortgages in a single year and the agreements vary occasionally. On top as said, the banks customer service seldom seem to be well versed in what's going on.

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a679591 t1_j00a27n wrote

Most people don't have the patience to learn about this stuff or read the fine print. We've become so accustomed to blindly clicking to accept the T&C that we don't even think twice when signing a mortgage. Look at credit cards, loads of people don't learn how to use them or read the fine print, then are shocked when their apr is stupid high after missing a payment. So many people are in such a rush that they won't take the time to focus on a major decision like buying a house.

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Graviton_Lancelot t1_j00himr wrote

To be fair, most people buy a house a couple of times in their lives. This guy "getting a couple of mortgages a year from the same bank" is absolutely not the norm.

When you're buying your first house, you don't even know what questions to ask. Nobody is really there to help you through it, they're just there to get another day of their jobs done just like the rest of us.

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Vaaag t1_j01822z wrote

>When you're buying your first house, you don't even know what questions to ask. Nobody is really there to help you through it, they're just there to get another day of their jobs done just like the rest of us.

I took one of my parents with me at every stage of house buying. They've done it 4 times at that point. After 35 years of home maintenance they know that to look out for. My mother asked questions I wasn't even considering. But they were good questions.

I went to the mortgage advisor alone. But discussed the results with my parents.

I think most people will have parents, uncles/aunts or good colleagues that would be willing to go through the above with you.

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obsquire t1_j01r9pa wrote

It's a good idea, but a big ask. Many families aren't that tight, and it's not the kids fault.

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computerguy0-0 t1_j02c2z1 wrote

You need to understand that you're extremely lucky. I do not have friends, family, or parents well versed and I had to learn everything myself. Now I am the one that friends, family and parents come to for advice.

My parents are college educated with decent middle class careers. They are absolutely clueless.

I'm a massive proponent of an entire year of high school being dedicated to life skills. People always say that's the parent's job but if that's what they've been saying for the last hundred years how many hundreds of millions of adults have come out clueless, because their parents were clueless?

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a679591 t1_j01ukwn wrote

But it's not about how many mortgages you end up getting, it's about not reading. Yes the other reply was out of the norm, most people will have maybe 3 mortgages in the ir life, but that doesn't mean you don't do the research on it and read the document.

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la_peregrine t1_j00tk9a wrote

You don't even know what questions to ask is an excuse. Try reading the documents and ask everything you do not understand. Call up your loan officer and ask questions on their documents. If your loan officer minds find a better one. Mine didn't know the answer to one question. So he said he'd ask someone more involved with that part and I had an answer in a day. In the title office you can sit and read every page and ask questions. Would they grump, sure. Did I give a shit? Nope. Idgaf that it was the hottest market in the country and they had many deals. They didn't send me the documents early so both my husband and I sat there reading and asking. When the person had to step away, we asked for post it's and put the questions there.

It's never going to be someone else's jobs to make sure you know wtf is happening. Even in a doctor's office, the onus is on you to ask questions.

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sensei8901 t1_j00m157 wrote

Most people are just happy they can get the loan these days...like a mobile contract they cbf looking into all.

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obsquire t1_j01r20m wrote

When I signed my mortgage, I sat there for an hour at closing in front of the real estate agent and the seller. I didn't have a copy of the documents I was about to sign ahead of time. It was 50 to a hundred pages (at least a half inch thick). It's more dense than most college level reading. So it's not surprising that most people don't read it and don't understand them.

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hbrthree t1_j01el37 wrote

What are some of your fav and least fav lease terms.

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Master_El0din t1_izxnesx wrote

In your opinion, could the government ever in the future step in and limit the mass purchase of residential homes? Also, do you feel like we will see a sharp decline in home prices in the next year or two? I have a young family and am hoping to see some better opportunities than what is available.

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ProfBU OP t1_izxovzt wrote

Not an economist but I'd be surprised if the current trend of declining home prices does not continue for several quarters especially with the Fed continuing to raise rates.

As for limiting bulk purchases, I do not see this in the future. Too disruptive to market forces.

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BetterMeThanYou t1_izy7xmn wrote

In other words -- the increase in housing prices is driven by speculation and housing as an investment vehicle rather than by immediate demand by people who actually want to live in houses.

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Sheol t1_izzgutl wrote

The whole American economy is based on speculative housing and the government backstop to keep it always trending up. It's what all of the 2007 recession was about.

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SupraMario t1_j009hpe wrote

Yea, but don't tell this to /r/realestate or anyone who got in on the over bidding....they only think their house value will increase forever. It's like everyone has memory loss and doesn't think 2008 ever happened.

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[deleted] t1_j022wmt wrote

[removed]

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SupraMario t1_j023g9m wrote

Realestate keeps up with basically inflation. Calling 2008 a blip? What? It had houses that sold for 270k in 07 listed for 90k in 2010. That's not a blip, thats a correction.

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Gordonb0mbay t1_izye887 wrote

Isn’t the mass buying of homes the real disruptive force to the market? We aren’t talking about widgets here

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ColTigh t1_izyhfnk wrote

Absolutely it is. But your speech isn’t as important as other “people’s” speech ($$$).

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notimeforniceties t1_izziwmm wrote

No, it's been overstated.

The two largest companies, Invitation and Starwood merged to form the largest institutional owner of single family homes, and they have a total of 80,000 units nationwide (out of many millions total of course).

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SupraMario t1_j009sei wrote

Uhh it's really not, black rock alone owns around 60k homes. Those are just the big players. There are a ton of smaller shops out there owning a few k. It all adds up really quick.

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notimeforniceties t1_j00bj5l wrote

60k is nothing on the scale of the country.

> Institutional owners still comprise a relatively small portion of the overall market, about 350,000 units, or 1.5% of the existing 23 million single-family home rental units, according to the National Rental Home Council. But in certain target markets, the concentrations are much higher.

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SupraMario t1_j00clfw wrote

In areas where they matter that's a ton of homes. This also doesn't include owners that own 10-20 homes either. One of the issues we have is so many of the single family homes are owned by someone else and being rented out.

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notimeforniceties t1_j00dc3x wrote

yes most single family rental homes are owned by "mom and pop" landlords, and that's generally not seen as a problem.

if you want actual stats:

> According to data from the 2018 Rental Housing Finance Survey, for example, individual investors owned approximately 73 percent of single-unit rentals in 2018, compared to 23 percent of apartment homes in smaller properties (5 to 49 units) and just 7 percent of apartment homes in properties with 50 or more units. In that same vein, a recent Altus Group study estimated that institutional investors (firms with portfolios of over 2,000 properties), despite controlling over half (50 to 55 percent) of all U.S. apartment units, owned between just 2.1 percent and 2.5 percent of all single-family rentals.

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SupraMario t1_j00enrv wrote

People may not look at it as an issue, but the amount of 2nd homes people bought during this boom was a huge number. It's definitely an issue, just everyone wants to just point fingers at the big companies, but it's the market over all.

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hillsfar t1_izzioss wrote

Also the mass increase in populational demand. Both.

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SupraMario t1_j00a08q wrote

https://www.cbo.gov/publication/57975

What? Population of modernized societies usually decreases, we're on a downward slope now.

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hillsfar t1_j00r35u wrote

Usually. Although we likely let slip in about 4 million in just the last 2 years, slo g with over a million or so legally. This grows the population and thus housing demand.

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Fireonpoopdick t1_j010l6f wrote

F*ck market forces when people are dying in the streets, at a certain point the governments job is to step in and not let people die, but if people like you cared about people and not money we wouldn't be in this situation.

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thehazer t1_izxtpd9 wrote

Fan of the landlord class?

−4

lilbluehair t1_izy5to8 wrote

He doesn't say the disruption would be a bad thing, just that it isn't likely to happen

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Architeckton t1_izy0agq wrote

Already in the works. A bill was introduced this week in Congress.

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ProfBU OP t1_izy5286 wrote

My first home was purchased with -0- down payment courtesy the VA and the GI Bill.

How about a similar benefit for a year of national service?

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lilbluehair t1_izy6449 wrote

Standard term in AmeriCorps is 10 months. I loved my time and think everyone should get to do it, but I had to work a second job to pay rent and had zero savings.

This idea could work if we also subsidized housing for the folks doing the service.

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badpeaches t1_izze9o5 wrote

> My first home was purchased with -0- down payment courtesy the VA and the GI Bill. > > How about a similar benefit for a year of national service?

You didn't have credit ratings back then.

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H2-22 t1_j00g77l wrote

I have had a zero down VA home loan. Lots of service members and veterans have. I was in the 2nd Iraq war.

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badpeaches t1_j00p8ai wrote

You can get approved for the loan with subpar credit ratings?

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[deleted] t1_j023dt9 wrote

[removed]

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badpeaches t1_j024jjt wrote

> VA and FHA loans don’t have strict credit rating requirements,

The loans don't but you can't get the loan from a bank with bad credit.

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The_Law_of_Pizza t1_izxuql3 wrote

Hi Con,

I'm a financial services attorney - not in the real estate space specifically, but a lot of my practice overlaps with that and other markets.

A hot button topic today (though perhaps it has always been so) is affordable housing, and how we encourage development of and access to it as a critical resource.

My question for you is this: Do you think that entities like the FHLBs can actually help the affordable housing problem? And if so, how?

I have always been skeptical of traditional mortgage-related "help" offered to consumers, as it appears to me that, while they might help the individual borrower in the short term, these programs ultimately inflate the market such that everyone is stuck with higher prices in the long run.

People tend to calculate the house they can afford by reverse engineering it - they take what they can afford in a monthly payment, and then work it backwards to arrive at a total house value. Thus why interest rates effect the value of housing, as you well know.

So, my concern is that mortgage programs which make it easier for people to bid higher on property just inevitably get baked into the value of all property, and within a short period of time everybody is back to square one as prices have adjusted to include whatever subsidy you've introduced in the system.

Do you see any way around this fundamental problem? In your view, is there a place for mortgage programs and/subsidies in the quest for affordable housing?

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ProfBU OP t1_izxwu0q wrote

Thanks for this excellent question about affordable housing.

Here's the issue. Congress has mandated 10% of net income for affordable housing. FHLBs treat that at a ceiling rather than a floor. In this public/private partnership why not require 50% of net income for affordable housing? Part of the problem too is the conflict of interest between the member banks that benefit from robust dividends. Also, every dollar of CEO and C-suite compensation undercuts their contribution to affordable housing. All the incentives need to be realigned. Thanks again.

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lilbluehair t1_izy6f8o wrote

This is EXACTLY the kind of solution we need, I hope you can spend some of your retirement as an activist :)

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scepticalbob t1_izyfszl wrote

I’m going to jump in here

the FHFA and other housing specific agencies can’t do much to address affordable housing, baring them instituting some form of subsidized program that permanently buys down mortgage interest rates. And there isn’t much of an appetite for that

Where the fed is screwing up, and what needs to be done

Right now inflation is being tackled by trying to dramatically curb demand by raising rates, which simultaneously increases housing costs and affordability.

The problem is, there is a massive housing shortage, so this process only really pushes out the individuals who are already on the fringes. In other words, it’s making it worse

What needs to be done, are federal and state level policies that stimulate supply

These should include tax incentives (both positive and negative incentives) for individuals and companies to sell Non Owner Occupied homes

Tax incentives to home owners to sell to Owner Occupants vs Investors

Tax incentives to stimulate new construction

Streamline permitting for new construction

Source : 30 years in the mortgage industry

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TerryScarchuk t1_izyq1j5 wrote

To add to that, while incentivizing supply increases we should also look to protect the developers from another future crash. Last time around tens of thousands of small to medium sized builders were financially ruined and left the industry entirely because they were left holding the bag on entirely too much inventory. That’s a big part of why the houses we need today don’t exist and likely won’t be built for another 5-10 years. I’m not saying a “too big to fail” type bailout, but a federal housing insurance program that builders can buy into and have a rescue net to sell inventory into. This could help create a diverse section 8 housing pool while keeping builders afloat.

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scepticalbob t1_izyqm95 wrote

Your comments are accurate, but new construction numbers are well below where they were in 2008, and overall percentage of home ownership is waaaay below 08

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TerryScarchuk t1_j056v7a wrote

Right, but the reason for NC numbers being so low is that so many builders are out of the industry, and those that remain are hesitant to break new starts. That trend has existed for over a decade.

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vAltyR47 t1_izz0ipa wrote

I think the most elegant way to achieve this is to simply shift the current property tax to fall on land value, rather than land value + building value. That way, people's tax bills don't go up when they improve their house or build on their land. Most people who actually live on that land would see an overall decrease in tax bills because most of their property value (the building) no longer gets taxed, but empty lots and lots with condemned or run-down buildings see their bill go up significantly, forcing them to sell to someone who's actually going to do something with the property.

Combine this with zoning and permitting reform to lower construction costs, and I think that will help the situation a lot.

1

theInferno t1_j00ekpi wrote

Property taxes are too localized and State ran. This needs to be a federal solution.

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councillleak t1_izxuabw wrote

I work in tech Financial Services, and focus specifically on the compliance of eSigning of financial assets.

The FHLBs are a thorn in our side, because while they do generally understand the compliance of accepting eNotes of conforming residential mortgages that are registered on the MERS eRegistry, they seem to have no idea that there are similar security concerns of accepting other collateral types that have been eSigned.

For our perspective, as a technology company that has expertise in eVaulting of all different asset types including Equipment Finance, Commercial Real-Estate, and Ag loans... The FHLBs today are exposed to huge risk of not being able to perfect on the collateral pledged to them that has been eSigned without a complaint vault to hold the Authoritative Copy of the loan/lease as defined by UCC Article 9-105.

How would you recommend we approach the FHLBs to educate them on the risk of fraud, specifically double pledging and other nefarious activities, so that they can promote better lending practices as all types of lenders shift away from wet-signed assets and adopt eSignature without understanding the complexities of doing so compliantly?

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ProfBU OP t1_izxvw1t wrote

FHLBs have been way late to the e-signature party. They lack any semblance of an entrepreneurial spirit. It will take a stong directive from their regulator, the FHFA, to drag them into the modern era.

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ItsShorsey t1_izxxdpj wrote

How do you see it possible for a regular working class family to afford a home? Housing prices are insane and they want perfect credit regardless of income. Rent prices reduce all savings and make it almost impossible to save for a down payment. It's getting to seem like a pipe dream that will never happen

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ProfBU OP t1_izxyh1q wrote

Totally get it! It was tough enough before the spike in mortgage rates. Increasing the FHLBs affordable housing quota to 50% would help but it would still be a drop in the bucket. Here's a suggestion for 45 million people who are struggling with the overhang of student debt...allow them to discharge that debt in bankruptcy. student debt is the only debt that is not dischargeable this way. This is before Congress now. Tell Sen. Durbin and Schumer to get off their a...s.

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GregorVDub t1_izzythm wrote

So we should go bankrupt then buy a house ? I don't understand.

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GingerMau t1_j00nu18 wrote

I'm still trying to understand how I can pay $2k a month in rent for 7 years straight without any missed payments, but I "can't afford" a $1400 mortgage.

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Grumple t1_j04451p wrote

The answer to that will be highly dependent on the individual and the lender they're dealing with. Without knowing any specifics about your situation, the only advice I can give you is to explore financing options through a few different lenders. While there are general guidelines that all the lenders will follow, some can be more flexible than others. Now, if you already have shopped around and you've been told no by multiple companies then there's a good chance that there are one or more factors that you need to address.

I would recommend looking at /r/personalfinance - as always, I would take any advice from Reddit with a grain of salt but that sub generally has good advice that can at least put you on the right track. Make a burner account if you don't want your financial details linked to your main account.

I've been in a similar position before so I know how hard it can be. Best of luck to you.

1

Karamzungu t1_izxpmvm wrote

Having read “Evicted” this year by Matthew Desmond, I’m curious to know how you feel about housing vouchers and their application? Or do you think a different strategy would be more suitable?

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ProfBU OP t1_izxq1zq wrote

Limited experience with vouchers. The application process is cumbersome and works against the applicant and is a turn-off for many landlords.

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Karamzungu t1_izxr3du wrote

Thanks! Sounds like another area that could use reform, then. Given your position, I’d implore you to read Desmond’s book if you haven’t.

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BananasAndPears t1_j02pqth wrote

Agreed, I grew up on section 8 housing. That system is very cumbersome, pretty intrusive and my mother didn’t have the easiest time finding housing. In many ways it’s helpful but in other ways it keeps you poor because the moment you cross a certain income amount you risk losing all assistance.

1

BUExperts t1_izxmdv9 wrote

Hi Con - Thank you for doing this Reddit AMA! I'm not too familiar with the the Federal Home Loan Banks (FHLBs) and how they operate. Could you please elaborate on this?

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ProfBU OP t1_izxru0l wrote

$1 trillion in assets

11 banks

Subsidized by the taxpayers.

FHLBs compete with depositors for funds.

Please DM me for more background.

1

IceburgSlimk t1_izxvw3d wrote

Is this a Q&A or a solicitation of services?

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H2-22 t1_j023b0l wrote

Lol what services would a professor be soliciting for

2

IceburgSlimk t1_j032vpg wrote

Whatever he wants to talk about in PM's rather than answering in his replies during a public Q&A.

−1

H2-22 t1_j04mw6z wrote

They asked a low effort question (they phrased it nicely) that a simple Google search could start them on their journey.

1

DCMcDonald t1_izxq0q1 wrote

How relevant are the FHLBs today? Should the FHLBs be required to do more to support affordable housing?

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ProfBU OP t1_izxq9qe wrote

They are largely irrelevant today and yes, yes, yes on more affordable housing!

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ergonaut t1_izxmo6b wrote

Do you go by Cornelius or do you use a nickname?

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ProfBU OP t1_izxo5fg wrote

I go by "Con" but "Mush4brains" works too...

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ergonaut t1_izxp1en wrote

Thanks! Just curious. I have a longer name myself and can never get anyone to use the whole thing.

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PeanutSalsa t1_izy5gtm wrote

How does getting a home loan from the FHLB differ from getting one from a bank?

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ProfBU OP t1_izy64tk wrote

Only members of FHLBs can borrow from FHLBs. In this sense, it's a very exclusive "club". Borrowing rates from the FHLBs are subsidized by you and me as taxpayers.

The question is, "What benefit do we as taxpayers get in return for our subsidization of the FHLBs?" Currently the answer to that question is, "Nothing".

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shaft6969 t1_izzrbct wrote

You keep mentioning the subsidy paid by taxpayers.

According to the FHLB site, they've never incurred a net loss.

Their benefit is using the federal promise to pay, thus getting lesser lower rates.

But how are the taxpayers losing $6+billion per year on this? Can you elaborate on this?

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ImDaChineze t1_j0047s7 wrote

Lets say you have a game where someone draws a random ball out of a bag of 100 balls. If it is white, you get $1. If it is the single Black ball in the bag, you have to pay that person $200. You wouldn’t want to play this game as it doesn’t benefit you much, and over the long run you actually lose money.

Well, someone comes along and says “Hey! I noticed you don’t want to play this game. What if every time someone draws the black ball, I pay it for you for free! So all you do is collect $1 every time its drawn with no risk to you?”

Of course, you love free money so you say yes.

20 new people draw a ball and they’re all white, so the nice person offering to pay if you lose hasn’t actually paid anything yet.

Does that mean the nice person hasn’t given you anything of value?

The nice person assumed the ~10% risk that one of the people would draw a black ball, and at $200 a ball that means they subsidized you $20 roughly.

This is in essence what’s happening here. Taxpayers are bearing the credit risk of these loans without the benefits.

The more detailed answer is that by being able to borrow money with the full backing of the taxable income of the United States, these loans have become seen as essentially “risk-free” and thus the borrowers do not have to pay credit risk. In the same way that someone who has great credit pays a lower rate than someone who’s just defaulted from a couple loans, having a government sponsored wrapper around your loan essentially makes your rate comparable to that which the US government itself borrows at. This is quite unfair, because hey, I would also like to borrow at SOFR MINUS a spread. Why can’t you offer me a 30Y loan at the Current 30y Treasury rate of 3.56%? Why do I have to pay 7%?

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shaft6969 t1_j008k3v wrote

Fair. But they allege they've never suffered a loss. So if that $200 never happens, then what?

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ImDaChineze t1_j0099es wrote

Over enough observations, the odds of it never hitting becomes exponentially less likely.

At 300 ball pulls, the odds that not a single black ball is pulled is less than 5% At 500 ball pulls, the odds are less than 0.7% At 1000 ball pulls, the odds are 0.004%

And at every single one of those pulls, the nice person subsidized you with what is known as expected value. It might not have hit, but the fact that they were willing to take the hit if it did has se value to it.

You might not get in a car crash every day, might not even get in one in a decade. But having coverage to cover the damages from accidents had value in terms of car insurance

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ProfBU OP t1_j0ezg3f wrote

Their claim that they never suffered a loss is a ruse. They lend to banks. If the bank fails the FHLB gets to collect AHEAD if the FDIC, in effect sticking the taxpayer with the loss.

2

ProfBU OP t1_j0f0q5r wrote

The value of the government guarantee of the FHLBs' debt is at least 50 basis points. 50bps X $1 trillion = $5 billion/year. According to the Congressional Budget Office, the value of the FHLBs' tax exemption is $1.3 billion/year. $5 billion + $1.3 billion = $6.3 billion. Helpful?.

2

DrHandBanana t1_izyfkxg wrote

I just want to buy a house.

Why do I have to compete with corporations?

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ImDaChineze t1_j0053mk wrote

There are too many incentives for investment managers to buy up housing and close to zero regulations against them.

These managers amassing mass blocks of housing collect all sorts of management fees to help investors who want the attractive yields of real estate ownership without dealing in the day to day aspects of being a landlord. By centralizing all of the operational aspects of being a landlord, they’ve created an investable asset class with high returns and a huge underlying industry able to support a ton of investment.

Now, everyone from pensions to insurance to individual investors get to have the upside of owning houses without the pesky downsides of chasing tenants for rent or evicting them.

4

Askebon t1_izxpifz wrote

Hi What is you favorite way to start your day?

10

ProfBU OP t1_izxpo4u wrote

Feet on the ground is a good start...

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geonewh t1_izxudcr wrote

Are there any redeeming qualities of the FHLB system that can be built on or do we need to start over?

8

ProfBU OP t1_izxvdpp wrote

Great question.

FHLBs are a great business model that happens to have gone off the rails.

Redeeming qualities are its structure (not to be confused with current governance), access to funding. Its regulator has asked that its mission be reconsidered. So many parts of the economy could benefit from this funding source. Think housing SUPPLY, climate remediation, infrastructure, and more.

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Raxnor t1_izyfs97 wrote

To be perfectly honest, I have no idea what role FHLBs or FHFA play in supplying housing. Like zero.

Can you give a brief summary of the pipeline of financing and responsibilities for these agencies are? Are they actual government entities, or are they similar to the Federal Reserve which is both public and private?

Save for individuals familiar with their roles already, I feel like most people don't even know these entities exist. I didn't, and I work in a field where I help design and build affordable housing projects...

6

yenmeng t1_izxpueg wrote

Hi Cornelius, quick question about the eligibility criteria. Does FHLB assess the underlying mortgages that members are funding? I believe a similar program in Canada exists (NHA MBS/CMB program) however there are very stringent requirements on what can and cannot be funded.

5

ProfBU OP t1_izxqif3 wrote

FHLBs do not underwrite mortgages. They take them as collateral.

13

yenmeng t1_izxrna0 wrote

Thanks! Isn’t there a concern that the collateral being held is low-quality though i.e a similar situation to the ‘07-08 crisis? Another question - how can an institution qualify to become a FHLB member? Can anyone apply or are there some sort of capital requirement?

3

ProfBU OP t1_izxu3ec wrote

FHLBs need not worry about quality because they pre-empt the FDIC. That's a real problem!

To apply for membership you must be a bank, credit union, insurance co. or CDFI. Helpful?

8

yenmeng t1_izxyig8 wrote

Very interesting, this has been insightful. Thank you!

1

obenjab t1_izxs034 wrote

What can I do as an entrepreneur to possibly start a lending company that takes advantage of these funds for homeowners or build different types of housing?

5

ProfBU OP t1_izxsc26 wrote

Today you'd have to form a bank. But Congress can and should change that admission requirement.

9

obenjab t1_izxxof3 wrote

I read you need to buy stock into the organization. How much is stock shares?

1

ProfBU OP t1_izxyq19 wrote

FHLBs are SEC registrants but their shares do not trade.

4

Shin-ei t1_izxqzrs wrote

How long were you an independent director of the Federal Home Loan Bank of Boston?

4

ProfBU OP t1_izxr8g4 wrote

Over 14 years.

5

Shin-ei t1_izxs1jy wrote

Thank you! At what point in your service did you realize the FHLBs were largely irrelevant?

3

ProfBU OP t1_izxtfdt wrote

I advocated fro change from the beginning. Their irrelevance became apparent to me when members ceased taking advances and their AHP numbers plummeted. Along the way I asked, "How is the FHLB of Boston promoting housing?" The answer from management was unsatisfactory.

11

hfregeau_bu_edu t1_izxs5j3 wrote

If someone wants to learn more about the FHLB System, do you have any recommendations for good articles that help explain the system, and any issues it may have?

3

ProfBU OP t1_izxspjg wrote

Go to Consumer Federation in America and search for a paper by George Gaberlavage. Look for my coming op-ed in the Boston Globe.

DM me for more...hope this gets you started.

6

geonewh t1_izxwb31 wrote

In your article is stated that the FHLB CEO's are paid for "distributing a government benefit to their members." Are they aware of this mission? Do all the banks have the same mission? Who evaluates the success of this mission? Are their bonuses paid on profits or mission?

3

ProfBU OP t1_izxxk8u wrote

The 11 FHLB CEOs take home from $2-3 million a year. These are essentially government positions. For example, the CEOs of the 12 Federal Reserve Banks earn less than $500K. Regarding "mission" part of the problem is that advances to members is considered part of their mission. However, the proceeds of the advances can be used for ANYTHING whether or not it is mission related.

9

beepadeep12 t1_izygdmm wrote

Hello. You honestly come across as someone with a personal grievance rather than a change maker interested in positive changes. You seem hung up on the CEO salary, and i’m wondering why this wasn’t something you addressed during your many years as a board member?

3

tywheat4life t1_izzofdf wrote

Couldn’t agree more. I don’t know much about it, but I read his piece and his background and there is zero credibility there. He can’t profit from it anymore as he’s no longer on a board.

2

YoStephen t1_izz0ve7 wrote

Why do rich people hate poor people so much?

3

Ashahoy t1_izz66u2 wrote

How much bailout money did your company accept and how much did it pay back?

3

idontknowmaybenot t1_j007mdt wrote

Do FHLB’s affect my ability to use my VA Home Lon?

3

CorrectPeanut5 t1_izyev0h wrote

I only know about FHLBanks from the monthly bond offerings I see from my broker. Is this part of the issue? It seems like a lot of big names in financial services industry are dealers for FHLB debt securities.

I would assume many of them would oppose any changes that make the debt offerings less attractive to people looking to buy fixed income products.

2

neuromorph t1_izyg8nc wrote

What loans arw available for people looking to buy a second home? Any programs we should be aware of?

2

GOMD4 t1_izz098n wrote

Commenting because interested in the response

1

Prodiuss t1_izypgh9 wrote

Did you change your name to that after becoming an academic? or have you always had that academic name?

2

allTradesbyName_ t1_izyx19i wrote

What’s it like getting a handout from the government every time you fuck up, princess?

2

heavyonthahound t1_j005buo wrote

How much inventory is blackrock and airbnb really taking out of the market?

2

[deleted] t1_izxppia wrote

[deleted]

1

ProfBU OP t1_izxr10k wrote

AHP is set by statute at 10% of net income. It should increase in '23 but still be a small fraction of the FHLBs' taxpayer subsidy.

5

natesiq t1_izy08ie wrote

What do you think our the biggest opportunities for real estate investors right now and in the next year with a higher interest rate environment?

1

ProfBU OP t1_izy19m9 wrote

As a non real estate investor, I have to think that whoever figures out the transition from retail and office space to whatever comes next will be the winner. Great question but several notches above my pay-grade.

5

Outlaw341080 t1_izy0imb wrote

How do your friends call you? Are you "Corney" to them?

1

ProfBU OP t1_izy1u6i wrote

I also go by "Connie". "Corney" drives me nutz...

3

primate-lover t1_izy4nbw wrote

Were you ever bullied for being named Cornelius?

1

ProfBU OP t1_izy5gfj wrote

Going by the nickname "Connie" led to some comments about the song, "A Boy Named Sue". Commotion ensued...

6

itravelglobaly t1_izz9mme wrote

How a foreign investor with an ITIN not SSN can get a loan to buy a house in the USA?

1

Siege40k t1_izzgl3y wrote

I have been renovating historic structures to help with housing needs.

How can fhlb’s help me as a historic developer who goes into rural communities?

1

badpandaunicorns t1_izzm9qr wrote

How often does shady stuff happen in your department?

1

kale4reals t1_izzwuw2 wrote

What are the dumbest regulations you face regularly?

1

Michalek303 t1_j00j6gs wrote

You prefer mayo or ketchup?

1

ExWallStreetGuy t1_j01zru8 wrote

Do we actually need 11 FHLBs? Advances are down and honestly SF and Chicago could handle the entire system

1

fleaArmy t1_j001szs wrote

Have you ever had a problem with people calling you Corn Hurl aka Cornhole?

0

andyat11 t1_j00aod4 wrote

Do you guys purchase assets like domains? I have some good ones for banks... HomeBankRates.com, Mortgage.Tools and Get.Loans ... Hoping to find a good bank that will use them.

0

IronRT t1_izzlssy wrote

wanting to invest a decent portion of my savings (500k or so) into real estate if some type. any recommendations? house, duplex, real estate? and how to go about it

−1

tywheat4life t1_izzntqb wrote

Hold on, this guy worked in the FHLB system for 14 years and then immediately turned around and bashed it after no longer being able to make a buck from it? Ha. Then he tries to leverage his knowledge of the FHLBs by trying to pretend to fix some imaginary problem and stay relevant. And teaches at BU, one of the most overpriced mediocre schools in the Northeast. Please, tell me more… Zero credibility.

−1

alarc777 t1_j0024gv wrote

Isn't 14 a bit too ypung to be a director?

−1

FFIFISISHFISHFISH t1_izyagzd wrote

Is it hard having all that responsibility despite being 14 years old? What do you want to be when you grow up?

−2