August 29, 2022
As I mentioned in my last message, the Federal Home Loan Bank System is celebrating 90 years of serving its cooperative members in 2022. The System formally hit that milestone in July, and FHLBank Topeka will celebrate 90 years of serving our members in October. We are proud of our history of being a reliable liquidity provider to members through all economic cycles. Through the expansion of the types of members we serve, as well as the assets we’re able to accept as collateral for advances and other credit obligations, Congress has always recognized the valuable role the System plays in not only serving our communities through our members but also more broadly helping to absorb shock in times of market stress as we most recently did in 2020.
Sandra Thompson, the newly confirmed director at our regulator, the Federal Housing Finance Agency (FHFA), testified before the U.S. House Committee on Financial Services (HCFS) in mid-July. The FHFA regulates the FHLBank System as well as Fannie Mae and Freddie Mac.
The majority of Director Thompson’s comments as well as almost all of the questions from HCFS members at the committee meeting contemplated the ongoing conservatorship of the other two housing GSEs. She did, however, mention the Federal Home Loan Banks, outlining the FHLBank System’s steadfast commitment to carrying out its mission to provide liquidity to its members. She also mentioned the FHFA’s plans to conduct a review of the FHLBank System to look back at our 90-year history and forward to our future. You can read Director Thompson’s written remarks on the FHFA website.
We will keep you posted on any developments as well as ways you can share your thoughts with the FHFA. Personally, I believe our mission statement says it all: “We make a difference by providing reliable liquidity and funding to help our members build strong communities.”
As your cooperative, our focus is on providing reliable funding to help you build strong communities. Last week, we released our second quarter operating highlights. Your trust in us and reliance on our reliable liquidity and funding is reflected through the recent increase in advance usage by our members.
In addition to a consistently strong dividend, your participation in the cooperative means we can help you build your communities in other ways like through our Affordable Housing Program (AHP).
First-time Homebuyer Grants
The Homeownership Set-aside Program (HSP) portion of our AHP opened in early March. The HSP provides up to $7,500 in down payment, closing cost and repair assistance for members to provide to first-time homebuyers who meet income requirements.
There was $6.24 million in HSP funds available for use by our members this year. By June 22, all funds had been reserved by FHLBank members to help first-time homebuyers in their communities become homeowners. We expect the grants will help our members support over 860 new homeowners in achieving the American Dream this year.
Affordable Housing Program
This year, we have $11.6 million available in the competitive portion of our AHP. The competitive AHP helps members provide funds to their housing partners for financing owner-occupied and rental housing affordable to low-income households. The competitive AHP helps fill financing gaps for our members and their housing partners. Without this gap funding, worthy affordable housing projects in our district might not be completed. Many thanks to our members who partner with housing organizations to make these projects realities.
Recently, some of our employees were given the opportunity to take a bus tour of Topeka sponsored by our local United Way. The bus tour, part of our Diversity, Equity and Inclusion efforts, showed how the inequities resulting from decades-old redlining practices still impact areas of the community with some of the greatest need. During the bus tour, we also saw how the competitive portion of the AHP is making a difference in improving areas of our community with the support of their local lenders.
With over $336.7 million in AHP grants awarded throughout our district since 1990 in the competitive AHP, I know many of your communities have also noticed its impact. If you haven’t applied in the past or have a new project in need of funding, please consider taking a look at our competitive AHP. The application period opened July 5 and closes Aug. 19. Visit our website to learn more about the program and how you can take part.
New Advance Product
We unveiled a new advance product on July 5. The regular adjustable-rate callable (RAC) advance joined our suite of products as a result of feedback from our members. Through our continuing member experience efforts, we listened to member needs and developed an advance product, tied to the Secured Overnight Financing Rate (SOFR), to help members manage their balance sheets.
The new advance is available in maturities of one to five years and can include a one-time call or monthly or quarterly calls that allow members to prepay the advance without fee. Pricing for the RAC advance is available on our daily rate sheet.
We had our first member execute an RAC a few weeks ago. The product is a good match for adjustable-rate loans and other interest-rate sensitive assets. SOFR is a near risk-free reference rate reducing the potential impact of widening credit spreads on your funding costs.
See more about this new product here or get in touch with your regional account manager or our lending team to discuss how you might be able to effectively utilize this advance.
Leadership Change in Housing and Community Development
In July, we celebrated the retirement of Tom Thull, our Community Investment Officer and Director of Housing and Community Development. Tom led our Housing area for 12 years and was a true advocate for community development. We wish him the best in his retirement.
Kylie Mergen has taken the reins as head of our Housing and Community Development department. Kylie has been with FHLBank for 15 years. She most recently served as vice president, Director of Financial Services in our Credit division. Kylie will be instrumental in continuing to lead our housing department in a way that provides value to our members and supports building your local communities.
Board of Directors Election
Nominations for our 2022 board of director election closed in July. Voting begins Sept. 30 and ends Nov. 2. I urge every member institution to participate to have a say in the selection of the member and independent directors who guide your cooperative.
As I close, please don’t forget about our regional meetings that kick off in Colorado next week. Registration is open until tomorrow for our Colorado regional meeting and up to a few days prior to each of the other sessions. You can register at www.fhlbtopeka.com/rm. I hope you will join me and the rest of the FHLBank team at the location nearest you.