Some Groups Urge Congress to Let FHLBs Sell Mortgage Backed Securities

Congress should give the Federal Home Loan Banks permission to sell pooled mortgage loans to investors to help manage interest-rate risk and create more competition for mortgage giants Fannie Mae and Freddie Mac, panelists told a U.S. Senate panel on Wednesday.

That process of pooling loans and creating securities, called securitization, should be included in legislation being weighed by the U.S. Congress to create one regulator for Fannie and Freddie and the Federal Home Loan Bank System, some bankers and an analyst told the Senate Banking Committee.

“It is a logical extension for the FHLBs,” said Alex Pollock, resident fellow at the American Enterprise Institute, a Washington think tank. “It would address the existence of a powerful duopoly in the mortgage securitization business, which generates exceptional profits for Fannie and Freddie.”

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