The twelve banks of the FHLBank System have agreed a three-month ban on admitting captive insurers as members, according to reports.
The Federal Home Loan Banks (FHLB) offered the move to their regulator, the Federal Housing Finance Agency, which has said the trend of real estate investment trusts (REITs) using captive insurers to access the government chartered system is a risk.
The three-month suspension follows Redwood Trust’s captive obtaining membership in the Chicago FHLB.
Redwood is the fourth REIT to join the network of regional lending cooperatives.
Federal Housing Finance Agency director Melvin Watt told the FHLBanks Directors Conference in May that his agency, which oversees the secondary mortgage markets in the US, is keeping an eye on captives.
“One area of insurance company membership—captive insurers—deserves some additional attention. Captive insurance borrowing and membership in the FHLBank System raises a number of possible issues related to safety and soundness and access to the system.”
