They Were Meant to Fund Homes—So Where Is the Money Going?

They were created to support affordable housing—but today, only a fraction of Federal Home Loan Bank funding goes toward home loans, raising serious questions about their role in the housing market. Tim Lucas and Craig Berry break down how this system evolved, where the money is going now, and what it could mean for housing affordability.In this episode you’ll learn:What the Federal Home Loan Banks were designed to do: Originally created during the Great Depression to provide low-cost funding for home loans and support housing access.Where the money is going today: Only about 10% of funding supports mortgages, with the majority flowing to large financial institutions like banks and insurance companies.How the system changed over time: The collapse of savings and loan institutions in the 1980s forced FHLBanks to expand their membership and shift their focus.Why critics are raising concerns: Some argue taxpayer-backed funding is no longer serving its intended purpose of improving housing affordability.What role FHLBanks still play: The banks say they provide liquidity that supports lending, jobs, and broader economic activity.The impact on today’s housing crisis: With affordability at historic lows, many question whether these funds should be more directly tied to housing.A proposed solution—the “missing middle”: Financing small- to mid-sized multifamily housing could help fill a major gap in supply without new taxpayer funding.Why reform isn’t simple: Industry groups like community banks oppose restrictions that would require funds to be used specifically for housing.What’s at stake for taxpayers: Government backing reduces risk for lenders, but raises concerns about accountability and public benefit.The big question: Should FHLBanks be restructured to refocus on housing—or is their broader role in the financial system still justified?Read the full article: https://www.mortgageresearch.com/articles/why-arent-the-federal-home-loan-banks-focusing-on-home-loans/