PRIA, Government Policy, Made Personal

Summary

Allows many kinds of lenders to join a Federal Home Loan Bank if they meet basic rules. Eligible lenders include building and loan associations, savings and loan associations, cooperative banks, homestead associations, insurance companies, savings banks, community development financial institutions, and insured depository institutions (like banks and thrifts). To join, an institution must be properly formed under state or federal law, be inspected and regulated under state or federal banking laws (or be certified as a community development financial institution), and make long-term home mortgage loans as the Director decides (for savings banks this depends on their time deposits). Extra rules apply to banks and thrifts that were not members on January 1, 1989: they generally must have at least 10 percent of assets in residential mortgages, be in a safe financial condition for advances, and have management and policies that support sound home lending. New institutions starting after that date have one year to meet the 10 percent rule under Director regulations. A qualifying community financial institution can join without the 10 percent test. Credit unions without federal insurance can be treated like insured institutions if the state supervisor certifies they meet federal insurance requirements at the time of application (or if the supervisor does not decide within 6 months, the credit union is deemed to meet the test). Advances and security interests from a Federal Home Loan Bank to such credit unions keep the same priority and rights as if the credit union were federally insured. A member must join the Federal Home Loan Bank for the district where its main office is, or with approval join a neighboring district. Building and loan associations that are not already regulated can become eligible if they agree to the inspection and regulation the Director requires.

Title 12, §1424

Banks and Banking, Source: USLM XML via OLRC

(a)Criteria for eligibility

(1)In general

Any building and loan association, savings and loan association, cooperative bank, homestead association, insurance company, savings bank, community development financial institution, or any insured depository institution (as defined in section 1422 of this title), shall be eligible to become a member of a Federal Home Loan Bank if such institution—

(A)is duly organized under the laws of any State or of the United States;

(B)is subject to inspection and regulation under the banking laws, or under similar laws, of the State or of the United States or, in the case of a community development financial institution, is certified as a community development financial institution under the Community Development Banking and Financial Institutions Act of 1994 [12 U.S.C. 4701 et seq.].; and

(C)makes such home mortgage loans as, in the judgment of the Director, are long-term loans (except that in the case of a savings bank, this subparagraph applies only if, in the judgment of the Director, its time deposits, as defined in section 461 of this title, warrant its making such loans).

(2)Qualified thrift lender

An insured depository institution that is not a member on January 1, 1989, may become a member of a Federal Home Loan Bank only if—

(A)the insured depository institution (other than a community financial institution) has at least 10 percent of its total assets in residential mortgage loans;

(B)the insured depository institution’s financial condition is such that advances may be safely made to such institution; and

(C)the character of its management and its home-financing policy are consistent with sound and economical home financing.

(3)Certain institutions

An insured depository institution commencing its initial business operations after January 1, 1989, may become a member of a Federal Home Loan Bank if it complies with regulations and orders prescribed by the Director for the 10 percent asset requirement (described in the paragraph (2)) within one year after the commencement of its operations.

(4)Limited exemption for community financial institutions

A community financial institution that otherwise meets the requirements of paragraph (2) may become a member without regard to the percentage of its total assets that is represented by residential mortgage loans, as described in subparagraph (A) of paragraph (2).

(5)Certain privately insured credit unions

(A)In general

Subject to the requirements of subparagraph (B), a credit union shall be treated as an insured depository institution for purposes of determining the eligibility of such credit union for membership in a Federal home loan bank under paragraphs (1), (2), and (3).

(B)Certification by appropriate supervisor (C) Security interests of Federal home loan bank not avoidable

(i)In general

For purposes of this paragraph and subject to clause (ii), a credit union which lacks Federal deposit insurance and which has applied for membership in a Federal home loan bank may be treated as meeting all the eligibility requirements for Federal deposit insurance only if the appropriate supervisor of the State in which the credit union is chartered has determined that the credit union meets all the eligibility requirements for Federal deposit insurance as of the date of the application for membership.

(ii)Certification deemed valid

If, in the case of any credit union to which clause (i) applies, the appropriate supervisor of the State in which such credit union is chartered fails to make a determination pursuant to such clause by the end of the 6-month period beginning on the date of the application, the credit union shall be deemed to have met the requirements of clause (i).

(D)Protection for certain Federal home loan bank advances

Notwithstanding any State law to the contrary, if a Bank makes an advance under section 1430 of this title to a State-chartered credit union that is not federally insured—

(i)the Bank’s interest in any collateral securing such advance has the same priority and is afforded the same standing and rights that the security interest would have had if the advance had been made to a federally insured credit union; and

(ii)the Bank has the same right to access such collateral that the Bank would have had if the advance had been made to a federally insured credit union.

(b)Location requirement

An institution eligible to become a member under this section may become a member only of, or secure advances from, the Federal Home Loan Bank of the district in which is located the institution’s principal place of business, or of the bank of a district adjoining such district, if demanded by convenience and then only with the approval of the Director.

(c)Inspection and regulation requirements

Notwithstanding the provisions of clause (2) of subsection (a) of this section requiring inspection and regulation under law as a condition with respect to eligibility for membership, any building and loan association which would be eligible to become a member of a Federal Home Loan Bank except for the fact that it is not subject to inspection and regulation under the banking laws or similar laws of the State in which such association is organized shall, upon subjecting itself to such inspection and regulation as the Director shall prescribe, be eligible to become a member.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Community Development Banking and Financial Institutions Act of 1994, referred to in subsec. (a)(1)(B), is subtitle A (§§ 101–121) of title I of Pub. L. 103–325, Sept. 23, 1994, 108 Stat. 2163, which is classified principally to subchapter I (§ 4701 et seq.) of chapter 47 of this title. For complete classification of subtitle A to the Code, see

Short Title

note set out under section 4701 of this title and Tables. section 461 of this title, referred to in subsec. (a)(1)(C), was in the original “section 19 of the Federal Reserve Act”. Definition provisions of section 19 are classified to section 461 of this title. Other provisions of section 19 are classified to section 142, 371b, 371b–1, 374, 374a, 463 to 466, 505, and 506 of this title.

Amendments

2015—Subsec. (a)(5). Pub. L. 114–94 added par. (5). 2008—Subsec. (a)(1). Pub. L. 110–289, § 1206(1), which directed insertion of “community development financial institution,” after “savings bank,”, was executed by making the insertion after “savings bank,” the first time appearing. Subsec. (a)(1)(B). Pub. L. 110–289, § 1206(2), which directed insertion of “or, in the case of a community development financial institution, is certified as a community development financial institution under the Community Development Banking and Financial Institutions Act of 1994.” after “United States,”, was executed by making the insertion after “United States” to reflect the probable intent of Congress. Subsecs. (a)(1)(C), (3), (b), (c). Pub. L. 110–289, § 1204(8), substituted “the Director” for “the Board” wherever appearing. 1999—Subsec. (a)(2) to (4). Pub. L. 106–102 inserted “(other than a community financial institution)” after “institution” in par. (2)(A), designated concluding provisions of par. (2) as par. (3), inserted heading and substituted “paragraph (2)” for “preceding sentence”, and added par. (4). 1989—Subsec. (a). Pub. L. 101–73, § 704(a), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “Any building and loan association, savings and loan association, cooperative bank, homestead association, insurance company, or savings bank shall be eligible to become a member of, or a nonmember borrower of, a Federal Home Loan Bank if such institution (1) is duly organized under the laws of any State or of the United States; (2) is subject to inspection and regulation under the banking laws, or under similar laws, of the State or of the United States; and (3) makes such home mortgage loans as in the judgment of the board, are long-term loans (and in the case of a savings bank if, in the judgment of the board, its time deposits, as defined in section 461 of this title, warrant its making such loans). No institution shall be eligible to become a member of, or a nonmember borrower of, a Federal Home Loan Bank if, in the judgment of the board, its financial condition is such that advances may not safely be made to such institution or the character of its management or its home-financing policy is inconsistent with sound and economical home financing, or with the purposes of this chapter.” Subsec. (b). Pub. L. 101–73, § 710(b)(1), struck out “or a nonmember borrower” after “eligible to become a member”. Pub. L. 101–73, § 701(b)(1), (3)(A), substituted “Board” for “board”. Subsec. (c). Pub. L. 101–73, § 701(b)(1), (3)(A), substituted “Board” for “board”. 1933—Subsec. (d). Act June 13, 1933, struck out subsec. (d) which provided for direct loans to homeowners. See chapter 12 (§ 1461 et seq.) of this title.

§1424 Eligibility for Membership