10 Things to Know About Federal Home Loan Banks

The Federal Home Loan Bank of San Francisco is one of 11 regional banks that comprise the Federal Home Loan Bank System (FHLBank System), an integral part of the U.S. financial system. 

Congress established the FHLB System in 1932, during the Great Depression, to improve the nation’s housing finance system by facilitating the flow of credit for mortgages throughout the country. FHLBanks operate as an independent wholesale cooperative directly serving member financial institutions – your local and national banks, credit unions, insurance companies and community development financial institutions (CDFIs) – to benefit families, individuals, and communities from coast to coast.

FHLBanks provide low-cost funding to our member community-based lending institutions, which then use that low-cost funding to support mortgage lending and investment in the local communities they serve. 

Top 10 things to know about the vitally important FHLBank System:

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1. Serves as a stabilizing force in the U.S. financial system.

The FHLBank System plays a stabilizing role in the U.S. financial system and is designed to provide access to on-demand liquidity, so that our member financial institutions – including banks, credit unions, insurance companies and CDFIs – can manage the risks that come with offering their customers 30-year fixed rate mortgages and holding loans and mortgage-backed securities in portfolio.

2. Receives no taxpayer assistance.

FHLBanks are privately funded and do not receive any taxpayer assistance or funding from the federal government. Each of the 11 FHLBanks in the System is an independent company, privately owned by the member financial institutions that purchase and hold stock in their cooperative. FHLBanks are registered with the Securities and Exchange Commission and supervised by the Federal Housing Finance Agency. 

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FHLBanks receive no taxpayer assistance
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3. Serves a membership defined by Congress.

Congress has mandated that only eligible banks, credit unions, insurance companies, CDFIs, and housing associates can borrow from FHLBanks. Today, approximately 6,500 of America’s banks, credit unions, insurance companies, and CDFIs are members of an FHLBank. Without access to FHLBank advances, most members would find it difficult to support lending within their communities. 

4. Delivers on-demand, low-cost liquidity to members.

FHLBanks refer to the loans we make to our members as “advances.” We serve as a reliable partner for member financial institutions of all sizes – supplying ready access to competitively-priced liquidity, expert financial services, and resources for targeted community and economic development – in all phases of the economic cycle. Members must invest in capital stock in their FHLBank to become a member and to support their ability to borrow advances.

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FHLBanks deliver on-demand, low-cost liquidity to members
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5. Secures advances with high-quality collateral.

FHLBanks provide their members with liquidity in the form of advances that are secured with mission-consistent high-quality collateral including mortgages and housing-related securities, in accordance with congressional and regulatory requirements. As with any other prudent secured lender, the collateral shields FHLBanks from credit losses on advances, and since their creation in 1932, the FHLBanks have not experienced any losses on their advances. 

6. Is strengthened by multiple layers of protection.

FHLBanks are well capitalized, and their self-capitalizing business model and risk-adverse management of capital preservation work together to provide a stable capital base that exceeds regulatory requirements. FHLBanks also operate with a fully collateralized lending model, which along with a statutorily provided “super lien”, has shielded FHLBanks from any credit losses. FHLBanks are further protected by the FHLBanks’ joint and several liability to repay all consolidated obligations. 

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FHLBanks are strengthened by multiple layers of protection
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7. Raises capital in global financial markets.

The FHLBank System raises the funds to provide advances to FHLBank members by issuing and servicing debt securities in the U.S. and global financial markets. Principal and interest from all consolidated obligations are backed by the financial strength of the entire FHLBank System, contributing to the attractiveness of FHLBank debt to investors worldwide.

8. Supports affordable housing and community investment.

While the FHLBanks hold tax-exempt status, each of the 11 FHLBanks annually directs a minimum of 10% of its net profits – and may voluntarily make additional contributions – to their Affordable Housing Program (AHP) to make grants to build affordable housing projects and partner with members to deliver downpayment assistance to consumers making 80% or less of the area median income. From 1990, the AHP’s first year, through 2022, the FHLBanks made available approximately $7.6 billion in AHP subsidies, assisting more than 1 million households. In addition, all FHLBanks offer considerable financial resources to meet a range of other community needs, such as providing funding for disaster relief and recovery efforts, grants for small businesses in underserved areas, quality jobs training and placement programs, financial literacy education, and homeownership counseling. 

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FHLBanks support affordable housing and community investment
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9. Is made up of independently operated and governed entities.

Each FHLBank is governed by an elected board of directors comprising both member directors and non-member independent directors who represent many areas of business, academic, and community economic development expertise. By statute, two-fifths of an FHLBank’s directors must not represent an FHLBank member, and at least two of those directors must be public interest directors with at least four years of experience in representing community or consumer interests. 

10. Lowers the cost of funds for local lenders.

The diverse membership of the FHLBank System provides critical scale to the FHLBanks, allowing smaller member institutions — thousands of community banks, credit unions, and CDFIs in all parts of the country that otherwise lack access to the global capital markets — to receive the benefits of the FHLBank System’s low cost of funds. The System’s largest member banks are a major source of income that flows to each FHLBank’s AHP and they sponsor a high number of affordable housing, homeownership, small business, and economic development grants for their communities.

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FHLBanks deliver low-cost funds for local lenders when needed

FHLBanks strengthen the U.S. financial system

FHLBanks are key partners in strengthening the fabric of their regions and the U.S. financial system by providing liquidity to member institutions to support housing finance and community investment. At FHLBank San Francisco, we’re committed to offering our members reliable access to low-cost liquidity, essential financial services and expertise, and resources for affordable housing and economic development in all economic environments. Together, we’re making our communities more vibrant, equitable, and resilient - and changing lives for the better.