Federal Home Loan Bank System (FHLB)

Overview

The Federal Home Loan Bank (FHLB) System is a national network of 11 regional cooperative banks that provide liquidity and funding to banks, credit unions, insurance companies, thrifts, and certified community development financial institutions. Overseen by the Federal Housing Finance Agency (FHFA), the FHLBanks support housing finance, community development, and local economic activity by supplying low-cost, wholesale funding to their members.

Key takeaways

• The FHLB System consists of 11 regional, privately capitalized cooperative banks.
• FHLBanks fund other financial institutions, not individuals.
• They raise funds by issuing debt (consolidated obligations) in the capital markets; they do not receive direct taxpayer funding.
• FHLBanks focus on mortgage finance, affordable housing, and community investment programs.
• Roughly several thousand financial institutions are FHLBank members; the system holds about $1.3 trillion in combined assets.

How the system works

Each FHLBank is a member-owned cooperative. Local financial institutions become members by purchasing stock in their regional FHLBank and meeting membership requirements (including involvement in real estate lending). Members access advances—short- and long-term loans—from their FHLBank, typically at low cost, to support mortgage lending and other activities.

Because FHLBanks are cooperatives, they generally pay no federal or state income taxes. The FHLBanks operate under FHFA oversight, and the FHLBanks’ Office of Finance manages collective debt issuance and reporting.

Regional structure and membership

The eleven regional banks and their headquarters are:
* Federal Home Loan Bank of Atlanta
* Federal Home Loan Bank of Boston
* Federal Home Loan Bank of Chicago
* Federal Home Loan Bank of Cincinnati
* Federal Home Loan Bank of Dallas
* Federal Home Loan Bank of Des Moines
* Federal Home Loan Bank of Indianapolis
* Federal Home Loan Bank of New York
* Federal Home Loan Bank of Pittsburgh
* Federal Home Loan Bank of San Francisco
* Federal Home Loan Bank of Topeka

Membership comprises commercial banks, credit unions, thrifts, insurance companies, and community development financial institutions that use FHLB advances and programs to support lending and community projects.

Primary services and programs

• Advances: secured loans to members for liquidity and mortgage financing.
• Affordable Housing Program (AHP): grants and subsidized advances to support affordable rental and homeownership projects.
• Community Investment Program and other targeted programs to promote local economic development.
• Secondary-market options in some regions for members selling mortgage loans.

Unlike Fannie Mae and Freddie Mac, FHLBanks do not guarantee individual mortgages; they provide wholesale funding and support programs for affordable housing and community development.

How FHLBanks are funded

FHLBanks raise funds primarily by issuing consolidated obligations—bonds, notes, and other debt instruments—in the capital markets. Debt is issued by individual FHLBanks but is backed jointly by the combined resources of the system, which helps lower borrowing costs and maintain strong access to capital. The Office of Finance coordinates issuance, investor reporting, and credit practices for the system.

Brief history

Created by the Federal Home Loan Bank Act of 1932 during the Great Depression, the FHLB System was designed to ensure a steady flow of funds for home mortgage lending and to make homeownership more accessible. The system originally had 12 regional banks; it now has 11 following mergers. Oversight has evolved over time and is currently exercised by the FHFA.

Impact and risks

Benefits:
* Provides reliable liquidity to the mortgage market, helping support homeownership, rental housing, and community development.
* Offers lower-cost funding that member institutions can pass along to consumers and local projects.
* Has played a stabilizing role in past market stress by maintaining lending when other funding sources contracted.

Risks and criticisms:
* Critics argue subsidized funding and program incentives can distort housing markets and encourage excessive risk-taking.
* Growing size and interconnectedness raise concerns about systemic contagion if an FHLBank faced severe distress.
* Some regional banks have merged historically after suffering capital losses.

Common questions

Is the FHLB a government agency?
* No. The FHLB System is a government-sponsored enterprise created by statute and overseen by the FHFA, but its regional banks are privately capitalized cooperatives.

How many FHLBanks are there?
* There are 11 regional Federal Home Loan Banks.

Do FHLBanks lend to individuals?
* No. FHLBanks make loans (advances) to member institutions, not directly to consumers.

Bottom line

The Federal Home Loan Bank System is a cornerstone of U.S. housing finance and local community lending. Through its member-owned regional banks, it supplies wholesale liquidity, supports affordable housing initiatives, and helps stabilize mortgage credit availability—while operating as a privately capitalized cooperative network under federal oversight.