FHFA Plans to Cut Red Tape for Federal Home Loan Banks

You might care about this because the Federal Housing Finance Agency or FHFA is proposing to cancel an old rule. This rule is called the "New Business Activities" regulation or 12 CFR part 1272. This regulation has been in place for more than 25 years. It set requirements for Federal Home Loan Banks when they wanted to start new types of business activities. These banks play a big role in housing finance. The FHFA believes this rule is no longer needed and might even stop banks from trying new things that could help housing. The FHFA's main reason for proposing this change is to follow a new government order. This order asks federal agencies to look at their rules and get rid of any that create unneeded burdens. The agency also wants to help improve how money is spent and make sure banks are careful with funds. They think the current rule might not be helping as much as it should to keep banks safe and sound. Instead, it might just be adding costs and slowing down new ideas. The original rule was created in 2000. It came after a law allowed banks to accept different kinds of loan collateral. At that time, regulators wanted to make sure banks could handle the new risks. Over the years, the FHFA adjusted the rule. In 2016, they narrowed it down. It only applied to new activities that involved "material risks not previously managed." Now, the FHFA says banks have a lot of experience managing risks. They also point out that very few new activities trigger the rule anymore. In fact, banks have submitted only two notices about new activities in the last five years. None of these were rejected because the risks were too high. This suggests the rule might be out of date. Removing it could make it easier for banks to offer new products and services to their members. This could also align with efforts to lower housing costs. The public has until August 12, 2026, to share their thoughts on this proposal. This proposal is particularly interesting because it shows a government agency actively trying to remove old rules that it now sees as burdensome. Instead of adding more regulations, the FHFA is looking to simplify things. This move comes directly from an Executive Order from the President. The order asks agencies to review their existing rules to make sure they are still useful and not causing unnecessary costs or delays. What makes this proposal stand out is the FHFA's argument that the rule, 12 CFR part 1272, might be preventing good changes. They believe it could be stopping Federal Home Loan Banks from developing new services. This could happen even if these new services could help achieve the banks' mission. The FHFA also notes that banks have gotten much better at managing risks over time. The original reason for the rule, which was to manage new types of collateral, is largely handled by the banks themselves now. The fact that so few new activity notices have been filed, and none have been rejected, suggests the rule might have become more of a formality than a real safety net. This proposed repeal suggests a shift in how regulations are viewed. It highlights a focus on efficiency and reducing costs within the government. It also aims to let regulated entities, like the Federal Home Loan Banks, innovate more freely. This could mean more new financial products and services. These could then help address current housing needs. People who work in banking and finance would be very interested in this legal document. This includes leaders and risk managers at Federal Home Loan Banks. They would be directly affected by the removal of a rule that has guided their business expansion for years. Mortgage lenders and other financial institutions that work with Federal Home Loan Banks would also want to know about this change. It could affect the types of products and services these banks offer them. Anyone concerned with housing policy and affordability should also pay attention. The FHFA believes repealing this rule could help make housing more affordable by encouraging innovation. This could lead to new ways of funding homes. Government transparency advocates and those interested in how federal agencies operate would find this proposal relevant. It shows an agency responding to directives to cut down on regulatory burdens. Finally, legal professionals specializing in administrative law or banking regulation will find this document important. It provides a clear example of an agency's process for repealing a rule. This includes citing executive orders and explaining the legal basis for such an action. Researchers and academics studying financial regulation or government efficiency would also find valuable insights here.