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Affiliates of several mortgage REITs obtained federal home loan bank membership in recent months despite continued uncertainty about the timing and nature of the Federal Housing Finance Agency's next step on a series of proposed rules that effectively prevent them from maintaining that newfound status.
Five Oaks Investment Corp. unit Five Oaks Insurance LLC and New York Mortgage Trust Inc.'s Great Lakes Insurance Holdings LLC gained membership to the Federal Home Loan Bank of Indianapolis in February. PennyMac Mortgage Investment Trust's PMT Insurance LLC and American Capital Agency Corp.'s Old Georgetown Insurance Co. LLC became members of the Federal Home Loan Bank of Des Moines subsequent to the first quarter's end. CYS Investments Inc.'s CYS Insurance Services LLC earned membership in the Federal Home Loan Bank of Cincinnati in March, according to an April 22 earnings release.
It has been one year since FHFA Director Melvin Watt told an audience at the 2014 FHLBanks Directors Conference that captive insurance borrowing and membership in the home loan bank system raised a number of possible safety and soundness issues. In June 2014, the home loan banks voluntarily placed a three-month moratorium on granting federal home loan bank admission to new captive insurance members. The FHFA in September 2014 issued the controversial notice of proposed rulemaking that defined the types of insurance companies that would be eligible and ineligible for home loan bank membership.
"While our ability to access the federal home loan bank system over the long term remains subject to proposed rulemaking, we are hopeful any final rule from the Federal Housing Finance Agency will result in a...