Back in 1932, Congress established the Federal Home Loan Bank System to fill a dire need for a stable source of funds for residential mortgages. The Great Depression had undermined the existing banking system, and with it, Americans who had recently purchased — or wanted to purchase — homes.

A Vital Resource for Community Lenders
America's banking system may have more checks and balances today, but the 12 regional Federal Home Loan Banks established by the Federal Home Loan Bank Act remain just as vital to the nation's community lenders.

Located in Atlanta, Boston, Chicago, Cincinnati, Dallas, Des Moines, Indianapolis, New York, Pittsburgh, San Francisco, Seattle, and Topeka, the 12 Federal Home Loan Banks help their member financial institutions meet the diverse housing-finance and economic-development needs of their communities.

Organization
The Federal Home Loan Banks are government-sponsored enterprises, federally chartered but privately capitalized and independently managed.

Each Federal Home Loan Bank is governed by a board of directors made up of industry directors elected by member institutions and public-interest directors appointed by the System's federal regulator, the Federal Housing Finance Agency. Each Federal Home Loan Bank is capitalized by the capital-stock investments of its members and its retained earnings. Members purchase stock in proportion to their borrowings from the Federal Home Loan Bank, their holdings of mortgages and mortgage securities, and their assets.

The Federal Home Loan Banks meet all their costs from earnings, including the costs of raising funds jointly in the capital markets. In addition, they are assessed for the full costs of the Federal Housing Finance Agency. No tax dollars are involved in the operation of the Federal Home Loan Bank System. The Federal Home Loan Bank System raises funds by issuing debt instruments (bonds and notes) in the capital markets. Because these instruments have "AAA" credit ratings, the Federal Home Loan Bank System can borrow at very favorable rates and terms. However, Federal Home Loan Bank debt is not guaranteed by, nor is it the obligation of, the U.S. government.

While the Federal Home Loan Banks are not subject to federal income tax, they do pay 20 percent of their net earnings to fund a portion of the interest on the Resolution Funding Corporation (REFCorp) debt, which was issued for the resolution of insolvent savings and loans. In addition, the Federal Home Loan Banks contribute the greater of 10 percent of their net income or $100 million toward the Affordable Housing Program, which awards grants and rate-subsidized loans for housing serving very low- to moderate-income families and individuals.

Membership
The Federal Home Loan Banks provide members with access to economical credit products and an attractive and safe stock investment.

Lenders eligible for Federal Home Loan Bank membership include savings banks, savings and loan associations, cooperative banks, commercial banks, credit unions, and insurance companies that are active in housing finance. Through the 12 Federal Home Loan Banks, the System has more than 8,000 member financial institutions.

Mission
The mission of the Federal Home Loan Banks is to support members' residential-mortgage and economic-development lending activities.

In a time when cash deposits in community banks are dwindling, the funds provided by the Federal Home Loan Banks guarantee a stable source of funds for mortgages and community lending. Without the Federal Home Loan Banks, most depository institutions would not have access to medium- and long-term sources of funding.

By supporting community-based financial institutions, the Federal Home Loan Bank System helps to strengthen communities. The System directly benefits consumers by helping to ensure competition in the housing-finance market.