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Federal Banks are different than regular commercial banks. Membership is by banks as opposed to membership by individuals. However, as the name implies, they do have both direct and indirect effects on the housing market in the form of stabilizing programs that help member banks deal with market volatilities. The details of their programs are very sophisticated and mostly deal with providing financial flexibility in cash flow and interest rate fluctuations. Indirectly, the Federal Home Loan Bank of Boston;s Mortgage Profit Finance program was created in 1997. Since then, the MPF program has helped more than 1,200 financial institutions fund more than 1.3 million loans for families across America to purchase new homes or lower the cost of their existing homes.

Supporting Community Development

Federal Banks also enter the market and directly help their member institutions through their Community Investment Program advances (or loans) that allow members to fund affordable housing while maintaining profit margins and minimizing risk. Members can obtain discounted advances that are priced up to 10 basis points below regular commercial advances to support qualified affordable housing development. These programs in turn are offered to developers and home builders to create an incentive for the construction of low cost housing.

Supporting Affordable Housing

Each year the Federal Home Loan Bank of Boston funds projects submitted to the Affordable Housing Project by member institutions is awarded in at least one competitive round. Subsidized loans (advances) and direct subsidies (grants) are available. The actual terms are determined by the member financial-institution applicant, based on the specific needs of the development.” Other federal banks put a percentage of their net profit into such programs, but this federal bank has many community support programs too numerous to list here in any detail, but are very clearly described under “Housing and Economic Growth” tab on their homepage..