FHLBank Leader Is Wary of MBS Authority.(Federal home loan banks)(impact of mortgage securitization)

Washington -- Legislative efforts to get the Federal Home Loan Banks involved in mortgage securitization has the potential to "destroy" the FHLBanks, according to a FHLBank president.

FHLBank of New York president Alfred DelliBovi is concerned about the risks involved in securitization and the impact it could have on the FHLBanks traditional advance lending business.

He even raised the specter that securitization could lead to consolidation of the 12 FHLBanks.

But he also is concerned that supporters of securitization are diverting attention away for the real purpose of a GSE bill, which is to improve and strengthen the regulation of Fannie Mae, Freddie Mac and the FHLBanks.

"Securitization would involve opening up the charters of the government-sponsored enterprises. A wrong path at the wrong time," he told the New Jersey Bankers Association.

Several banking groups that represent the majority of FHLBank members are concerned about timing of a securitization amendment that would authorize the FHLBanks to guarantee and issue mortgage-backed securities.

The Mortgage Bankers Association and National Association of Home Builders are pushing the amendment so that the FHLBanks can compete directly with Fannie and Freddie in the MBS market and increase competition.