Finance Board Taking a Look At FHLB Portfolio Programs.(Federal Home Loan Banks)

Washington -- The new chairman of the Federal Housing Finance Board is trying to determine if the Federal Home Loan Banks are taking excessive risks in purchasing mortgages from their members and holding them in portfolio.

Finance Board chairman Ronald Rosenfeld said he is working with the agency's supervisory staff to analyze the risks and rewards of the Chicago FHLBank's Mortgage Partnership Finance program and the Seattle FHLBank's Mortgage Purchase Program.

The Chicago bank has accumulated the largest mortgage loan portfolio in the FHLBank System. And the Seattle bank has the third-largest portfolio. Both banks are operating under supervisory agreements.

"Given our purpose of regulating for safety and soundness, it is implicit that you consider risk," chairman Rosenfeld said in an interview.

"If we find that these assets create an overwhelming problem, then we have to do something about it. On the other hand, they may be very attractive," he said.

At this point, he added, it is too early to provide any specifics about the review of the mortgage programs. Mr. Rosenfeld became the new chairman a few weeks ago, thanks to a recess appointment by President George Bush on Dec 14.

He previously served as president of Ginnie Mae (since July 2001) where he implemented several reforms to make Ginnie mortgage-backed securities more attractive to ...