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Federal Home Loan Bank (FHLB) System

File Photo: Federal Home Loan Bank (FHLB) System
File Photo: Federal Home Loan Bank (FHLB) System File Photo: Federal Home Loan Bank (FHLB) System

What Exactly Is the Federal Home Loan Bank System (FHLB)?

The Federal Home Loan Bank System (FHLB) is a group of 11 regional banks that supply trustworthy liquidity to other banks and lenders for housing, infrastructure, economic development, and other requirements. The Federal Housing Finance Agency manages FHLB.

A government agency administers the FHLB and has a public purpose, although each bank in the network is privately financed and receives no government assistance.

FHL Bank System Function

The Federal Home Loan Bank System’s 11 regional banks are privately capitalized cooperatives. Members of local banks that acquire FHLBank stock own them. Member institutions must lend real estate. As cooperatives, Federal Home Loan Banks pay no federal or state income taxes.

FHLB Banks
The 11 FHL Bank System banks are nationwide. Each serves a multi-state region.

Eleven FHLBanks:

  • Atlanta FHL Bank
  • Boston FHL Bank
  • Chicago FHL Bank
  • Cincinnati FHL Bank
  • Dallas FHL Bank
  • Des Moines FHL Bank
  • Indianapolis FHL Bank
  • New York FHL Bank
  • Pittsburgh FHL Bank
  • San Francisco FHL Bank
  • Topeka FHL Bank

Service Federal Home Loan

Federal Home Loan Banks charge member banks low interest because of their cooperative expenses and overhead. This gives member banks low-cost loans to lend to clients.

FHLBanks specializes in real estate lending. However, unlike Fannie Mae and Freddie Mac, FHLBs do not guarantee mortgage loans. Instead, FHLBs function as “banks to banks” by giving their members long- and short-term loans, termed “advances,” and specialized grants and loans to increase affordable housing and economic growth. FHLBs may offer secondary market venues for mortgage loan sellers.

FHLBanks operate under government initiatives. Affordable Housing Program, Community Investment Program, Mortgage Partnership Finance Program, and Mortgage Purchase Program

Federal Home Loan Banks support 80% of U.S. lending institutions.

How FHLBanks are Funded

The Federal Home Loan Banks raise funds through capital market bonds, discount notes, and other term debt. We call these consolidated obligations.

All 11 FHLBanks issue debt through the Office of Finance. Each bank provides a debt instrument, but all banks back it, making it a safer investment.

The FHLB System History

After the Great Depression devastated the U.S. economy, especially the banking industry, the FHL Bank System was created. The Federal Home Loan Bank Act of 1932, the first in a line of laws to make homeownership more accessible to Americans, established it. The rationale was to provide banks with low-cost funds for mortgages. They would make more loans, making it easier for people to buy homes and stimulating the real estate market.

FHLB originally had 12 independent regional wholesale banks, like the 12 regional Federal Reserve Banks. The Act provided them with total funding of $125 million. However, Seattle and Des Moines banks merged in 2015, reducing FHLBanks to 11.

The Act established the Federal Home Loan Bank Board to oversee the system. The FHFB took over oversight, and the OTS took over regulation after it was discontinued in 1989. The HERA-created Federal Housing Finance Agency has regulated the FHLB since 2008.

For much of the FHLB’s 89-year history, savings and loan institutions have dominated the ranks of its member financial institutions. Their numbers began to dwindle in the 1980s and ’90s after the Savings and Loan Crisis. In the 21st century, commercial banks (which joined in 1989) and insurance companies dominate membership.

Federal Home Loan Bank Impact

Advocates of the FHL Bank System say it keeps funds flowing to the residential mortgage market, enabling millions to become homeowners. FHLBs support rental properties, small companies, and other community development projects, boosting economic growth, employment, and quality of life.

Critics say the FHLB’s government-sponsored initiatives affect housing market supply and demand. They say FHLB funding promotes reckless lending and a more turbulent residential real estate cycle.

There are also concerns that the recent growth in FHL Bank members, increased reliance on FHLB funding, and increasing financial system interconnectedness could spread FHLBank distress throughout the capital markets and economy.

The inability to recoup capital losses forced FHLB Seattle to join FHLB Des Moines. Overall, their practices are solid. Unlike Fannie Mae and Freddie Mac, the FHLBanks did not need government bailouts during the 2008 subprime mortgage crisis. After other financial sources dried up, they boosted lending.

Federal Home Loan Bank—Government Agency or Bank?

The FHL Bank System was founded as a government-sponsored enterprise to assist community investments and mortgage financing. Although not an agency, the FHL Bank Act formed it.

How Many FHL Banks?

The FHLB is a network of 11 regional banks that supply funds to other banks.

Does FHLB lend to individuals?

No FHLB banks lend to other lenders, primarily for real estate.


  • Eleven regional banks make cash available to other banks through the FHLB to keep money flowing to consumers and companies.
  • The federal government established the FHLB during the Great Depression.
  • Private cooperative FHLB banks receive no public assistance.
  • Consolidated obligations are federal home loan banks’ primary funding source.
  • Federal Home Loan banks finance mortgages and invest in the community, offering low-cost loans to member banks.



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