The Bank is a federally chartered corporation that was organized in 1932 and
is one of 11 district FHLBanks. The FHLBanks, along with the Finance Agency
and the Office of Finance, comprise the FHLBank System. The FHLBanks are U.S.
government-sponsored enterprises (GSEs) organized under the authority of the
FHLBank Act. Each FHLBank operates as a separate entity within a defined geographic
district and has its own management, employees, and board of directors. The
Banks defined geographic district includes Alabama, Florida, Georgia, Maryland,
North Carolina, South Carolina, Virginia, and the District of Columbia.
The Bank is a cooperative owned by member institutions that are required to
purchase capital stock in the Bank as a condition of membership. Federally insured
depository institutions, insurance companies, and community development financial
institutions (CDFIs) located in the Banks defined geographic district and engaged
in residential housing finance are eligible to apply for membership. The Banks
capital stock is not publicly traded and is owned entirely by current or former
members and certain non-members that own the Banks capital stock as a result
of a merger or acquisition of a Bank member.
The primary function of the Bank is to provide readily available, competitively
priced funding to these member institutions. The Bank serves the public by providing
its member institutions with a source of liquidity, thereby enhancing the availability
of credit for residential mortgages and targeted community developments.
The Banks primary source of funds is proceeds from the sale of FHLBank debt
instruments to the public. These debt instruments, known as “consolidated
obligations,” are the joint and several obligations of all the FHLBanks.
The Office of Finance, a joint office of the FHLBanks, facilitates the issuance
and servicing of the FHLBanks debt instruments and prepares the combined quarterly
and annual financial reports of the FHLBanks.
Deposits, other borrowings, and the issuance of capital stock provide additional
funds to the Bank. The Bank accepts deposits from both member and eligible non-member
financial institutions and federal instrumentalities. The Bank also provides
members and certain non-members with correspondent banking services such as
cash management and other services, as discussed below.
The Bank is exempt from ordinary federal, state, and local taxation, except
real property taxes. It does not have any subsidiaries nor does it sponsor any
off-balance sheet special purpose entities.
With the passage of the Housing and Economic Recovery Act of 2008 (Housing Act),
the Finance Agency was established as the independent regulator of the FHLBanks
effective July 30, 2008. Pursuant to the Housing Act, all regulations, orders,
determinations, and resolutions that were issued, made, prescribed, or allowed
to become effective by the former Federal Housing Finance Board (Finance Board)
have and will remain in effect until modified, terminated, set aside, or superseded
by the Finance Agency Director, any court of competent jurisdiction, or operation
of law. The Finance Agencys stated mission with respect to the FHLBanks is to
provide effective supervision, regulation, and housing mission oversight of the
FHLBanks in order to promote their safety and soundness, support housing finance
and affordable housing, and support a stable and liquid mortgage market.
The Banks products and services include the following:
Credit Products;
Community Investment Services; and
Cash Management and Other Services.
Mortgage Loan Purchase Programs
The Bank’s mortgage loan purchase programs provide members an alternative
to holding mortgage loans in a portfolio or selling them into the secondary
market. Prior to 2008, the Bank purchased loans directly from member participating
financial institutions (PFIs) through the Mortgage Partnership Finance®
Program (MPF® Program), a program developed by FHLBank Chicago and the Mortgage
Purchase Program (MPP), a program separately established by the Bank. The Bank
ceased directly purchasing new mortgage assets under these mortgage programs
in 2008. However, the Bank continues to support its existing MPP and MPF Program
mortgage loan portfolios. In 2014, the Bank renewed its participation in the
MPF Program. The Bank now offers MPF Program products, MPF Xtra, MPF Direct,
and MPF Government MBS, through which the Bank facilitates third parties purchases
of PFI loans rather than holding such loans as Bank assets.
MPF Program
The Bank has from time to time offered various products to members through
the MPF Program. FHLBank Chicago, as the MPF provider, is responsible for providing
transaction processing services, as well as developing and maintaining the underwriting
criteria and program servicing guide. The Bank pays FHLBank Chicago a fee for
providing these services. Conventional loans purchased from PFIs under the MPF
Program are subject to varying levels of loss allocation and credit enhancement
structures. Federal Housing Administration (FHA)-insured and Department of Veterans
Affairs (VA)-guaranteed loans are not subject to the credit enhancement obligations
applicable to conventional loans under the MPF Program. The PFI may retain the
right and responsibility for servicing the loans or sell the servicing rights,
and the PFI may be required to repurchase a loan in the event of a breach of
eligibility requirement or other warranty.
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