Monday | April 27, 2020

Scott, Cortez Masto Applaud FHFA Decision to Allow Federal Home Loan Banks to Accept PPP Loans as Collateral

WASHINGTON – U.S. Senators Tim Scott (R-S.C.) and Catherine Cortez Masto (D-Nev.) applauded the decision by the Federal Housing Finance Agency (FHFA) to allow the nation’s eleven Federal Home Loan Banks to accept Payment Protection Program (PPP) loans as collateral on advances to their qualifying member banks. This move will allow small community banks to pledge PPP loans as collateral in order to obtain additional financing from the FHLBanks to make new loans to small business owners in their communities.

“We’re pleased by FHFA’s decision to help make more resources available for struggling small businesses. However, since the government guarantee does not transfer with the PPP loan, the FHLBanks are unable to provide the greatest amount of financing available to the community banks that pledged the initial loan. That’s why we are working on legislation to ensure that community financial institutions that pledge PPP and SBA loans are able to receive advances that provide them adequate financing to make new loans,” said the senators. “Congress has acted quickly to provide financing for small business owners; we must ensure the small community banks are able to provide these loans in an effective and efficient manner.”

BACKGROUND:

Created after the Great Depression, the eleven regional Federal Home Loan Banks are government-sponsored enterprises regulated by the FHFA that provide member financial institutions with liquidity to support mortgage lending and community development. Nearly every bank and credit union in the nation is a member of one of the FHLBanks.

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Related Issues:  COVID-19