August recess is in full swing, and Congress is only scheduled to be in session for three more weeks until the November elections. During that limited time, government funding will be the primary focus and a continuing resolution is all but guaranteed to temporarily extend funding past Sept. 30. The largest unknown is the length of the extension. Some groups in Congress would prefer an extension until just after the election to force a lame duck discussion, while others prefer a January extension to push negotiations into a new administration.

Both parties are also preparing their policy agenda for the for the 119th Congress and there are many issues that will require attention. The debt ceiling debate will return as the suspension expires on Jan. 1, 2025, at which time Treasury will again use extraordinary measures to keep the United States from defaulting on its debt obligation until Congress can determine a solution.

Both parties are gearing up for a long difficult debate over taxes, as many provisions in the Tax Cuts and Jobs Act of 2017 will expire. Individuals would be impacted the most as many of the business provisions were permanent putting additional pressure on Congress to act.

Housing supply and cost, as well as housing finance reform, is also likely to get increased attention by the new Congress and new administration.

Sen. Warner Introduces Bill to Require Discount Window Usage

U.S. Senator Mark Warner (D-VA), Senate Banking Committee member, introduced a bill to modernize the discount window, to require periodic usage by depository institutions over $10 billion and to reduce stigma.

The bill includes a provision requiring the Federal Reserve System to simplify and harmonize collateral processes with FHLBanks. The Federal Reserve Board must work with FHFA and the FHLBank System to simplify and harmonize policies and procedures for pledging and transferring collateral among FHLBanks and Federal Reserve Banks.

Read more here.

August update from the Council of FHLBanks, a trade association for the FHLBank System is available here.

The Affordable Housing Program (AHP) funding is available through two distinct programs – an AHP competitive application program that is generally geared toward development of multifamily housing, and an AHP set-aside program that is targeted toward individual borrowers and homeowners.

In 2023, the FHLBanks awarded more than $319 million in AHP competitive funds, supporting 443 rental and owner-occupied housing projects and a total of more than 20,000 housing units.

Click here to view the chart below in detail.

FDIC Proposed Rule on Brokered Deposits

The Federal Deposit Insurance Corporation (FDIC) issued a notice of proposed rule on brokered deposits. The proposed rule would simplify the definition of “deposit broker,” eliminate the “exclusive deposit placement arrangement” exception and revise the interpretation of the primary purpose exception (PPE) to consider the third party’s intent in placing customer funds at a particular insured depository institution (IDI).

In addition, the proposed rule would: 

• Allow only IDIs to file notices and applications for PPEs.
• Revise the “25 percent test” designated business exception for a PPE to be available only to broker-dealers and investment advisers and only if less than 10 percent of the total assets that the broker-dealer or investment adviser has under management for its customers is placed at one or more IDIs. 
• Eliminate the enabling transactions designated business exception.
• Clarify when an IDI, which has lost its agent institution status, can regain that status for purposes of the limited exception for reciprocal deposits. 

FDIC Proposed Rule Governing Parent Companies of Industrial Banks

The FDIC issued a notice of proposed rule to amend part 354 of the FDIC Rules and Regulations governing parent companies of industrial banks and industrial loan companies.

The proposed amendments would set forth additional criteria that the FDIC would consider when assessing the risks presented to an industrial bank by its parent organization and evaluating the industrial bank’s ability to function independently of the parent organization.

The proposed amendments would also clarify the relationship between written commitments and the FDIC’s evaluation of the statutory factors applicable to an industrial bank filing. 

Additionally, the proposed amendments would revise the scope of part 354 to: 

• Include conversions involving a proposed industrial bank under section 5 of the Home Owners’ Loan Act or other transactions as determined by the FDIC;
• Ensure that a parent company of an industrial bank would be subject to part 354 if there is a change of control at the parent company or a merger in which the parent company is the resultant entity; and
• Provide the FDIC the regulatory authority to apply part 354 to other situations where an industrial bank would become a subsidiary of a company that is not subject to Federal consolidated supervision.

U.S. Department of Housing & Urban Development Announces New Funding Opportunity

HUD is issuing a notice of funding opportunity for the Pathways to Removing Obstacles to Housing (PRO Housing) program. The program supports communities who are actively taking steps to remove barriers to affordable housing, such as:

• Barriers caused by outdated zoning, land use policies, or regulations;
• Inefficient procedures;
• Gaps in available resources for development;
• Deteriorating or inadequate infrastructure;
• Lack of neighborhood amenities; or
• Challenges to preserving existing housing stock such as increasing threats from natural hazards, redevelopment pressures, or expiration of affordability requirements.

Eligible applicants are State and local governments, metropolitan planning organizations (MPOs), and multijurisdictional entities.

The application deadline is October 15, 2024. Learn more here.