Note: This piece was originally featured in the February 2026 edition of MortgagePoint magazine.
As housing affordability challenges persist and mortgage market volatility reshapes lending dynamics, the Federal Home Loan Bank (FHLBank) System continues to serve as a countercyclical source of liquidity for more than 6,500 member institutions nationwide. In a wide-ranging conversation with MortgagePoint, Council of Federal Home Loan Banks President and CEO Ryan Donovan and Policy Economist John Comeau outline how the System has scaled its advance activity in response to shifting market conditions, expanded its affordable housing commitments, and addressed heightened regulatory scrutiny, all while maintaining its core mission of supporting local lenders and community development.
Ryan Donovan currently serves as President and CEO for the Council of Federal Home Loan Banks (FHL Banks). Prior to joining the Council in 2022, Donovan served as EVP and Chief Advocacy Officer at the Credit Union National Association, where he led a team of more than 100 advocates at CUNA and its state credit union leagues and associations. He has been an advocate focused on financial services policy for almost two decades, having worked for the California and Nevada Credit Union Leagues prior to his nearly 15-year run at CUNA. Donovan began his career working for former House Democratic Leader Richard A. Gephardt (D-MO) and Representative Brad Sherman (D-CA).
John Comeau is the Policy Economist for the Council of Federal Home Loan Banks, where he focuses on policy analysis, research, and the U.S. economy. Comeau is a Chartered Financial Analyst (CFA) with more than 20 years of economic, analytic, and housing finance experience. Prior to joining the Council, Comeau served as a Financial Economist at the U.S. Department of the Treasury, Senior Financial Analyst at the Federal Housing Administration, Senior Economist at the U.S. Department of Housing and Urban Development, and Model Validation Analyst at U.S. Bank.
Q: How would you describe the role of the Federal Home Loan Bank System in today’s housing finance market, particularly amid ongoing affordability and liquidity challenges?
Ryan Donovan: The Federal Home Loan Banks continue to do what they were created to do over 90 years ago: play a critical role in support of housing and community development by providing reliable, collateralized liquidity to their roughly 6,500 member financial institutions across the country. This liquidity is essential to the local lenders that anchor communities large and small, and independent research demonstrates that it provides stability in the broader financial system and supports expanded lending—particularly residential real estate lending.
Q: In what ways has the mission or day-to-day function of the FHLBanks shifted during the rate hikes and market volatility of the past few years?
John Comeau: One of the defining strengths of the FHLBank System is that its mission—to provide liquidity to members and support housing and community development—remains constant regardless of market volatility. In fact, the FHLBanks are a stabilizing force during times of market fluctuation. When other sources of market liquidity retreat during times of instability, the FHLBanks lean in. So, from a day-to-day perspective, the mission and reliability of the FHLBanks remains constant, while member demand for liquidity may shift based on market conditions.
Q: How are member institutions using FHLBank advances differently today compared to the pre-2022 market environment?
Comeau: Member advance use today differs markedly from the period leading up to 2022. During the COVID-19 pandemic, unprecedented monetary and fiscal support flooded the economy with liquidity, sharply reducing demand for wholesale funding after an initial spike in demand for FHLBank advances in early 2020. As a result, outstanding FHLBank advances averaged just over $413 billion from Q2 2020 through Q1 2022 an unusually low level by historical standards.
As stimulus flowed through the system and economic conditions normalized, demand rebounded sharply, with advances averaging nearly $766 billion from Q2 2022 to Q3 2025—an increase of more than 85%. This rebound underscores the elastic nature of the FHLBank System and its ability to scale liquidity up or down as needed, supporting members and the households and small businesses they serve across all phases of the economic cycle.
Q: What trends are you seeing in advance demand across community banks, credit unions, and larger institutions?
Comeau: Demand remains stable across all member types, but the drivers vary. Community banks and credit unions often use advances to offset deposit pressures and maintain local lending, while larger institutions tend to use advances more tactically to manage balance-sheet and liquidity needs. Regardless of demand or how advances are used, members must pledge eligible housing-related collateral—one of the FHLBank System’s most direct and important links to housing. Across the board, the common theme is that members value the FHLBanks as a reliable, countercyclical source of liquidity when market funding becomes more expensive or less predictable.
Q: Where do you believe the FHLBanks can have the greatest impact on housing affordability, both directly and indirectly?
Comeau: Directly, each of the 11 FHLBanks operates an Affordable Housing Program and is required by law to contribute 10% of the previous year’s net income to fund it. These grants are often a critical component of the financing stack for new affordable housing construction and are also used to provide direct assistance to qualifying homebuyers through down payment assistance, closing cost grants, and related support. Whether funding a multifamily development or assisting an individual homebuyer, AHP resources are delivered on a dollar-for-dollar basis, with no administrative or origination fees deducted. Since the program’s enactment in 1990, the FHLBanks have contributed more than $9.5 billion through the Affordable Housing Program.
The FHLBanks also maintain a range of voluntary funding initiatives to expand housing and local investment efforts. Because more than 90% of FHLBank members are small, community-based institutions, the Banks have deep insight into local conditions and tailor these programs accordingly. For example, FHLBank San Francisco operates the Nevada Targeted Fund, which supports affordable housing projects in a state with one of the highest shares of extremely low-income households that are severely cost-burdened. In 2024, the FHLBanks collectively contributed $528 million to voluntary housing and community investment programs. Indirectly, the FHLBanks provide low-cost advances, including more deeply discounted community impact cash advances (CICA) that deliver meaningful cost savings for borrowers. A recent Urban Institute study found that FHLBank advance borrowing between 2002 and 2024 was associated with approximately $850 billion in additional residential real estate lending. An earlier Urban Institute analysis found that U.S. homeowners save an estimated $3.8 billion annually in lower mortgage costs due to FHLBank liquidity.
Q: How has the deployment of Affordable Housing Program funds evolved in response to today’s market conditions?
Comeau: While the Affordable Housing Program operates within statutory requirements established by federal law, each FHLBank develops an annual Targeted Community Lending Plan informed by research, data, and engagement with local officials, housing organizations, and other stakeholders. This process allows each Bank to respond to changing conditions and direct resources where they are most needed in their local communities, supported by Affordable Housing Advisory Councils in each region. For example, FHLBank Atlanta identified heirs’ property—generational land ownership without clear title—as a significant barrier to housing stability in parts of its district and adjusted its AHP scoring criteria to incentivize projects that prevent or resolve heirs’ property challenges.
Similarly, the FHLBanks’ voluntary programs are designed to adapt to evolving community needs. FHLBank Topeka’s Native American Housing Initiatives fund is designed to address housing challenges in tribal communities, such as overcrowding and lack of access to affordable financing options. Last year, FHLBank Topeka expanded NAHI funding to $5 million and, as of last October, some 36 projects across four states were supported by the program
Q: The FHLBank System has faced increased scrutiny from regulators and policymakers. How do you balance calls for reform with the need to preserve the system’s stability and effectiveness?
Donovan: In recent years, the FHLBanks have devoted significant effort to ensuring policymakers and stakeholders have a clear understanding of the System’s role in the housing finance ecosystem and its tangible benefits for families and communities. A recent report by the Government Accountability Office affirms the value and crucial role the FHLBanks play for the broader financial system. Most importantly, the GAO report found that the FHLBanks operate in line with their statutory mission and with congressional intent and that the regulatory framework governing their operations is functioning as designed.
The findings of the GAO are corroborated by research published by the Filene Institute and the Urban Institute demonstrating the System’s value proposition. FHLBank funding enables local lenders to do what they do best: serve their customers and communities. The critical role the FHLBanks play has been widely acknowledged by policymakers and elected officials, and we are constantly asked how we can do more for the communities we serve.
Q: What do critics most often misunderstand about the role or risk profile of the FHLBanks?
Donovan: Because the Federal Home Loan Banks have “federal” and “home loan” in their name, some people incorrectly assume that the FHLBanks are part of the federal government or make home loans directly to consumers. The FHLBanks are, in fact, a government-sponsored enterprise, or GSE, which is a private entity chartered to fulfill a public mission. As the recent GAO report makes clear, the role of the FHLBanks is to act as a steady, reliable source of secured liquidity across economic cycles for their members.
They were created to raise funds in capital markets to ensure a reliable flow of liquidity was available so their 6,500 member-owners could continue to serve customers across the country in any economic climate. The FHLBanks are not supported by taxpayer dollars. Rather, they are member-owned cooperatives, funded entirely by private capital. Some may have the misconception that the FHLBanks take on outsized risk or increase systemic risk, but research published in 2025 found exactly the opposite, and the GAO report concludes that members are using their access to FHLBank liquidity responsibly.
The FHLBanks are conservatively managed, subject to comprehensive oversight by the Federal Housing Finance Agency, and organized as 11 independent regional banks, each with its own management team and board of directors. The 11 FHLBanks are jointly and severally liable for each other’s obligations, creating strong structural incentives for each institution to monitor risk across the entire System, while market and interest rate exposure are actively hedged. On top of this, FHLBank advances, standby letters of credit, and mortgage purchases are fully collateralized. The FHLBanks do not take credit risk; they provide secured liquidity to regulated financial institutions, which helps explain why the System has remained stable for over nine decades.
Q: From a research and policy perspective, what housing or mortgage trend is currently underappreciated but could have major implications in the coming years?
Comeau: Mortgage lock-in effects on housing supply are a fundamental economic issue that warrants deeper research and a policy solution. Millions of households are effectively locked into homes that do not meet their needs—whether families are growing, shrinking, or aging in place—because sub-market mortgage rates and unrealized capital gains reduce the incentive to sell and move. This dynamic is constraining household mobility, suppressing home sales, restraining mortgage originations, and limiting workers’ ability to relocate to regions of economic opportunity. The White House and some members of Congress have raised the possibility of increasing or eliminating capital gains exclusions on primary residences, which would help reduce these frictions and help thaw a frozen housing market. Addressing mortgage lock-in is essential for restoring market fluidity and allowing housing markets, and the broader economy, to return to equilibrium.
Q: Looking ahead, what does success for the FHLBank System look like over the next five years?
Donovan: The FHLBanks’ core purpose is to empower local lending. Day in and day out, they support communities across the country, providing reliable liquidity in all market environments while expanding support for housing and community development. Looking ahead, they will continue to hew to their core purpose while finding ways to innovate and develop programs and initiatives to support local community needs and drive economic prosperity.
The full February 2026 issue of MortgagePoint is available here.
