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Federal Home Loan Bank System (FHLB)


The Federal Home Loan Bank System (FHLB) is a government-sponsored network of 11 regional banks situated throughout the U.S. Established in 1932, its primary purpose is to provide a stable source of long-term funding for community financial institutions to support housing finance and community investment. FHLB members, primarily banks and credit unions, can borrow funds at low rates, enabling them to offer mortgages and other loans to their customers.


The phonetics of the keyword “Federal Home Loan Bank System (FHLB)” can be broken down as follows:Federal: /ˈfɛdərəl/Home: /hoʊm/Loan: /loʊn/Bank: /bæŋk/System: /ˈsɪstəm/FHLB: /ˈɛf ˈeɪʧ ˈɛl ˈbi/When spoken together: /ˈfɛdərəl hoʊm loʊn bæŋk ˈsɪstəm ˈɛf ˈeɪʧ ˈɛl ˈbi/

Key Takeaways

  1. The Federal Home Loan Bank System (FHLB) is a government-sponsored enterprise that supports housing finance and community investment.
  2. It consists of 11 regional banks across the United States, providing low-cost funding and liquidity to member financial institutions, primarily commercial banks, credit unions, insurance companies, and savings institutions.
  3. FHLB helps its members finance affordable housing, economic development, and rural projects, contributing to the stability and growth of the communities they serve.


The Federal Home Loan Bank System (FHLB) is an essential element in the U.S. financial landscape as it plays a critical role in supporting housing finance, community development, and local economies. Established in 1932, the FHLB consists of 11 regional banks that serve as reliable funding sources for affiliated financial institutions, primarily commercial and savings banks, credit unions, and insurance companies. By providing low-cost loans, known as advances, these institutions are able to make mortgages more affordable and accessible for homebuyers, facilitating growth and stability in the housing market. Additionally, the FHLB contributes significantly to affordable housing and community investment programs, thus fostering economic development and meeting the specific needs of local communities. Overall, the FHLB promotes stability, liquidity, and affordability in the financial system, ultimately benefiting both consumers and financial institutions alike.


The Federal Home Loan Bank System (FHLB) serves as a crucial pillar in the U.S. financial system, designed to facilitate and support the growth of affordable housing and community development projects by providing liquidity and funding solutions to financial institutions. Established by the U.S. Congress in 1932 during the Great Depression, this membership-based network of eleven regional banks has an enduring responsibility to meet the mortgage lending and funding needs of communities across the country. It functions as a wholesale bank, only dealing with members—comprised primarily of local and regional banks, credit unions, insurance companies, and community development financial institutions—effectively ensuring the availability of credit and enhancing the stability of the financial services industry. By devising cost-effective funding solutions, the FHLB system allows its member institutions to extend credit to households and small businesses, fostering economic growth and development. In essence, it acts as a reliable source of liquidity that can be tapped into by members during times of financial stress, thus providing continuous access to capital that helps maintain a steady flow of credit. Moreover, FHLBs offer a variety of financial products and services, ranging from secured loans called “advances” that enable members to fund mortgages, consumer loans, and small business loans to granting funds for affordable housing programs, economic development projects, and educational initiatives. Through these extensive efforts, the Federal Home Loan Bank System fulfills its pivotal role in promoting and sustaining homeownership, community investment, and financial stability in the United States.


1. Affordable Housing Program: The Federal Home Loan Bank System (FHLB) supports various community housing initiatives through its Affordable Housing Program (AHP). A real-world example is the FHLB of Atlanta’s AHP funding, which has helped local non-profit organizations develop low- and moderate-income housing projects in the region. One specific project involved the construction of a 44-unit apartment building that provided affordable rental units for seniors in Gainesville, Georgia. Through AHP subsidies, the cost burden on developers was lowered, making affordable housing development more feasible. 2. Advances and Community Investment: In 2020, the Federal Home Loan Bank of Dallas provided $60 million in advances to Texas Capital Bank, enabling the bank to fuel community development and support small businesses during the COVID-19 pandemic. By offering a stable source of funds through advances, the FHLB ensured that small businesses and local economies could continue to grow in spite of temporary economic setbacks. This not only provided economic relief to affected communities but also showcased FHLB’s crucial role in supporting financial institutions during challenging times. 3. Mortgage Partnership Finance Program: The Federal Home Loan Bank of Chicago’s Mortgage Partnership Finance (MPF) Program is another real-world example of how FHLB assists in fostering a stable housing market. This program enables participating members to sell eligible mortgage loans to the FHLB, thereby providing liquidity and alleviating credit risk. For instance, in 2019, the FHLB of Chicago’s MPF Program announced a partnership with the Wisconsin Housing and Economic Development Authority to increase access to affordable mortgage loans and reduce down payment barriers for homebuyers in the state. By supporting such initiatives, the FHLB contributes to the growth and stability of the housing market, making homeownership more accessible for countless Americans.

Frequently Asked Questions(FAQ)

What is the Federal Home Loan Bank System (FHLB)?
The Federal Home Loan Bank System (FHLB) is a government-sponsored organization consisting of 11 regional banks across the United States, established to provide low-cost financing solutions and economic support to local banks, credit unions, insurance companies, and other financial institutions involved in lending for housing, community development, and business growth.
How was the Federal Home Loan Bank System created?
The Federal Home Loan Bank System was created in 1932 as part of the Federal Home Loan Bank Act, in response to the Great Depression. Its objective was to stabilize, support, and improve the housing market and mortgage lending by providing a stable source of funds for these institutions.
How is the FHLB funded?
FHLBanks are funded primarily through the issuance of debt securities in the capital markets, often referred to as “consolidated obligations.” These debt securities have the backing of the U.S. government, thus ensuring their safety and stability. The funds raised through the issuance of debt securities are lent to FHLB member institutions at competitive rates.
Who are the members of the Federal Home Loan Bank System?
The members of the FHLB include commercial banks, savings institutions, credit unions, insurance companies, and community development financial institutions who are involved in providing housing finance and community investment. These member institutions are also required to hold capital stock in the respective FHLBanks as a condition of their membership.
What are the benefits of being part of the FHLB system?
By being part of the FHLB system, member institutions can access low-cost funding and other financial services such as liquidity support, risk management tools, and resources for community and economic development initiatives. This helps these institutions better serve their customers and communities, as well as promote homeownership and affordable housing.
What are the main products and services offered by the FHLB system?
The FHLB system offers various products and services, including:1. Advances: Low-cost, short and long-term funding to member institutions for supporting mortgages, community investment, and other credit needs.2. Letters of Credit: Issued on behalf of member institutions as a substitute for pledged collateral or as a guarantee for public funds deposits.3. Mortgage Purchase Program: A secondary market for member institutions to sell eligible, fixed-rate, single-family mortgage loans.4. Community Investment Programs: Grants, low-interest loans, and other resources to support affordable housing and community development projects within the member institutions’ communities.5. Education and Training: Programs and resources for helping member institutions with regulatory compliance, risk management, and best practices.
How does the Federal Home Loan Bank System contribute to the stability of the U.S. financial system?
The FHLB system contributes to the stability of the financial system by providing a reliable source of funding and support services to its member institutions during economic downturns and financial stress periods. This helps to maintain the stability of the housing market and strengthens the overall economy. FHLBanks are also subject to strict regulations and oversight by the Federal Housing Finance Agency (FHFA) to ensure their stability and adherence to safety and soundness practices.

Related Finance Terms

  • Advance Loans
  • Member Financial Institutions
  • Collateral
  • Housing Finance
  • FHLB Bonds

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