Federal Home Loan Banks' Mission Implementation Act

II 117TH CONGRESS 1ST SESSION S. 1684 To strengthen the ability of the Federal Home Loan Bank system to provide critical financing to address the economic crisis caused by the COVID– 19 pandemic and to meet the short- and long-term housing and commu- nity economic development needs of low-income communities, including Tribal communities, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 18, 2021 Ms. CORTEZ MASTO (for herself, Mr. LEAHY, and Mr. SANDERS) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To strengthen the ability of the Federal Home Loan Bank system to provide critical financing to address the eco- nomic crisis caused by the COVID–19 pandemic and to meet the short- and long-term housing and community economic development needs of low-income communities, including Tribal communities, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Federal Home Loan 4 Banks’ Mission Implementation Act’’. 5 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 2 •S 1684 IS SEC. 2. PURPOSE. 1 The purpose of this Act is to promote economic recov- 2 ery in response to the COVID–19 pandemic and to meet 3 the short- and long-term housing and community eco- 4 nomic development needs of low-income communities, in- 5 cluding Tribal communities, by— 6 (1) increasing the ability of the Federal Home 7 Loan Banks to accept, as collateral, small business 8 loans guaranteed by the Small Business Administra- 9 tion; 10 (2) authorizing the Federal Home Loan Banks 11 to accept government guaranteed loans as collateral 12 to support COVID–19 programs; 13 (3) allowing community development financial 14 institutions and credit unions to pledge community 15 financial institution collateral, such as small busi- 16 ness, small agriculture, and community development 17 loans, and enable the Federal Housing Finance 18 Agency to raise the threshold for qualification as a 19 community financial institution; 20 (4) providing letters of credit to provide liquid- 21 ity, and support, stabilize and strengthen local, Trib- 22 al, State and Federal governmental entities public 23 unit deposits, housing and community development 24 efforts, and vital public financing; 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 3 •S 1684 IS (5) increasing funding for the Affordable Hous- 1 ing Program established by each Federal Home 2 Loan Bank under section 10(j) of the Federal Home 3 Loan Bank Act (12 U.S.C. 1430(j)) and establishing 4 a 2 percent set aside for Native American Tribes; 5 and 6 (6) creating a community economic development 7 investment program within the Federal Home Loan 8 Bank system to generate financial opportunity, cre- 9 ate jobs, and stimulate economic development in dis- 10 tressed urban, rural, Tribal, and suburban commu- 11 nities in the United States. 12 SEC. 3. FHLB ADVANCES SECURED BY SBA LOANS. 13 Section 7 of the Small Business Act (15 U.S.C. 636) 14 is amended by adding at the end the following: 15 ‘‘(o) FEDERAL HOME LOAN BANK ADVANCES.— 16 ‘‘(1) DEFINITION OF BANK.—In this sub- 17 section, the term ‘Bank’ means a Federal Home 18 Loan Bank, as defined in section 2 of the Federal 19 Home Loan Bank Act (12 U.S.C. 1422). 20 ‘‘(2) ADVANCES.—A Bank that, in the exercise 21 of its authority under section 10 of the Federal 22 Home Loan Bank Act (12 U.S.C. 1430) to make se- 23 cured advances, accepts as collateral a loan guaran- 24 teed by the Administration under this Act or any 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 4 •S 1684 IS other provision of law, including loans guaranteed 1 under section 7(a)— 2 ‘‘(A) may exercise all of the rights and 3 remedies contained in any pledge or similar se- 4 curity agreement between the Bank and the 5 lending or participating institution that made 6 or purchased the loan; and 7 ‘‘(B) in the event of default on the loan, 8 shall possess the same rights and remedies as 9 such a lending or participating institution 10 would possess in the same circumstance, includ- 11 ing collecting monies due on the guarantee di- 12 rectly from the Administration. 13 ‘‘(3) TRANSFER OF GUARANTEE.—With respect 14 to a guaranteed loan that a Bank accepts as collat- 15 eral under paragraph (2), the guarantee obligation 16 of the Administration on the loan shall transfer to 17 the Bank.’’. 18 SEC. 4. MAKING GOVERNMENT GUARANTEED LOANS IN RE- 19 SPONSE TO THE COVID–19 CRISIS ELIGIBLE 20 COLLATERAL FOR THE FEDERAL HOME LOAN 21 BANKS. 22 Section 10(a)(3) of the Federal Home Loan Bank 23 Act (12 U.S.C. 1430(a)(3)) is amended by adding at the 24 end the following: 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 5 •S 1684 IS ‘‘(F) Loans guaranteed or insured by the 1 United States Government or any agency there- 2 of and made by any member under programs or 3 facilities established by the Secretary of the 4 Treasury or the Board of Governors of the Fed- 5 eral Reserve System under the CARES Act 6 (Public Law 116–136) or other similar pro- 7 grams or facilities in subsequently enacted Acts 8 to address the impact to the economy from the 9 COVID–19 crisis, including other similar pro- 10 grams or facilities established under section 11 13(3) of the Federal Reserve Act (12 U.S.C. 12 343(3)). 13 ‘‘(G) Loans guaranteed by the Small Busi- 14 ness Administration under the Small Business 15 Act (15 U.S.C. 631 et seq.) or any other provi- 16 sion of law.’’. 17 SEC. 5. ADDING CREDIT UNIONS TO THE DEFINITION OF 18 COMMUNITY FINANCIAL INSTITUTIONS AND 19 EXPANDING THE PURPOSES OF ADVANCES 20 AND COLLATERAL AVAILABLE TO CERTAIN 21 COMMUNITY DEVELOPMENT FINANCIAL IN- 22 STITUTIONS. 23 (a) IN GENERAL.—Section 10(a) of the Federal 24 Home Loan Bank Act (12 U.S.C. 1430(a)) is amended— 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 6 •S 1684 IS (1) in paragraph (2)(B), by inserting ‘‘or quali- 1 fying community development financial institution’’ 2 after ‘‘community financial institution’’; and 3 (2) in paragraph (3)(E), by inserting ‘‘or quali- 4 fying community development financial institution’’ 5 after ‘‘community financial institution’’. 6 (b) DEFINITIONS.—Section 2 of the Federal Home 7 Loan Bank Act (12 U.S.C. 1422) is amended— 8 (1) in paragraph (10)— 9 (A) by striking ‘‘INSTITUTION.—’’ and all 10 that follows through ‘‘The term’’ and inserting 11 ‘‘INSTITUTION.—The term’’; 12 (B) by striking subparagraph (B); 13 (C) by redesignating clauses (i) and (ii) as 14 subparagraphs (A) and (B), respectively, and 15 adjusting the margins accordingly; 16 (D) in subparagraph (A), as so redesig- 17 nated, by inserting ‘‘(12 U.S.C. 1811 et seq.) 18 or the Federal Credit Union Act (12 U.S.C. 19 1751 et seq.)’’ before the semicolon; and 20 (E) in subparagraph (B), as so redesig- 21 nated, by striking ‘‘$1,000,000,000’’ and insert- 22 ing ‘‘assets at a level set by the Agency, but not 23 more than $10,000,000,000’’; and 24 (2) by adding at the end the following: 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 7 •S 1684 IS ‘‘(13) QUALIFYING COMMUNITY DEVELOPMENT 1 FINANCIAL INSTITUTION.—The term ‘qualifying 2 community development financial institution’ means 3 an entity that— 4 ‘‘(A) has been certified as a community de- 5 velopment financial institution (as such term is 6 defined in section 103 of the Riegle Community 7 Development and Regulatory Improvement Act 8 of 1994 (12 U.S.C. 4702) by the Secretary of 9 the Treasury; and 10 ‘‘(B) satisfies the average total assets 11 threshold requirement for a community finan- 12 cial institution set forth in paragraph (10).’’. 13 SEC. 6. STANDBY LETTERS OF CREDIT. 14 The Federal Home Loan Bank Act (12 U.S.C. 1421 15 et seq.) is amended— 16 (1) in section 2 (12 U.S.C. 1422), as amended 17 by section 5 of this Act, is amended by adding at 18 the end the following: 19 ‘‘(14) EMPLOYEE- OR COMMUNITY-OWNED COM- 20 PANY.—The term ‘employee- or community-owned 21 company’ means— 22 ‘‘(A) an organization described in section 23 1381 of the Internal Revenue Code of 1986; 24 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 8 •S 1684 IS ‘‘(B) an eligible worker-owned cooperative, 1 as defined in section 1042(c)(2) of the Internal 2 Revenue Code of 1986; and 3 ‘‘(C) an employee stock ownership plan, as 4 defined in section 4975(e)(7) of the Internal 5 Revenue Code of 1986, which meets the re- 6 quirements of section 409 of such Code.’’; 7 (2) in section 11 (12 U.S.C. 1431), by adding 8 at the end the following: 9 ‘‘(m) STANDBY LETTERS OF CREDIT.— 10 ‘‘(1) IN GENERAL.—Each Federal Home Loan 11 Bank is authorized to issue and confirm standby let- 12 ters of credit, secured by collateral eligible to secure 13 advances, to support any activity permitted under 14 law or regulation applicable to the member or non- 15 member mortgagee eligible to receive advances under 16 section 10b, subject to safety and soundness over- 17 sight, including the purposes described in paragraph 18 (2). 19 ‘‘(2) PURPOSES.—Each Bank is authorized to 20 issue or confirm on behalf of members or non-mem- 21 ber mortgagees standby letters of credit that comply 22 with the requirements of this subsection for any of 23 the following purposes: 24 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 9 •S 1684 IS ‘‘(A) To assist members or non-member 1 mortgagees in facilitating residential housing fi- 2 nance. 3 ‘‘(B) To assist members or non-member 4 mortgagees in facilitating community lending. 5 ‘‘(C) To assist members or non-member 6 mortgagees with asset or liability management. 7 ‘‘(D) To provide members or non-member 8 mortgagees with liquidity or other funding. 9 ‘‘(E) To assist members in facilitating 10 business retention or facilitating business tran- 11 sition to employee- or community-owned compa- 12 nies or assisting those companies.’’. 13 SEC. 7. LETTERS OF CREDIT ON TAX EXEMPT BONDS. 14 (a) IN GENERAL.—Clause (iv) of section 15 149(b)(3)(A) of the Internal Revenue Code of 1986 is 16 amended by striking ‘‘a bond during the period beginning 17 on the date of the enactment of this clause and ending 18 on December 31, 2010’’ and inserting ‘‘a municipal bond 19 (as defined in section 75(b)(1)) on or after the date of 20 enactment of the Federal Home Loan Banks’ Mission Im- 21 plementation Act’’. 22 (b) SAFETY AND SOUNDNESS REQUIREMENTS.— 23 Subparagraph (E) of section 149(b)(3) of the Internal 24 Revenue Code of 1986 is amended by striking ‘‘which are 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 10 •S 1684 IS at least’’ and all that follows through the period and in- 1 serting ‘‘as are established by the Director of the Federal 2 Housing Finance Agency from time to time.’’. 3 (c) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to guarantees made after the date 5 of enactment of this Act. 6 (d) SUNSET.—Effective on the date that is 2 years 7 after the date on which the Federal Emergency Manage- 8 ment Agency terminates the emergency declared on March 9 13, 2020 by the President under the Robert T. Stafford 10 Disaster Relief and Emergency Assistance Act (42 U.S.C. 11 4121 et seq.) relating to the Coronavirus Disease 2019 12 (COVID–19) pandemic, section 149(b)(3) of the Internal 13 Revenue Code of 1986 is amended— 14 (1) in subparagraph (A)(iv), by striking ‘‘a mu- 15 nicipal bond (as defined in section 75(b)(1)) on or 16 after the date of enactment of the Federal Home 17 Loan Banks’ Mission Implementation Act’’ and in- 18 serting ‘‘a bond during the period beginning on the 19 date of the enactment of this clause and ending on 20 December 31, 2010’’; and 21 (2) in subparagraph (E), by striking ‘‘as are es- 22 tablished by the Director of the Federal Housing Fi- 23 nance Agency from time to time’’ and inserting 24 ‘‘which are at least as stringent as such require- 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 11 •S 1684 IS ments which apply under regulations applicable to 1 such guarantees by Federal home loan banks as in 2 effect on April 9, 2008’’. 3 SEC. 8. AFFORDABLE HOUSING PROGRAM. 4 (a) IN GENERAL.—Section 10 of the Federal Home 5 Loan Bank Act (12 U.S.C. 1430) is amended— 6 (1) in subsection (j)— 7 (A) in paragraph (3)— 8 (i) in the matter preceding subpara- 9 graph (A), by striking ‘‘such as the fol- 10 lowing:’’ and inserting ‘‘such as—’’; 11 (ii) in subparagraph (A)— 12 (I) by inserting ‘‘the’’ before 13 ‘‘purchase’’; and 14 (II) by striking the comma at the 15 end and inserting a semicolon; 16 (iii) in subparagraph (B)— 17 (I) by inserting ‘‘the’’ before 18 ‘‘purchase’’; and 19 (II) by striking ‘‘and’’ at the end; 20 (iv) in subparagraph (C)— 21 (I) by inserting ‘‘the’’ before 22 ‘‘purchase’’; and 23 (II) by striking the period at the 24 end and inserting a semicolon; and 25 VerDate Sep 11 2014 23:30 Jun 03, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1684.IS S1684 pbinns on DSKJLVW7X2PROD with BILLS 12 •S 1684 IS (v) by adding at the end the following: 1 ‘‘(D) the purchase or rehabilitation of 2 housing financed by a community land trust; 3 and 4 ‘‘(E) the purchase or rehabilitation of 5 housing in qualified manufactured home com- 6 munities owned by nonprofit organizations or 7 the residents.’’; and 8 (B) in paragraph (5)(C)— 9 (i) by striking ‘‘10’’ and inserting 10 ‘‘20’’; 11 (ii) by striking ‘‘100,000,000’’ and in- 12 serting ‘‘200,000,000’’; and 13 (iii) by adding at the end the fol- 14 lowing: ‘‘Of such contribution, an amount 15 equal to not less than 2 percent of 20 per- 16 cent of the preceding year’s net income 17 shall be used to support subsidized grants 18 or advances through the Affordable Hous- 19 ing Program benefit [Text truncated for display. 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