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A bipartisan group of 29 senators aired concerns Monday with Federal Housing Finance Agency Director Mel Watt over proposed changes to Federal Home Loan Bank membership criteria they say "will negatively affect new and current members" in the system.

The current rules, the senators said in a joint letter, already state that a member cannot borrow from an FHLBank if it doesn't have assets that meet system requirements for eligible collateral. The proposed rule would add the possibility of being expelled from membership if the institution doesn't meet a new, "unprecedented" mortgage assets test, they noted.

"The consequences are harsh and terms of the proposed rule are inconsistent with the express terms of the FHLBank Act," the lawmakers wrote.

NAFCU has concerned about the proposed rule. In Credit Union Times, NAFCU President and CEO Dan Berger is quoted warning of the added regulatory burden. He said the proposed rule changes would "immediately and negatively" impact some credit unions and will serve as a deterrent to joining the FHLB System. "Further, small banks have a statutory exemption and credit unions need parity," he is quoted saying.

NAFCU is preparing official comments to send FHFA on the proposed rule and has NCUA to weigh in as well.

FHFA is taking comments until Jan. 12.