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NAFCU strongly opposes proposed changes to Federal Home Loan Bank membership eligibility requirements, which would "disenfranchise over 1 million credit union member-owners" from receiving FHLB benefits, association Director of Regulatory Affairs Alicia Nealon told the Federal Housing Finance Agency Monday.

Nealon urged FHFA to withdraw the proposal.

"While NAFCU appreciates FHFA's intention of fostering FHLB's housing finance missions, we believe the current regulatory requirements effectively ensure that FHLB members demonstrate ongoing commitments to mortgage lending in their communities," Nealon wrote in an official comment letter on the proposed rule. "Given the sufficient existing requirements, and the lack of statistical support for the proposed changes, NAFCU does not believe FHFA needs to move forward with the newly proposed ‘ongoing' membership requirements for depository institutions in this rulemaking."

The proposed rule would establish new asset threshold for both applications and ongoing membership. FHLB members and applicants would be required to keep 1 percent of assets in home mortgage loans. Also, current members would be required to hold at least 10 percent of assets in residential mortgage loans on an ongoing basis – a marked change from the current rule, which only requires this 10 percent threshold at the application stage. The proposal would also require FHLBs to evaluate member compliance annually and to terminate membership after two consecutive years of noncompliance.

In Monday's comment letter, Nealon said FHLB membership requirements should not be one-size-fits-all. Instead, they should "provide credit unions and other community institutions with the flexibility necessary to continue to meet their members' needs." She proposed recommendations to FHFA on the proposal's 1 percent and 10 percent standards and said these standards "run afoul of Congress' history of expanding FHLB membership and activities."