Urban Institute Study Finds FHLBank Advances Boost Housing and Community Lending

Study Findings

The study - the second in a three-part Urban Institute research series - analyzes more than two decades of data (2002-2024) and explores the ways that FHLBank liquidity positively impacts FHLBank member institutions' lending behavior over time, including before and after the 2008 financial crisis. This is the first time an independent research study has been commissioned to examine this direct linkage.

Highlights of the study include:

• FHLBank Advances Expand Total Lending: Urban Institute researchers found that increases in FHLBank advances contributed to more than $1.8 trillion in increased total lending by bank and credit union members between 2002-2024.
• FHLBank Advances Increase Real Estate Lending: Increases in advances led to approximately $850 billion in additional residential real estate lending by banks and credit unions from 2002 to 2024, underscoring the FHLBank System's foundational role in housing finance.
• Smaller Institutions Benefit the Most from Advances: Smaller commercial and savings banks increased their lending by an even greater extent, highlighting the importance of FHLBank liquidity for community-based financial institutions.
• Community and Small Business Lending Increased: Advances were positively associated with increased lending to small businesses, small farms, and low- and moderate-income households.
• Increased Advances Increased Mortgage Originations: A $100 increase in FHLBank advances relative to assets is associated with a $22 increase in mortgage origination volume over assets across the full sample period.
• Stronger Effects Post-2008: The relationship between advances and lending was even stronger following the implementation of post-financial-crisis regulatory reforms, when alternative funding sources became more constrained and members increased utilization of FHLBank funding.