Legal Definitions - FHLBB

The Federal Home Loan Bank Board (FHLBB) was a United States federal agency that existed from 1932 to 1989. Its primary role was to regulate and supervise the nation's savings and loan associations, often referred to as "thrifts," and the twelve Federal Home Loan Banks. These institutions were crucial for providing financing for home mortgages across the country. The FHLBB set policies, examined financial institutions, and aimed to ensure the stability and solvency of the home lending industry. Its functions were largely transferred to other agencies following the savings and loan crisis of the 1980s.

Here are some examples illustrating the role of the FHLBB:

• Regulatory Oversight of a Savings and Loan: In the 1970s, a regional savings and loan association planning to expand its operations into a new state would have needed to submit its detailed business plan and financial projections to the Federal Home Loan Bank Board for approval. The FHLBB would review these plans to ensure the expansion was financially sound and complied with all federal regulations designed to protect depositors and maintain the stability of the housing finance market.

• Setting Industry Standards for Home Lending: The Federal Home Loan Bank Board was responsible for establishing uniform rules regarding the types of mortgages that member institutions could offer, the maximum loan-to-value ratios, and the capital reserves that savings and loans needed to maintain. For instance, it might have issued a directive specifying the minimum down payment required for a conventional home loan, thereby influencing lending practices across the entire thrift industry.

• Responding to Financial Instability: During periods of economic downturn, if several savings and loan associations in a particular region began to experience financial difficulties due to widespread mortgage defaults, the Federal Home Loan Bank Board would intervene. It might have facilitated mergers between stronger and weaker institutions or provided emergency liquidity to prevent widespread failures, thereby working to safeguard the overall stability of the nation's home financing system.