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Stalling mortgage rates have temporarily killed refinance momentum. Mortgage applications were down 1.3% last week compared to the seven days prior, according to the Mortgage Bankers Associations' Market Composite Index measure. The trade group's Refinance Index, up 186% from the same week last year, fell 3% weekly. The findings come after mortgage activity for the week ending Sept. 20 hit a two-year high. Wednesday's results also ended two consecutive periods of double-digit growth in the Refi Index."Last week's incoming data showed an economy that is still growing at a solid pace, even as inflation continues to decline," said Mike Fratantoni, senior vice president and chief economist at the MBA, in a statement. "As a result, mortgage rates were up modestly."Effective rates for loan terms tracked by the association mostly rose across the board, with the average 30-year fixed rate mortgage ticking up to 6.14%, from 6.13% from the previous week. Larger declines stemming from the Federal Open Market Committee's rate cut last month have long been priced in, mortgage experts said. Purchase activity continues to rise, with both seasonal and unadjusted indexes up 1% weekly. On an unadjusted basis, purchase applications are 9% greater from the same time a year ago.Fratantoni pointed to an overall rising inventory of new and existing homes this year as the reason for purchase interest. Buyers however appear to be waiting out even lower rates; recent government data showed new home sales pulling back in August after a July gain. Average rates for jumbo loans grew in the past week by 3 basis points to 6.50%, while Federal Housing Administration-backed home loan rates moved up 7 bps to 6.06%.  Contract rates for 15-year fixed-rate mortgages rose slightly to 5.51% week-over-week, and the average contract rate for 5/1 adjustable-rate loans climbed 11 bps to 5.87%. Overall, rates for those products are still on average down over 100 bps from the same time last year.Seven days removed from setting a survey record, the average loan size for both purchases and refis ending Sept. 27 was $408,600.

National Association of Mortgage Brokers President Valerie Saunders can project calm amid chaos, a trait that's served her well as she's worked to help the industry navigate tumultuous housing-market business cycles and operate businesses in a hurricane-prone state. Valerie Saunders In an interview from Florida shortly before a storm, Saunders weighed in on how she and NAMB are contending with disaster risk, new government-sponsored enterprise restrictions on a rebounding refinance market and trade association policy positions in a polarized election year.Excerpts of an Sept. 27 interview with Saunders covering these topics and others, edited for clarity and length, follow.

Senator JD Vance, a Republican from Ohio and Republican vice-presidential nominee, left, and Tim Walz, governor of Minnesota and Democratic vice-presidential nominee.Bloomberg News WASHINGTON — Minnesota Gov. Tim Walz and Sen. J.D. Vance, R-Ohio, disagreed on the root causes of the high cost of housing in the first and only vice presidential debate. Walz repeatedly pressed the idea that housing should be seen as more than an "asset" or a "commodity." "A house is more than just an asset," he said. The comments likely referenced growing institutional ownership of the housing market, an issue already hit on directly by current Vice President Kamala Harris in her presidential campaign. "This issue of housing — and I think those of you listening on this — the problem we've had is that we've got a lot of folks that see housing as another commodity," Walz said. "It can be bought up, it can be shifted, it can be moved around. Those are not folks living in those houses." The Harris campaign has proposed a number of housing policies that aim to make a home purchase more affordable, such as a 25,000 subsidy for first-time buyers. She also called on Congress to pass a bill that would prevent an investor who acquires 50 or more single-family rental homes from deducting interest and depreciation on those properties, as well as that would make it illegal for rental property owners to use companies that coordinate rental housing prices. "Some corporate landlords, some of them buy dozens, if not hundreds, of houses and apartments, then they turn them around and rent them out at extremely high prices," Harris said in an August speech. "And it can make it impossible, then, for regular people to be able to buy or even rent a home." Vance, meanwhile, repeatedly pinned economic issues, such as inflation, on the policies of the Biden administration, and on Harris' role within that administration. "If she wants to enact all of these policies to make housing more affordable, I invite her to use the office that the American people already gave her, not sit around and campaign and do nothing while Americans find the American dream of homeownership completely unaffordable," he said.Vance also said that immigrants who have entered the U.S. illegally have also contributed to the housing shortage. "You've got housing that's totally unaffordable because we brought in millions of illegal immigrants to compete with Americans," he said. Vance also backed a plan promoted by former President Donald Trump to build new houses on seized federal lands. Vance said that high regulation, which he tied to Harris, is to blame for unaffordable housing. "It is also the regulatory regime of Kamala Harris. Look, we are a country of builders," he said. "We're a country of doers. We're a country of explorers, but we increasingly have a federal administration that makes it harder to develop our resources, makes it harder to build things, and wants to throw people in jail for not doing everything exactly as Kamala Harris says they have to do." He said that he agreed with Walz's point about housing being a "commodity," but again sought to draw a connection with immigration policies. "We should get out of this idea of housing as a commodity, but the thing that has most turned housing into a commodity is giving it away to millions upon millions of people who have no legal right to be here," he said. Walz said that immigration isn't the root cause, and that the government could play a role in boosting housing supply, and therefore address the problem of housing affordability. "We can't blame immigrants … that's not the case that's happening in many cities," he said. "The fact of the matter is that we don't have enough naturally affordable housing, but we can make sure that the government is there to kickstart it."

When mortgage rates surged off their record lows in early 2022, the housing market ground to a halt.In the span of less than 10 months, 30-year fixed mortgage rates climbed from the low-3% range to over 7%.While a 7% mortgage rate is historically “reasonable,” the percentage change in such a short period was unprecedented.Mortgage rates increased about 120% during that time, which was actually worse than those 1980s mortgage rates you’ve heard about in terms of velocity of change.The rapid ascent of interest rates was severe enough to introduce us to a new phrase, mortgage rate lock-in.In short, existing homeowners became trapped in their properties seemingly overnight because they couldn’t leave their low rates behind and exchange them for much higher ones.Either because it was cost-prohibitive or simply unappealing to do so.And there isn’t a quick fix because your typical homeowner has a 30-year fixed mortgage in the 2-4% range.Mortgage Rates Have Come Down, But What About Loan Amounts?There’s been so much focus on mortgage rates that I sometimes feel like everyone forgot about sky-high loan amounts.Mortgage rates climbed as high as 8% a year ago, but have since fallen to around 6%. And can be had for even lower if you pay discount points.So in some regard, mortgage rate lock-in has eased, yet housing affordability remains constricted.For the typical home buyer who needs a mortgage to get the deal done, there are two main components of the purchase decision. The asking price and the interest rate.As noted, rates are a lot higher than they used to be, but have come down about two percentage points from their 2023 highs.The 30-year fixed hit 7.79% during the week ended October 26th, 2023, which wasn’t far away from the 21st century high of 8.64% set in May 2000, per Freddie Mac.However, home prices haven’t come down. While many seem to think there’s an inverse relationship between mortgage rates and home prices, it’s simply not true.Sure, appreciation may have slowed from its unsustainable pace, but prices continued to rise in spite of markedly higher rates.And if we consider where home prices were pre-pandemic to where they stand today, they’re up about 50% nationally.In certain metros, they’ve risen even more. For example, they’re up about 70% in Phoenix since 2019, per the latest Redfin data.So when you look at how mortgage rates have come down, you might start to focus your attention on home prices.While a 5.75% mortgage rate seems fairly palatable at this juncture, it might not pencil when combined with a loan amount that has doubled.This might explain why just 2.5% of homes changed hands in the first eight months of 2024, per Redfin, the lowest turnover rate in decades. Listings are also at the lowest level in over a decade (since at least 2012).An Example of Loan Amount Lock-InHome Purchase Then vs. Now (2019 and 2024) $265k sales price$450k sales priceLoan Amount$212,000$360,000Interest Rate3.5%5.75%P&I Payment$951.97$2,100.86Payment Differencen/a$1,148.89Let’s consider a median-priced home in Phoenix, Arizona. It used to be $265,000 back in August 2019, per Redfin.Today, it’s closer to $450,000. Yes, that’s the 70% increase I referred to earlier. Now let’s imagine the home buyer put down 20% to avoid PMI and get a better mortgage rate.We might be looking at a rate of 3.50% on a 30-year fixed back in mid-2019. Today, that rate could be closer to 5.75%.When we factor in both the higher mortgage rate and much higher loan amount, it’s a difference of roughly $1,150 per month. Just in principal and interest.The down payment is also $90,000 versus $53,000, or $37,000 higher, which could be deal-breaker for many.This explains why so few people are buying homes today. The one-two punch of a higher mortgage rate AND higher sales price have put it out of reach.But what’s interesting is if the loan amount was the same, the difference would only be about $285, even w/ a rate of 5.75%.So you can’t really blame high rates too much at this point. Sure, $300 is more money, but it’s not that much more money for a monthly mortgage payment.And it’s a lot better than the $1,150 difference with the higher loan amount.In other words, you could argue that existing homeowners looking to move aren’t locked in by their mortgage rate so much as they are the loan amount.What You Can Do to Combat Loan Amount Lock-InIf you already own a home and are struggling to comprehend how a move could be possible, there’s a possible solution.I actually had a friend do this last spring. He was moving into a bigger home in a nicer neighborhood, despite holding a 2.75% 30-year fixed mortgage rate.To deal with the sharp increase in interest, he used sales proceeds from the sale of his old home and applied them toward the new mortgage.The result was a much smaller balance, despite a higher-rate mortgage. This meant far less interest accrued, despite monthly payments being higher.He did this when rates were in the 7% range. There’s a good chance he’ll apply for a rate and term refinance to get a rate in the 5s, at which point he can go with a new 30-year term and lower his monthly.If he prefers, he can make extra payments to principal to continue saving on interest, or simply enjoy the payment relief.Either way, knocking down the loan amount to something more comparable to what he had before, using sales proceeds, is one way to bridge the gap.And the big silver lining for a lot of existing locked-in homeowners is they got in cheap and have a ton of home equity at their disposal. Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.Latest posts by Colin Robertson (see all)

Figure Technology Solutions, parent company to Figure Lending, added an additional generative artificial intelligence tool to its platform, shortly after bringing an AI-powered customer service chatbot to market.Figure introduced a "stare and compare killer" which will address time-consuming tasks such as document reviews. The tool is built on OpenAI's GPT, just like many other generative AI tools used by mortgage stakeholders.Its document review tool and previously launched chatbot are expected to remove more than $8 million in costs associated with loan origination, the company claims.In a press release, the fintech company notes document reviews for loan processors and originators means "staring at reams of side-to-side loan documents and data," which can often result in human errors, bias and loan processing bottlenecks. The "stare and compare" tool, which incorporates more than six years of origination data, is set to change this for Figure's lending partners and customers. Thus far the tool has led to a 93% improvement in manual upfront document review labor, shaving high costs associated with progressing loans, Figure claims. The company's "growing generative AI investment is a prime example of how [Figure is] building a technology platform…to reduce costs and provide value to lenders and consumers alike," said Nicole Beaulieu, chief technology officer at Figure, in a press release Monday."We've yet to find a lender who doesn't want to reduce bias, lower costs, and eliminate manual work or isn't eager to improve accuracy and customer and employee satisfaction. Now, thanks to AI, a technology leader like Figure is even more well positioned to help lenders solve these big pain points," she added.Figure, which has hopes of going public in the near future, has built out an ecosystem that streamlines the origination of home equity loans. Its platform currently has more than 120 lending partners, said Michael Tannenbaum, chief executive officer of Figure.According to Figure, its software has been used to originate more than $11 billion of HELOC loans making it the largest non-bank provider in this space."We consider our AI our lending partners' AI, so we designed it with them in mind – for their own funnels, processes, and customers," Tannenbaum added in a written statement. "Bigger picture, by lowering loan processing costs, we're lowering our product costs and thereby housing costs broadly."

Rocket Mortgage and Annaly Capital Management, both of whom are large-scale players in their business lines, have formed a new partnership that deepens the former's involvement in the servicing space.The housing finance company and residential mortgage real-estate investment trust respectively have entered into an business arrangement in which Rocket will provide subservicing operations and recapture for part of Annaly's portfolio.The partnership complements the publicly traded nonbank lender's acceleration of mortgage-servicing rights acquisition activity, Bill Banfield, Rocket's chief business officer, said in an interview."We now have enough of a track record that we know we have the ability to do retention on acquired portfolios, so we're going to keep feeding into that," Banfield said, noting that Rocket would provide purchase, refinance or home equity products to borrowers it subserviced. Annaly is Rocket's second subservicing client. Rocket also has a pre-existing, long-term subservicing relationship with Charles Schwab. Annaly has previously purchased some bonds from Rocket's securitizations."This is consistent with Rocket's recently stated focus on servicing in order to leverage strength in recapture," analysts at Keefe, Bruyette & Woods said in a report on the mortgage company's new subservicing partnership.Subservicing makes up about 8% or $42 billion of Rocket's overall $534 billion unpaid principal balance of loans serviced, according to KBW's analysis. Annaly's total servicing portfolio is $192 billion."While RKT will likely be servicing a small part of Annaly's portfolio, this could be seen as slightly negative for larger servicers/subservicers," the KBW analysts said.Banfield said the partnership was not a signal of deepening involvement in subservicing on the order of larger players already in the space."We do not have a desire to be a standalone subservicer and compete with many of the firms that are out there that are low-cost providers in that space," he said. "We are looking to grow our portfolio and really focus in on what we describe as the flywheel. So, for certain strategic and meaningful partnerships where we can help them with retention, that's what we would be looking to do."Rocket's high customer satisfaction ranking and use of artificial intelligence tools for transcriptions of borrower communications and client tracking drew Annaly into the partnership, Steve Campbell, president and chief operating officer, said in that company's press release."We are proud to have constructed one of the most durable and high qualify portfolios of MSR in the market and this partnership will allow us to benefit from Rocket's industry-leading servicing capabilities," he said.By early December Rocket hopes to board Annaly's subservicing onto its system, which combines a widely used vendor platform with proprietary tools and is designed to facilitate a smooth transition, Bannfield said."We put an enormous amount of effort into making sure that our AI tools that help a client onboard are available 24/7 and that the landing pages are clear. We've seen the first call resolution go up dramatically because of it," Banfield said."If we can make the experience better for that client who's transferring it can help them trust us and for when they want to do a future transaction," he said.

Federal Reserve Gov. Lisa Cook.Al Drago/Bloomberg The Federal Reserve Board's leading voice on artificial intelligence wants a unified approach to various elements of artificial intelligence, including its impact on bias and fraud.Fed Gov. Lisa Cook, an economist who has studied AI since 2018, discussed the emerging technology Tuesday morning at a conference hosted by the Federal Reserve Bank of Atlanta. Given all the uncertainties related to machine learning, Cook said it was important to provide clarity wherever possible, including on the policy front."Fostering the global innovation ecosystem remains desirable through research and development, advanced education, worker training and retraining, and legal protections for intellectual property," she said. "Moreover, a consensus needs to be forged on the benefits and costs of regulation of the use of AI in the areas of privacy, compensation for training data, perpetuation and amplification of bias, and fraud."This was the third time Cook has delivered prepared remarks about AI since joining the Fed's board of governors in 2022. Last week, she gave a speech at Ohio State University about the technology's impact on the labor market, and in September 2023 called for greater transparency in AI software. She has also addressed the topic several times during public question-and-answer sessions. During her speech and in a subsequent conversation with Atlanta Fed President Raphael Bostic on Tuesday, Cook struck an optimistic tone about the potential impacts of AI. She said the technology could be disinflationary by increasing economic productivity over the long run and even result in higher wage growth. Contrary to the fear that AI — particularly generative AI, which can create unique content based on human-provided prompts — might replace workers, Cook sees the technology overtaking specific tasks but not entire occupations. She did nevertheless cite examples of AI being used to fill in gaps for underpopulated professions, such as welding. She added that AI has made it easier and more cost-effective for new businesses to be launched and operated. Taken together, she said, these developments have improved the overall sentiment toward AI during the past year as concerns about wholesale substitution of workers have subsided. "The fear that I heard … I'm not going to say it's gone away completely, but I think that there is a calmer approach to thinking about which tasks we're going to need to train and retrain workers for rather than this dire, stark dichotomy between occupations and AI," she said.Cook also said AI and technology more broadly could be used to augment certain sectors — such as manufacturing — in ways that make them more appealing to Gen Z and other upcoming generations of workers."What they are finding, in the auto industry at least, is that having some technology, interfacing with some technology, is what gets [younger generations] interested in manufacturing," she said. "A lot of the jobs could be roboticized and the ones that really require human talent are the ones they're interested in and there's some sort of interface that they're accustomed to. So there are ways to adapt these jobs and make them more palatable, more interesting to the youngest generations."Cook also reiterated the importance of training AI software properly. She said doing so requires input from a diverse set of users, to limit embedded biases. In particular, she noted that the generative AI chatbot ChatGPT is primarily learning from male users, citing a study out of Denmark that showed men out-adopting the program over women by 20% — bucking the trend from the 1980s of women being earlier adopters of new technology.Cook said this speaks to her long-running concern about inclusion in the fields of science, technology, engineering and mathematics. But addressing these disparities falls on the private sector, she said."Ultimately, it's the employers that have the most say about this," she said. "But, I think there are opportunities to make sure it's more widespread."

Loandepot has again turned to the capital markets to securitize its warehouse facility, the 10th such transaction it has undertaken.The latest issuance is a $300 million transaction, Mello Warehouse Securitization Trust 2024-1. It has a two-year term and is backed by newly originated fixed or adjustable rate loans underwritten to Fannie Mae or Freddie Mac standards or are Ginnie Mae-eligible.A presale report from Morningstar DBRS dated Sept. 20 noted that eight of the prior transactions had paid off. On Sept. 25, and in anticipation of this latest deal, Loandepot prepaid and terminated Mello Warehouse Securitization Trust 2021-3, a Securities and Exchange Commission filing said."No borrowings are currently outstanding under the 2021-3 Securitization Facility and loanDepot did not incur any termination penalties as a result of the termination of the 2021-3 Securitization Facility," the filing continued.In the past, Loandepot was one of the four lenders that participated in a warehouse securitization from Jefferies Group.Morningstar DBRS rated the $201 million Class A tranche at AAA(sf), reflecting the 33% credit enhancement the subordinated notes in the securitization provides."The AA (sf), A (sf), and BBB (sf) credit ratings reflect 31.90%, 21.40%, and 12.05% of credit enhancement respectively," the rating agency said. "The B (sf) credit rating on the Class E and Class F Notes reflect the Long-Term Issuer Rating of the Repo Guarantor."Loandepot's obligations are guaranteed by LD Holdings Group LLC, an entity that owns a majority equity interest in the mortgage lender that Morningstar DBRS has given a B rating to.Each class of the offering pays interest set at 30-days Term SOFR plus an applicable margin."This transaction further demonstrates the strength and breadth of Loandepot's financing strategy and attractive capital raising alternatives, as we continue our focus on delivering exceptional service to our customers throughout the entirety of their homeownership journey," said Chief Financial Officer David Hayes in a press release.Loandepot lost just under $66 million in the second quarter, inclusive of a $27 million accrual in anticipation of a legal settlement over a data breach.The credit ratings reflect transactional strengths that include the following: Well-qualified borrowers; ongoing third-party due diligence; standby servicer; experienced loan custodian; and margin maintenance," Morningstar DBRS said. "The transaction also includes the following challenges: Wet loans; limited scope of third-party due diligence; and representations and warranties framework."U.S. Bank is the standby servicer and securities intermediary, while related firm U.S. Bank Trust Co. is the deal's indenture trustee, note calculation agent and collateral agent. Wilmington Savings Fund Society will serve as the owner trustee, and Deutsche Bank National Trust Co. is mortgage loan custodian.

Over the past several years, mortgage lenders have been offering “early bird” conforming loan limits for the upcoming year.This allows them to make bigger loans that adhere to the underwriting guidelines of Fannie Mae and Freddie Mac without them being considered jumbo loans.Instead of waiting until January 1st, they make a projection for where the loan limit will land the next year and offer it around the fourth quarter.For example, in early October 2023 some lenders raised the 2024 loan limit to $750,000 ahead of the announcement that came in late November.That loan limit wound up being $766,550, which meant the lenders who offered the higher loan limits ahead of time didn’t get caught out.But that only worked because home prices kept on marching higher and higher.Some Lenders Are Already Offering 2025 Conforming Loan Limits as High as $803,500Like last year, lenders haven’t waited for the conforming loan limit announcement in late November to raise it.And this year it has come even earlier than in years’ past. It has actually become a sort of game between competing mortgage companies to be the first out of the gate.Rocket Pro TPO, the wholesale division of Rocket Mortgage, was first to come out with the 2025 loan limits this year.On September 13th, they announced a limit of $802,650, up from the current limit of $766,550. This represents a 4.7% increase.While that seems like a fairly reasonable estimate, home price appreciation has been slowing this year.At last glance, home prices as measured by the FHFA HPI were up 4.5% from July 2023 to July 2024.To come up with the conforming loan limit, the FHFA uses home price movement from the third quarter of the prior year to current year (see FAQ).So we need the August and September data before they can make that determination.Since the YoY appreciation is currently below the 4.7% needed to hit those projected 2025 loan limits, the next two releases will need to show home prices rising at a faster clip. What if they don’t?What Happens If Home Prices Fall Short and the 2025 Loan Limits Are Lower?Remember how I said this has become a game between lenders to see who comes out with the loan limits first? Well, it has also become a game of who goes highest.And it appears that the nation’s largest lender, United Wholesale Mortgage (UWM), has won that battle.They weren’t first, but they came out with the highest 2025 loan limit, offering to fund loans up to $803,500 for the remainder of 2024.That’s a 4.8% YoY increase in home prices. Not much different than Rocket’s, but well above some other mortgage lenders who are playing it a little safer.For example, Rate (formerly Guaranteed Rate) has only offered to go as high as $792,000, while Pennymac is only willing to go to $795,000.Inside Mortgage Finance writer James Dohnert expressed some concern with these varying limits, noting that “it’s possible that some origination shops shot too high.”And that if the actual 2025 loan limits come in below what these lenders are currently allowing, any of the related conforming loan production would “inherently turn into non-agency product.”At that point, these lenders would either need to keep the loans on their books or perhaps sell them at a discount (maybe a loss) if they wished to unload them.They wouldn’t qualify for backing by Fannie Mae or Freddie Mac, meaning they couldn’t be sold to or guaranteed by the pair.This could present problems for the lenders who do a decent amount of volume using these new provisional loan limits.It may also change how they offer early bird limits going forward if home prices do indeed come in lower than expected.Given how home prices have been screaming higher and higher each year, it has yet to be a problem.But this could finally be a turning point as housing affordability finally weighs on appreciation.Stay tuned on this one. It might get interesting.Which Lenders Are Already Offering 2025 Conforming Loan Limits?CrossCountry Mortgage – $802,650Guild Mortgage – $799,125Movement Mortgage – $802,650Newrez – $795,000Pennymac – $795,000Rate – $792,000Rocket Mortgage – $802,650TowneBank Mortgage – $795,000United Wholesale Mortgage – $803,500 Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.Latest posts by Colin Robertson (see all)

Bloomberg News The Federal Housing Finance Agency has proposed relaxing limits to capital rules on interest-bearing deposit accounts that would give the Federal Home Loan Banks more flexibility to manage liquidity during times of stress.The FHFA on Monday proposed a rule that would exclude interest-bearing deposit accounts and other investments from certain capital requirements. The proposal would give interest-bearing deposits the same capital treatment as overnight federal funds, potentially making it easier and less costly for the 11 regional Home Loan Banks to manage their own liquidity. The proposal is largely a technical tweak that the Home Loan Banks have asked for because interest-bearing deposits have become a preferred money market instrument, particularly during periods of higher interest rates. "These modernizations will create more flexibility for the FHLBanks in their liquidity management, which will allow them to better serve their members, particularly during periods of market stress," FHFA Director Sandra Thompson said in a press release. Thompson said the proposal follows on the release of a report last year, "FHLBank System at 100", which suggested that one of the steps the FHFA could take to improve the system would be to enhance the system's ability to maintain interest-bearing deposits with commercial banks to manage intraday liquidity requests. Currently, overnight federal funds are excluded from the more restrictive "general limit" on capital requirements for unsecured credit to a single counterparty. Under the proposed rule, interest-bearing deposit accounts would be excluded from the "general limit" and would instead join overnight federal funds in the "overall limit" as a special category of unsecured extensions of credit subject to a substantially higher limit."FHFA expects that expanding the Banks' ability to use IBDA deposits for liquidity management would further benefit the Banks by reducing the overall cost of holding liquidity assets due to higher yields available through [interest bearing deposit accounts]," the FHFA said in its 23-page proposal. Ryan Donovan, president and CEO of the Council of Federal Home Loan Banks, said the system supports enhancements that provide more liquidity to its members. "As FHFA notes, the changes in this proposed rule are in furtherance of the agency's effort to modernize the FHLBanks' ability to meet the liquidity needs of members," Donovan said.The FHFA, the system's regulator, said the financial products the banks invest in "have evolved considerably" since 2011, when general and overall capital limits were created by a predecessor agency. Money market instruments — including overnight Fed Funds, reverse repurchase agreements and interest-bearing deposits — make up the biggest segment of bank liquidity holdings.The Home Loan Banks issue debt that comes with an implied government guarantee, providing ready access to low-cost funding even during periods of financial market dislocation. Besides issuing debt, the FHLBanks can meet members' short-term liquidity needs using funds held in their deposit accounts at the Federal Reserve or in interest-bearing deposit accounts at large domestic banks. On Friday, the FHFA followed up on the 100-year review with a 10-page advisory bulletin that requires the Home Loan Banks to regularly monitor the financial condition and creditworthiness of its members and not just the collateral pledged to the system before advancing funds.The FHFA is accepting public comment on the proposed rule for 60 days following publication in the Federal Register.