The U.S. housing market’s high demand and low inventory is leading to escalating prices, making home affordability a challenge, especially for lower-income families and individuals in areas with limited supply. The Federal Home Loan Bank (FHLBank) of San Francisco, one of 11 banks comprising the Federal Home Loan Bank System, has partnered with policymakers and member financial institutions—banks, credit unions, community development financial institutions, and other lenders—to expand access to and speed development of affordable housing in Arizona, California, and Nevada.
In 1932, in response to the Great Depression, Congress created the FHLBank System to facilitate mortgage lending. In turn, the System helped spur development of the 30-year fixed-rate mortgage and the FHLBanks continue to support this valuable option, providing consumers with more stability and homeownership opportunities. The FHLBank System’s mission has evolved over time, and it now also plays an important role in affordable housing and community development.
Today, FHLBank San Francisco provides more than 300 lenders in its region with competitively priced liquidity, funding that lenders can offer to customers as home mortgages, multifamily loans, or commercial real estate loans. In essence, FHLBank San Francisco helps members manage interest rate risk and better control their cost of funds, enabling lenders to pass benefits along to mortgage customers, affordable housing developers, and others. Ultimately, FHLBank San Francisco supports housing affordability across Arizona, California, and Nevada in three key ways.
1. Making mortgages more affordable
FHLBank San Francisco’s support of local lenders trickles down to individual borrowers, by, for example, lowering overall borrowing costs (improving affordability). One University of Wisconsin study indicates banks with access to FHLBank System funding significantly increase annual mortgage lending and can save borrowers $13 billion in interest payments each year. Additionally, FHLBank System-provided liquidity allows banks to fund more borrowers and reduces mortgage rejection rates.
Additionally, the FHLBanks promote housing affordability through grant programs that help build affordable housing and get more people into homes, propelling the housing and economic cycle. Since 1990, the FHLBank System has collectively awarded $8 billion in Affordable Housing Program grants, helping more than 1 million households rent or own an affordable home. Continuing this momentum, the Council of Federal Home Loan Banks expects the System to put approximately $1 billion toward affordable housing and community development initiatives in 2024.
2. Boosting affordable housing lending
Local lenders who access low-cost liquidity are better positioned to respond to evolving community needs. The FHLBank System shifts the mortgage market's competitive landscape by leveling the playing field for small banks. The University of Wisconsin study showed that when a bank joins the FHLBank System and gains access to low-cost funding, related cost reductions are passed through to borrowers.,
For affordable housing organizations in urban or rural settings, having a lender familiar with local conditions means their loan application may be given greater consideration than by a distant lender with little knowledge of a borrower’s circumstances. With FHLBank San Francisco support, local lenders can benefit from a strong economy in their service area, which incentivizes finding ways to support growth in affordable housing.
3. Funding homeownership and economic development
FHLBank San Francisco offers various community grant programs members can deploy to address community needs. For example, the Bank’s WISH Program 4-to-1 matching downpayment assistance grants to eligible first-time home buyers. Also, the Empowering Black Homeownership program matches member institutions’ grants to housing counseling agencies that serve aspiring and at-risk homeowners in communities of color, supporting both Black homeownership and intergenerational wealth building.
In 2023, FHLBank San Francisco launched a $10 million Middle-Income Downpayment Assistance matching grant pilot program, helping middle-income households achieve homeownership amid high home prices and interest rates. The program assisted 216 households with grants of up to $50,000 per home buyer and was renewed for 2024 with a $20 million allocation. Also in 2023, FHLBank San Francisco awarded $4 million in AHEAD grants to 75 local organizations for programs ranging from microenterprise projects and job training to financial education and support for Native American communities.
FHLBanks play a unique role in the financial services industry and are essential partners in providing valuable resources for affordable housing, first-time home buyers, and economic development. Their initiatives contribute to a community’s economic vitality, supporting people by making a basic human need—safe and stable housing—affordable and attainable. The FHLBank System’s community investments strengthen diverse neighborhoods and empower residents to build sustainable communities. Learn more at fhlbsf.com.
