Government agencies sometimes receive hundreds or even thousands of responses to requests for public comment. The Federal Housing Finance Agency (FHFA) received only five on its plan to repeal a regulation governing new business activities at the Federal Home Loan Banks.

Most of the commenters supported the proposal to eliminate the process FHLBanks use to request approval for new products, services or business activities.

The regulation, 12 CFR Part 1272, titled New Business Activities (NBA), was established in an FHFA final rule from 2016. It created the process FHLBanks use to notify FHFA about proposed new business activities.

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The proposed repeal stems from a 2025 executive order from President Donald Trump directing federal agencies to review regulations and repeal, as appropriate, those that impose unnecessary regulatory burdens.

The FHLBanks have submitted only two NBA notices over the past five years, according to the proposed rule.

“In both cases FHFA determined the respective Bank to be capable of managing the risks presented by the proposed activity,” the proposal stated. Over the past decade, FHFA has rejected no NBA notice for unmanageable risk.

Two of the responses — one from the Community Home Lenders of America (CHLA) and another from the Defense Credit Union Council (DCUC) — called the FHFA’s NBA framework “duplicative” and “unnecessary.”

Three CHLA recommendations

The letter from the CHLA, a national trade group representing independent mortgage banks (IMBs), said it supports eliminating the requirements but offered three recommendations.

Its first suggestion was to “maintain appropriate guardrails around significant new activities.”

While CHLA’s letter expressed support for “giving FHLBanks greater operational flexibility,” it cautioned that flexibility should not result in the expansion of activities that could create unnecessary risk to the system or “blur the distinction” between the FHLBanks and government-sponsored enterprises Fannie Mae and Freddie Mac.

In an email shared with Scotsman Guide, CHLA reiterated its opposition to any proposals to allow the FHLBanks to directly purchase loans, which is the primary activity of Fannie and Freddie.

Its second suggestion was to use the rulemaking as an opportunity “to address a fundamental structural issue in the modern mortgage market: the exclusion of IMBs from FHLBank membership.”

According to the trade group, IMBs account for about 84% of mortgage originations and an even larger share of government and agency lending.

“CHLA therefore believes Congress and FHFA should pursue a framework that would allow qualified IMBs to access FHLBank membership and liquidity under appropriate safety-and-soundness requirements,” it stated.

Finally, CHLA argued that FHFA “should consider whether continued FHLBank membership” and access to its benefits “should be more directly connected to an institution’s ongoing mortgage lending activity.”

It recommended that FHFA consider annual reviews of members’ active mortgage lending, using flexible standards that account for different types of institutions.

Additional responses

The DCUC, which represents credit unions that serve active-duty military, veterans and their families worldwide, wrote that the current requirement has had minimal impacts on the FHLBanks’ introduction of new products and services to members.

“Very few of the banks’ new business activities rise to the risk level that would trigger an NBA notice submission,” DCUC wrote, adding that without this provision, the FHLBanks “are still subject to ongoing prudential supervision through the FHFA’s examination function which includes the development of NBAs.”

The Center for Regulatory Analysis and Engagement, a project of the Main Street Foundation, also supported repealing the regulation.

“FHFA has a legitimate responsibility to oversee new Bank products and activities that may present material or unfamiliar risks,” said Andrew Langer, president of Main Street Foundation. “Effective prudential oversight, however, does not require preserving every procedural layer when accumulated experience demonstrates that other supervisory mechanisms can perform the same function more efficiently.”

Another submission came from Daron Davis, who identified himself as an independent Black governance researcher and public scholar.

Davis said he supports the objectives of reducing unnecessary administrative burden, preserving institutional flexibility and enabling responsible innovation. However, he does not support complete repeal unless FHFA “establishes a proportional replacement for the regulation’s core governance functions.”

These functions include “early visibility into materially novel risks, attributable authorization, documented risk assessment, supervisory intervention before institutional embedding and an examination-ready decision record,” Davis wrote.

He said the proposal “relies heavily on informal early engagement and later examination,” calling them “not institutionally equivalent to a defined notice architecture.”

The final submission came from an anonymous sender, who said the agency’s goal of streamlining unnecessary regulatory paperwork and aligning agency operations with administrative efficiency directives “is well appreciated.”

The sender noted the regulation “has become largely irrelevant because very few new business activities trigger an NBA notice.”

FHFA declined to comment to Scotsman Guide on the proposed rule.