Major life insurers are accessing cheap funding at record levels from a U.S. government-backed financing system, sapping billions of dollars meant to help increase affordable housing, interviews with industry executives and regulatory disclosures show, Reuters reported. When Federal Home Loan Banks (FHLBs) were created in 1932 in the aftermath of the Great Depression to finance firms that offer home loans, insurers were granted access to this system because they provided mortgages. They stopped providing mortgages in the following decades as they became an industry distinct from banking. Starting in 2008, they have been aggressively drawing on FHLBs, arguing they support housing because they invest in residential mortgages and related securities. The extent to which FHLBs finance insurers has not been previously reported. Reuters interviews with more than a dozen industry executives and regulators, a review of regulatory disclosures and data show this borrowing has not been matched by a rise in home loan affordability, with the cost of mortgages soaring to its highest in 23 years.
