FHLBanks accepting Paycheck Protection Program loans as collateral

The Federal Housing Finance Agency has announced that Federal Home Loan Banks can accept Paycheck Protection Program loans as collateral when making loans, known as advances, to their members. The measure is being taken in support of small and community banks.

FHLBanks can accept loans guaranteed by the Small Business Administration under the Paycheck Protection Program if these banks comply with certain safety and soundness requirements, a release from the FHFA stated.

The paycheck program, a $349 billion emergency loan program, was launched in early April by the SBA.

The release states, “To date, the FHLBanks have been able to meet the needs of their members, especially small and community banks, during the COVID-19 national emergency. Accepting PPP loans will provide additional liquidity for small and community banks to borrow from their FHLBank to support the small businesses in their communities.”

For more, head to fhfa.gov