What keeps mortgage industry afloat? - FHLB

A collection of 12 banks owned by over 8100 financial institutions from all 50 states in the U.S. , known as the Federal Home Loan Banking system (FHLB), is providing hundreds of billions of dollars to the mortgage industry at a time when banks are reluctant to make loans available to many lenders.

This might be one reason why:
In this recent dramatic credit crises the U.S. has not experienced a bank run so far.
European financial institutions and lenders are in bigger trouble than its U.S. counterparts because there is no such organization in Europe.

Article in the FT:
The Federal Home Loan Banks are pumping hundreds of billions of dollars into the mortgage industry in the form of loans against mortgage collateral at a time when purely private sources of finance are offered only at punitive terms for many lenders. In doing so they have cushioned the impact of the credit squeeze and ensured that mortgage lending in the US has not come to a sudden stop. The scale of the cash infusion by the FHLBs vastly exceeds the few billion dollars of cash lent to banks by the Federal Reserve through its direct lending facility. By making vast amounts of cash available on a routine basis against a wide range of mortgage securities, with none of the stigma associated with going cap in hand to the Fed, the FHLBs have reduced the risk of a liquidity crisis at the most stressed institutions. Analysts say this is one reason why the US has avoided a bank run of the kind that crippled Northern Rock, the crisis-hit UK mortgage lender. The FHLB move is attracting intense interest in Europe, where policymakers are waking up to the fact that the securitised market-based model of US housing finance was imported without the quasi-public safety valves of the US system.

The latest Fed flow of funds data shows that FHLBs issued new loans at an unprecedented annualised rate of $746bn (€508bn, £366bn) in the third quarter, up from practically nothing in the second quarter. FHLB loans helped depository institutions ramp up their acquisition of mortgages by almost $190bn, annualised to $312bn. This – along with record purchases of mortgages by better-known government sponsored enterprises Fannie Mae and Freddie Mac – offset a large part of the $512bn annualised decline in mortgage purchases by special investment vehicles (SIVs) conduits and other issuers of asset-backed securities at the epicentre of the crisis.