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The following article originally appeared on HousingWire.com on October 6, 2026.
The Federal Home Loan Banks’ Mortgage Partnership Finance® Program helps community lenders expand homeownership through liquidity, collaboration and targeted financing solutions
Housing affordability is often framed as an interest rate problem, but community lenders know the challenge runs deeper. A persistent housing supply shortage, rising upfront costs and the decline of local community mortgage lenders have combined to limit homeownership opportunities for many qualified borrowers.
The Federal Home Loan Banks’ Mortgage Partnership Finance® (MPF®) Program helps expand access to homeownership through coordinated action across the housing ecosystem. Increasing construction must be paired with targeted borrower assistance, reliable community lender liquidity and financing solutions that reflect how today’s buyers and homeowners are navigating the market.
Housing affordability challenge is more than rates
Today’s affordability crisis is often attributed to the gap between the historically low mortgage rates available during the pandemic and today’s higher rates. However, the real challenge is the combination of rates, prices, supply and household finances. The country spent more than a decade building too few homes following the financial crisis. Demand has since caught up with that supply deficit, placing particular pressure on entry-level and workforce housing.
Higher home prices have also increased down payment and closing cost burdens. As student loans and other consumer debt compete for household income, borrowers may struggle to accumulate the cash needed to close even when they can afford the monthly mortgage payment.
The growing wealth gap adds another layer. Families that already own homes, investment properties or stocks have benefited from asset appreciation. Prospective buyers without those assets may find themselves competing against cash offers while lacking access to generational wealth for a down payment.
“Interest rates are easy to focus on, but the story is much more nuanced,” said Patrick Sullivan, Executive Vice President, Group Head, MPF Program at FHLBank Chicago. “Housing supply is the most significant long-term challenge we face, particularly for entry-level and workforce housing.”
Financial education can help borrowers identify available options. Down payment assistance, closing cost support and government-backed financing programs are already helping households overcome barriers, but awareness remains uneven across communities.
Community lenders are losing ground
Community banks and credit unions have long played an important role in expanding access to homeownership. Their local market knowledge and relationship-based approach can be especially valuable in rural and underserved communities where borrowers may have needs that do not fit standardized lending models.
Increased compliance regulation, technology investments and capital demands have made mortgage lending more challenging for many community institutions. As a result, some lenders have scaled back mortgage activity or exited the business altogether, reducing local mortgage options in some markets.
“Community lenders bring local knowledge, longstanding relationships and a deep understanding of the markets they serve,” Sullivan said. “Preserving those institutions within the housing finance ecosystem is important to maintaining broad access to mortgage credit.”
The lock-in effect
The mortgage rate lock-in effect has further restricted housing supply. Homeowners with rates well below market levels lack financial incentives to sell, even when their homes no longer meet their needs. Downsizing in the current market can result in higher purchase prices and costlier mortgages, making it financially unattractive.
Because the lock-in effect is unlikely to disappear quickly, lenders and investors are exploring other ways to keep the market moving. Construction-to-permanent financing and other new-construction products can help expand supply. Renovation loans and home improvement financing can serve homeowners who plan to remain in place.
Balance sheet lenders also have opportunities to develop flexible structures that make moving more feasible for existing borrowers. Life events will continue to create housing demand. The opportunity is to provide financing that reflects the unusual constraints borrowers now face.
Partnerships can turn assistance into homeownership
Partnerships can also help address both affordability and supply challenges. The MPF® Habitat for Humanity® program was recently launched through FHLBank Chicago. The program provides approved member financial institutions with access to below-market mortgage financing for eligible Habitat for Humanity homebuyers.
Habitat affiliates support new construction and rehabilitation, while participating lenders originate mortgages for qualified homebuyers. The MPF Program provides secondary market access by purchasing eligible loans, helping lenders manage capital constraints and continue financing additional Habitat projects.
Down payment and closing cost assistance programs can help address one of the most immediate barriers for first-time and lower-income buyers. Through the cooperative Federal Home Loan Bank system, member institutions can access housing programs that help expand homeownership opportunities in their communities. All FHLBanks provide direct financial assistance through member institutions to help low- and moderate-income households purchase or rehabilitate homes that meet specific program requirements. Funding is provided through FHLBank members and delivered as grants to eligible homebuyers.
Rate relief can also make the difference between a borrower qualifying for a mortgage and remaining outside the market. Several FHLBanks participating in the MPF Program have offered rate relief initiatives for qualifying low-income and very low-income borrowers. Funding from participating FHLBanks supports interest rate reductions, helping borrowers satisfy debt-to-income requirements. The programs have generated strong lender participation, with allocated funds fully utilized in many cases.
“There is no single solution for housing affordability,” Sullivan said. “These programs demonstrate what can happen when nonprofits, lenders and secondary market investors work together to address different parts of the problem.”
Reliable mortgage liquidity supports local lending
For smaller institutions, access to the secondary market can determine whether mortgage lending remains a sustainable business line. A community lender may understand its borrowers and want to originate more mortgages but lack the deposits or balance sheet capacity to continue offering 30-year loans.
The MPF Program provides participating FHLBank members with dependable mortgage liquidity across all market cycles. That access helps lenders continue originating loans during periods of economic uncertainty while reducing balance sheet pressure and supporting prudent risk management.
The MPF Program also enables community lenders to retain mortgage servicing, maintain borrower relationships and preserve a local role in the home financing process. As technology becomes increasingly important to compete in mortgage lending, the MPF Program continues to evolve its systems and products around the needs of participating institutions.
Keeping community lenders in the housing ecosystem
Housing affordability will not be solved by one rate movement, loan product or policy change. Expanding access to homeownership requires more housing supply, greater program awareness, sustainable assistance and a lending system that includes institutions of every size.
Community banks and credit unions remain an important connection between the housing finance system and the neighborhoods it serves. With reliable liquidity, modern technology and coordinated partnerships, these institutions can continue helping borrowers navigate a market shaped by high prices and limited inventory.
While housing affordability challenges remain significant, community lenders continue to play a vital role in expanding access to homeownership. Ensuring those institutions have access to liquidity, targeted financing solutions and effective partnerships will be essential to meeting the nation’s housing needs in the years ahead.