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FAQs – Anti-Predatory Lendings

Q:

My institution pledges mortgage-backed securities (MBS) to the Bank that are issued and guaranteed by a U.S. government agency (such as Ginnie Mae) or a U.S. government-sponsored enterprise (such as Fannie Mae or Freddie Mac). Are these MBS eligible as collateral under the Bank's APL Policy?

Members may assume that MBS that are issued and guaranteed by a U.S. government agency or by a U.S. government-sponsored enterprise, including MBS issued and guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae, are eligible collateral in accordance with the Bank's APL Policy.

For MBS other than those issued by a U.S. government agency or U.S. government-sponsored enterprise, members should consult the prospectus of the investment to determine whether the security complies with the Bank's APL Policy. The prospectus for a MBS typically includes a representation from the issuer that the loan pool does not include loans that do not comply with applicable federal, state, and local laws, including anti-predatory lending laws. The prospectus also typically notes that any loans found to be in violation of such laws subsequent to the issuance of the security will be repurchased by the seller of the loan.

If you have questions as to whether the prospectus for your security includes such a disclosure, you should contact your investment advisor or the broker-dealer from whom you purchased the security.

Q:

Are mortgage loans secured by multifamily property (five or more units) subject to the Bank's APL Policy?

The Bank's APL Policy requires that residential mortgage collateral pledged to the Bank and residential mortgages purchased by the Bank comply with applicable federal, state, and local anti-predatory lending laws. The Federal Home Ownership and Equity Protection Act (HOEPA) defines a residential mortgage transaction as involving the financing of a consumer's principal "dwelling," meaning a residential structure that contains one to four units, including individual condominium or cooperative units. Many state and local anti-predatory lending laws contain either a similar definition, or make reference to definitions in HOEPA or the Truth in Lending Act (TILA). If you have questions regarding whether a loan complies with all applicable laws, you should contact your legal advisor and/or your regulator.

Q:

My institution originates residential mortgage loans with prepayment fees out to five years. Are these loans eligible collateral under the Bank's APL policy?

These loans may be eligible collateral if the prepayment fee is permissible under applicable law. The second paragraph of the APL policy states that "The Bank requires that residential mortgage collateral...compl[y] with applicable federal, state, and local anti-predatory lending laws and other similar credit-related consumer-protection laws, regulations, and orders designed to prevent or regulate abusive or deceptive lending practices." Therefore, if a loan does not comply with applicable law for any reason, including prepayment fees, such a loan is not eligible as collateral.

The Bank acknowledges that there is uncertainty in some jurisdictions regarding the acceptable prepayment fees in accordance with applicable APL laws. The Bank is not able to provide definitive guidance in situations that involve legal interpretations. The Bank does make available a list of some current APL laws that apply to "high cost loans" and "covered loans" as defined by the Bank. This list is included in Appendix C of the Products Policy. Note that this list does not include all APL laws that are in effect in all jurisdictions. If you have questions regarding whether a loan complies with all applicable laws, you should contact your legal advisor and/or your regulator.

Q:

My institution does not pledge collateral that is located in a subsidiary or affiliate to the Bank. Am I required to complete the Subsidiary/Affiliate Representations and Warranties Certification?

No: Only members that have pledged collateral that is contained within a subsidiary or affiliate, such as a REIT, PIC, or Securities Corporation, are required to complete the Subsidiary/Affiliate Representation and Warranties Certification. All members are required to complete the Member Representation and Warranties Certification. However, you may also wish to complete the Subsidiary/Affliate Representations and Warranties Certification if you intend to pledge collateral that is held in a subsidiary or affiliate in the foreseeable future.

 
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