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
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
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.
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.
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
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.