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FAQs – Collateral

Q:

Where can I find the requirements for qualified collateral?

Qualified collateral is limited to the types of collateral that are listed in Appendix A of the Products and Solutions Guide Adobe PDF icon. If you have a question regarding the appropriate collateral category for any type of collateral, please contact the Collateral Department.

Q:

How do I qualify a subsidiary as qualified collateral?

In order to qualify collateral held in a subsidiary, please refer to the collateral section of the Products and Solutions Guide. Also refer to Appendix A of the Products and Solutions Guide for a description of all qualified collateral.

Q:

Can deposit accounts at the Bank be included as qualified collateral?

Only funds placed in a collateral overnight deposit account can be included as qualified collateral. A collateral overnight deposit account pays the same rate as other overnight deposit accounts.

Q:

Can capital stock be used as collateral?

No: Qualified collateral is limited to collateral that is listed in Appendix A of the Products and Solutions Guide. Per Federal Housing Finance Agency regulations, capital stock is excess collateral, and members cannot borrow against its value.

Q:

Can corporate or municipal bonds be used as collateral?

No: Per Federal Housing Finance Agency regulations, qualified collateral is limited to collateral that is listed in Appendix A of the Products and Solutions Guide. The four main categories of collateral are:

  1. residential mortgages;
  2. securities;
  3. funds deposited in the Bank;
  4. and other real estate-related collateral.

The criteria applied to each of these categories of collateral are detailed in Appendix A of the Products and Solutions Guide.

Q:

How do I access the Qualified Collateral Report (QCR) on your website?

Please contact the Collateral Department at to request a QCR.

Q:

Can I fill out the QCR form electronically?

Yes: The QCR must be filled out electronically. The Bank has a secure file transfer site that allows members to update their collateral pledge electronically. Once the member completes the Qualified Collateral Report (QCR) through the Bank's secure website, the member's owner-occupied, 1-4 family pledge is updated on the Bank's collateral system.

Q:

How can I increase my borrowing capacity?

If the member's qualified collateral has increased, and the member wishes to increase its borrowing capacity, the following steps must be taken for member's that are assigned by the Bank to one of the three collateral status groups:

  1. Category 1
    Can submit a Qualified Collateral Report to the Bank to increase their overall borrowing capacity at any given point in time.

  2. Category 2
    As stated in the Products and Solutions Guide, members pledging collateral to secure advances are required to update the collateral balances on at least a quarterly basis, or more often as the Bank may require. Members can update their balances at any time to reflect an increase in their qualified collateral.

  3. Category 3
    As stated in the Products and Solutions Guide, members pledging collateral to secure advances are required to update the collateral balances on at least a quarterly basis, or more often as the Bank may require. Members can also deliver additional collateral at any time to increase their borrowing capacity.

Q:

What should I do if my qualified collateral decreases?

Per Federal Housing Finance Agency regulations and the Bank's Products and Solutions Guide, members are required to maintain at all times an amount of qualified collateral that satisfies the collateral-maintenance level established by the Bank. If the value of a member's pledged collateral declines, management must pledge additional collateral and/or substitute qualified collateral that is acceptable to the Bank in order to maintain sufficient qualifying collateral to secure advances. For all members, any collateral deficiency identified must be corrected as soon as possible. Members should not wait for collateral deficiency notification from the Bank. (See Appendix A and Appendix B of the Products and Solutions Guide, as well as the collateral section of the Products and Solutions Guide.)

Q:

Why does the Bank require me to submit call reports or financial statements?

These documents assist the Credit Department in underwriting members as creditworthy borrowers of the Bank.

Q:

When do I need to send call reports or financial statements?
  • Insured members should submit their call reports on a quarterly basis.
  • Insurance company members should submit financial statements quarterly.

Q:

Are the Bank's underwriting requirements different for Category-3 members?

As noted in the Credit Underwriting section of the Products and Solutions Guide, members in Category-3 status must submit "Supplement A to Application for Advance" to the Bank at least three business days prior to the expected commitment date of an advance. Supplement A provides additional credit underwriting information to the Bank for Category-3 members.

Q:

What is the Bank's position regarding overdrafts on a member's IDEAL Way account?

The Bank strongly discourages members from overdrawing their IDEAL Way account beyond the amount of their IDEAL Way line of credit. These overdrafts present potential liquidity and credit risks to the Bank. Therefore, each member should maintain an IDEAL Way line of credit that is sufficient to cover anticipated shortfalls in the collected balance of the member's IDEAL Way account to avoid such an overdraft. The Bank does not charge members a fee to establish or maintain an IDEAL Way line of credit.

The IDEAL Way line of credit is overdraft protection for your account. The Products and Solutions Guide notes that, "Members that have obtained an IDEAL Way line of credit may overdraw their IDEAL Way demand-deposit account and get an automatic IDEAL Way advance to cover the overdraft. The Bank typically approves an IDEAL Way line of credit equal to two percent of a member's assets." Members are required to pledge sufficient collateral to the Bank to secure their IDEAL Way line of credit at all times, including at the time that the line is established.

For additional information on establishing an IDEAL Way line of credit, or increasing the size of your existing IDEAL Way line of credit, please contact the Money Desk.

Q:

What is the definition of a 1-4 family owner-occupied residential property?

In accordance with the Bank's definition for collateral purposes, a 1-4 family owner-occupied residential property is a dwelling that is the borrower's primary residence. Second homes, vacation homes, or other investor-type properties do not qualify under this collateral category. These non-owner occupied 1-4 family residential loans must be individually listed with the Bank to receive credit.

Q:

What kind of collateral may be included under the blanket lien of 1-4 family owner-occupied residential loans?

Only First Mortgage loans secured by 1-4 family owner-occupied residential properties may be included in the blanket pledge of owner-occupied, 1-4 family loans. The Bank typically applies a 25 or 40 percent haircut to these loan types depending on FICO score.

Q:

Can loans secured by second position Home Equity Lines of Credit (HELOCs) or Home Equity Loans (HELs) be included as qualified collateral?

In accordance with Appendix A of the Bank's Products and Solutions Guide, HELOCs and HELs are eligible under the Category 5, Other Real-Estate-Related Collateral category and are subject to a haircut of 50% of the book value.  This section allows members to pledge "other real-estate-related" collateral to the Bank in a discounted amount up to two times their GAAP capital.

HELOCs and HELs should be excluded from the blanket pledge of owner-occupied 1-4 family loans.  These loans must be individually listed with the Bank to receive credit.  Please contact the Collateral Department for information regarding the Bank's procedure for pledging HELOCs and HELs.

Q:

Can loans secured by manufactured housing be included as qualified collateral?

In order for a manufactured home to be eligible, it must be (i) permanently affixed to the real estate owned by the borrower, and (ii) the member must provide the Bank with a legal opinion from its legal counsel that the manufactured home is classified as "Real Property" under applicable state law and considered by taxing authorities to be part of real estate.

Q:

Can Non-Agency Residential MBS be used as collateral?

Publicly offered non-agency residential mortgage-backed securities (MBS) that represent an unsubordinated interest in cash flows from pools of 1-4 family residential properties are eligible collateral for Bank advances. Subordinate tranches may be eligible as Category 5, Other Real Estate Related Collateral. Non-agency residential MBS collateral is subject to individual review and acceptance by the Bank. Private placements, IO strips, and PO strips of any security typically are not eligible as collateral. Please contact the Collateral Department if you are interested in pledging non-agency residential MBS as collateral, or if you have questions regarding whether a particular security is eligible as collateral.

Q:

Can Commercial MBS be used as collateral?

Publicly offered commercial mortgage-backed securities (MBS) may be eligible as Category 5, Other Real Estate Related Collateral. Commercial MBS are subject to review and acceptance by the Bank. Private placements, IO strips, and PO strips are typically not eligible collateral. Please contact the Collateral Department if you are interested in pledging commercial MBS as collateral, or if you have questions regarding whether a specific security is eligible as collateral.

 
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