Revised LTVs and Changes to Underwriting Assessment Methodology

As a part of our quality assurance initiatives, FHLB Des Moines periodically reviews our collateral loan-to-values (LTVs) to ensure they are consistent with the current market environment. As of October 2, 2017, we implemented revised LTVs for most collateral categories. Please click here for more details about the changes.

FHLB Des Moines is also simplifying our underwriting assessment methodology by trimming the application of our LTV (haircut) administration from a two level haircut structure to a single haircut. Going forward, any impact to the lendable value of pledged collateral resulting from loans not meeting underwriting assessment requirements during a Member Collateral Verification (MCV) will be reflected in an adjustment to the Eligibility Factor (EF) rather than a lower haircut level. Please click here for more details on direct impacts.

Electronic Note (eNote) Reminder

FHLB Des Moines does not currently accept eNotes of any loan type for pledging. Presently, legal and market practices regarding electronic execution of loans are developing faster than a deep and liquid market for these types of loans. However, FHLB Des Moines remains steadfast in executing the best practices for our customers, thus we are collaborating with the Federal Home Loan Bank System to discover solutions and implement common standards that allow for eNotes pledging. We will keep you updated on eNote considerations (what qualifies and what does not). Be on the lookout for additional information including transferability conditions and general items relating to loans executed in this manner.

Don’t Forget The Last Step of BBC Certification

November 15 is the cutoff date for BBC submission. Please remember to click “certify” to ensure proper submission. If you have not filed your BBC form, expect a call from the Collateral team. You have until the Last Date Accepted of the current quarter (December 31) to submit your application. You can view the BBC submission schedule here.

Collateral Property Manufactured Homes Not Deemed Real Property by Applicable Law

Conventional one-to-four family mortgage loans must be secured by a habitable, four-season, one-to-four family dwelling located in the U.S., or its territories, currently used for residential purposes.

What does this exclude? 

Any manufactured homes that fail to meet the real property definition under law, including, mobile and manufactured homes not affixed to a permanent foundation.

Reminder - Mortgage Obligations and Ability to Repay

For loans subject to Regulation Z – Ability to repay (ATR) requirements (i.e., consumer purpose transaction loans with application dates after January 10, 2014), the loan must be underwritten per regulatory requirements to be eligible as collateral. ATR regulation requires a repayment ability assessment (e.g., Debt to Income or DTI) that assesses all monthly debt obligations, including mortgage-related obligations. Included in mortgage-related obligations are principal, interest, taxes and insurance, plus any special assessment, ground rents and leasehold payments.

Sidenote: 

Periodically, we see members not including taxes and insurance in the DTI, resulting in the loan not meeting ATR regulations and causing the loan to be ineligible for collateral. Please be aware of this stipulation.

Changes to Eligibility Requirements on Certain Collateral Types

FHLB Des Moines systematically reviews existing collateral policies and practices to ensure we are adequately capturing the various risk associated with pledged collateral. As a result of these reviews, some additional modifications to the collateral practices related to pledged Home Equity and Participated loan collateral are occurring. We will provide additional details before year-end.