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Pledging Paycheck Protection Program (PPP) Loans as Collateral

On April 23, 2020, the Federal Housing Finance Agency announced that the Federal Home Loan Banks can accept Paycheck Protection Program (PPP) loans as collateral. Federal Home Loan Bank of Des Moines is working to finalize eligibility terms, processes and internal system requirements to accept PPP loans as eligible collateral. We will communicate further details when they become available.

Interested in pledging PPP loans as collateral?
Members will need to notify FHLB Des Moines of your intent to pledge PPP loans by contacting the Advance Collateral team: [email protected].

Supporting our Members through COVID-19

We understand that these uncertain times are having a significant impact on you, your financial institution and your customers. We are committed to working with you. There are several action steps we are taking to adjust our eligibility guidelines on pledged collateral to align with our member financial institutions who are implementing loan forbearance or loan modifications agreements for their borrowers.

Find the latest information and collateral guidelines for these adjustments on our web site.

Additionally, our President and CEO, Kris Williams, along with representatives from the Bank, hosted a live webinar on Tuesday, April 14, for all members. Updates on adjustments to collateral eligibility and guidelines were provided. Watch a recording of the webinar and view answers to members’ questions on our website.

eNotes Update: eVault Selection and Implementation

FHLB Des Moines is now in the final stretch on our road to accepting 1-4 family residential eNotes as eligible collateral. We’ve selected an eVault and are now in the process of implementing with our systems and processes.

Q: Will members need to use the same eVault as FHLB Des Moines to be able to pledge eNotes?
A: No. It is not a requirement to use the same eVault vendor. Applicable eVault requirements are found in Section 9 of the eNotes Requirements and Guidelines.

Q: How will pledging and collateral reporting change for eNotes?
A: Once a member has all systems in place to originate and pledge eNotes, the process for pledging and reporting eNotes will mostly remain the same. Members who pledge and report on a quarterly Borrowing Base Certificate (BBC) will continue to pledge and report quarterly, and members who pledge and report on a monthly Loan Listing will continue to pledge and report monthly. eNotes will, however, have new collateral type codes. Earlier this year, we published the requirements and guidelines necessary to pledge eNotes to FHLB Des Moines.

Collateral Type Codes
Collateral Type	Wet-inked Signed Notes	eNotes
1-4 Family Residential First Mortgage Loan	1101	3101
1-4 Family Residential First Mortgage Loan - Nontraditional Loan	1102	3102
1-4 Family Residential First Mortgage Loan - Subprime Loan	1103	3103
Government Insured - VA Home Loan	1203	3203
Government Insured - FHA Home Loan	1205	3205
1-4 Family Residential Home Equity Mortgage Loan	1414	3414

We have seen an increased interest in eNotes due to social distancing requirements across our district. If your institution is now considering the possibility of developing eNotes within your systems, we have many resources to help you get started.

Loan Listing Reporting Changes Taking Effect July 1

Beginning July 1, 2020, FHLB Des Moines members submitting their monthly loan listing using the General File Format must complete a Rate Index column in their file.

With the expected phase-out of the London Interbank Offered Rate (LIBOR) at the end of 2021, this addition was made to capture the referenced index for adjustable-rate loans pledged to the Bank via a loan listing.

A new column titled ‘Rate Index’ (column AL) will be included for all members using the General File Format, even if adjustable rate loans are not pledged. When reporting fixed rate loans, the Rate Index column will remain blank.

Changes to Pricing on Securities Pledged

On May 4, 2020, FHLB Des Moines began to daily price securities pledged as collateral. Prior to May 4, the Bank's pricing was updated on a weekly basis. This change is permanent to address the volatility of financial markets and to provide the most up-to-date market values for our members. This new process is captured in our Collateral Procedures document.

No actions or changes are required on your part. If you have questions on this process change, contact the Collateral Department at 800.544.3452, ext. 2500.

Collateral Eligibility Clarification

FHLB Des Moines would like to clarify information from an article in our Q1 Collateral Quarterly Newsletter regarding eligibility of HELOCs that permit a portion of fundings under the line to be termed.

Members who currently originate and pledge such HELOCs to the Federal Home Loan Bank of Des Moines may continue to pledge them and receive the same Advance Equivalent value for those loans until further notice.

HELOCs with a borrower option to term out the line should be treated as follows:

• Pledged in collateral code 1423 or 1424, based on the lien position of the mortgage securing the HELOC;
• Pledged on one line, regardless of the number of fixed advances created under the line of credit;
• The unpaid principal balance should be the total of all outstanding fixed and floating advances.

Currently the Bank is conducting additional research to assure that these loans meet the four requirements listed below from the Member Products Policy.

1. Must have a readily ascertainable market value;
2. Can be reliably discounted to account for liquidation and other risks;
3. Capable of being liquidated in due course; and
4. The Bank must be able to perfect its security interest in the collateral.

We commit to providing liquidity for these and all other collateral available to our members as we all work through the current stressed environment. 

Questions may be directed to Advance Collateral at [email protected].

Federal Home Loan Bank of Des Moines

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