Expiration of Adjusted Eligibility Guidelines for COVID-19 Relief

last updated on Monday, May 23, 2022 in Business News

FHLB Des Moines is ending the temporary Adjusted Eligibility Guidelines for Pledged Collateral for COVID relief effective with collateral pledged as of June 30, 2022.  

As a result, members should consider the following in reports of eligible collateral as of June 30, 2022 (‘modification’ means any change to original note terms).  

Modifications with Electronic Signatures

• Electronically signed loan modifications of wet-inked promissory notes will continue to be accepted subject to the following:

  • The original, wet ink paper note is in the member’s possession (or with a custody service) and is available for Bank review; and

  • The electronically signed loan modification merely amends one or more terms of the original paper note and does not supersede, restate or replace the original paper note. Importantly, the original note remains in force and the modification does not constitute a refinancing. Loan modifications advancing new funds or capitalizing unpaid interest are considered a refinancing and a restatement of the original terms; a wet-ink signature is required; and

  • A copy of the electronically signed loan modification must be stored with the related loan documentation for the loan, maintained in a format that is accessible by the Bank and be available for review by the Bank; and

  • The electronically signed loan modification must be signed using electronic signature technology that complies with the ESIGN Act.

  • Modifications clearly to the borrower’s benefit (such as a reduced interest rate), various forms of borrower acknowledgement will be accepted, provided that a copy of the borrower acknowledgment includes identification of the promissory note being modified, is stored with the related loan documentation for the loan, is maintained in a format that is accessible by the Bank and is available for review by the Bank.

  • If the electronically signed loan modification requires an amendment to the mortgage as well as the note, the member must comply with all recording requirements for the jurisdiction in which the property is located and the original mortgage is recorded.

Electronic Signature Modification Guidelines

Forbearance

• Loans granted forbearance on or after June 30, 2022 that do not meet the Bank’s Payment Status requirements are not eligible
• Loans granted COVID-related forbearance prior to June 30, 2022 must meet the Bank’s Payment Status requirement or be in compliance with an established repayment plan by December 31, 2022, to remain eligible

Originations with Electronic Signatures

• Loans originated using electronic signatures¹ during COVID relief must be re-signed by the borrower with an ink signature to be eligible on or after December 31, 2022.

SBA Paycheck Protection Program loans 

• SBA Paycheck Protection Plan loans (type code 1286) will no longer be eligible collateral commencing on and after December 31, 2022.

Post Forbearance Repayment Plans

Loans granted forbearance with the following post forbearance repayment options will continue to be eligible in accordance with the requirements above.  

Reinstatement: Forborne funds fully collected at the end of the forbearance period. No signature of the borrower is required, provided there are no changes in the terms of the original note. 

Repayment Plan: Forborne funds collected in installments to bring the loan current over a period not to exceed 12 months beyond the expiration of the forbearance period. No signature of the borrower is required, provided there are no changes in the terms of the original note.

Payment Deferral: Forborne funds collected at the end of the loan term, with no other change in terms. Evidence of borrower acknowledgement and acceptance is required, and the agreement should be delivered to the Bank’s custodian where loan delivery is required. No signature of the borrower is required, provided there are no changes in the terms of the original note.

Loan Modification: A change in terms of the original note. Signatures, electronic or wet, are required for any agreements that provide for any of the following:

• Adding the deferred payments to remaining note payments over a period that exceeds 12 months
• Extending the maturity of the note 
• Adding all or a portion of the deferred payments to the principal of the note
• Changing the interest rate

Past Due Assessment  

Reporting past due status for impacted loans should be completed in accordance with the requirements of the member’s primary regulator and applicable law.

For members providing detailed loan listing data, the past due status as determined by the member should be reflected in the Delinquency Code field. A loan’s paid through date, however, should continue to reflect payments made under the contractual terms of the note, including any executed modification or forbearance agreements. 

If you have questions on the above changes, please contact our Collateral team: advancecollateral@fhlbdm.com.

¹ Excludes eNotes pledged under the respective type code
 

1. Collateral
2. COVID-19
3. Credit and Collateral