Collateral Eligibility Updates Q3-Q4 2024

last updated on Friday, September 13, 2024 in Business News

FHLB Des Moines will be updating several collateral eligibility requirements over the next two quarters with the majority of the updates effective September 30, 2024. Many of these updates simplify eligibility requirements or provide improved eligibility for certain collateral types.

Please review the information below before submitting your collateral reporting after September 30.

Collateral Updates Effective September 30, 2024

Subprime Credit Score Threshold Lowered to 620

The subprime definition for conventional, 1-4 family first mortgage term loans and mortgage-backed securities is being updated to reflect a FICO^® Score ≤ 620. After September 30, members can benefit from a higher LTV Discount by pledging loans that have a credit score for the primary borrower greater than 620 in type code 1101. Credit scores must be at origination or when the last credit decision was made on the loan.

• Currently, credit scores ≤ 660 are defined as subprime.

Additionally, loans with credit reports obtained at origination but without credit scores will be simply defined as subprime if the debt-to-income ratio is greater than 43%. Home equity loans and lines of credit and 1-4 family construction loans continue to require a credit score > 660 or as noted in the eligibility checklist.

Real Estate Loans with Preliminary Title Work Now Eligible

Effective for members with a Blanket APSA

Real estate loans originated with preliminary lien verification (title work) will be eligible if the loan documentation includes recorded satisfaction of the prior lien.

• Currently, final title work is required for all non-residential loans and for residential loans with an unpaid principal balance greater than $250,000.

Government Insured Loans

The pledge reporting requirement for government guaranteed loans will be updated to be the loan’s unpaid principal balance owned by the pledgor as of the reporting date.

• Current requirement for reporting the unpaid principal balance is to report the government insured unpaid principal balance.

Additionally, eligibility criteria has been simplified to state that the loan must meet all requirements on the applicable agency’s program criteria in order to pledge in the government insured collateral type codes. Eligibility checklists are no longer published for these type codes; however, the requirements found in the General Eligibility Checklist still apply.

Loan Terms

Maximum maturity is being updated to 40 years for Home Equity Lines of Credit (HELOC), Agricultural Real Estate and amortizing Community Financial Institution (CFI) collateral type codes.

• Current maximum term is 30 years for these collateral types.

The additional calculation requirements for HELOC loan terms will be eliminated.

CFI non-amortizing collateral requirements will update the maturity to be set at 5 years and will remove the requirement of an annual credit review if the note matures in less than 13 months.

Collateral Updates Effective December 31, 2024

30-Day Maximum Past-Due Eligibility Requirement

Agricultural Real Estate, CFI and non-residential government loans cannot be more than 30-days past due after December 31, 2024.

• Currently, past due loans of 90 days are eligible for the below mentioned collateral types.

If you have questions, or would like additional information on the updated collateral eligibility requirements, please reach out to your relationship manager, email advancecollateral@fhlbdm.com or call 800.544.3452 ex 2500.

1. Collateral
2. Credit and Collateral