800.809.2733 | FHLB.Lending@fhlbtopeka.com
How is the prepayment calculation figured on fixed rate and amortizing advances?
The prepayment of fixed rate advances, including amortizing, is based upon the return or yield we can obtain when reinvesting the funds in the open market in comparison to the advance rate being charged on the advance. The prepayment fee is priced live to the market using the yield of a U.S. Treasury on advances prior to 2001, or the yield of an FHLBank bond. The stockholder will be charged the difference between the advance rate and re-investment rate for the remaining period to maturity. If the re-investment rate is greater than or equal to the advance rate, no fee will be charged.
How late can I call to borrow?
The lending window closes at 4 p.m. CT.
How late can I wire money out?
Outgoing wire transfers may be requested until 5 p.m. CT as long as the receiving institution can accept a wire this late. Contact our Wire Services department at 800.934.9473 with questions.
What is a convertible advance? What is the difference between the Bermudan and European option?
A convertible advance typically offers an attractive fixed rate of interest in exchange for granting us the option to convert the advance at specific intervals (Bermudan/European) to an adjustable rate advance on a predetermined date(s) before maturity. The option to convert the advance is solely at our discretion. Once we exercise our option to convert, the resulting adjustable rate advance may be prepaid without a fee on the conversion date and on any reset date thereafter.
A European option (single option) allows us to convert the advance to a prepayable adjustable rate advance after a predetermined lockout period. A Bermudan option (strip of options) allows us to convert the advance to a prepayable adjustable rate advance after a predetermined lockout period and quarterly thereafter.
How long (term) can I borrow?
The maximum term on a non-subsidized advance is 30 years. Some structured advances may be limited to 15 years.
How do moves in the market affect advance pricing?
Our advance rates are based upon the cost of issuing debt in the open market plus a spread. Any moves in the bond and treasury markets would cause yields to move either up or down adjusting advance rates accordingly. Rates are set by around 9 a.m. and are updated throughout the day to reflect market movements.
How much spread should I charge when funding with an FHLBank advance?
The spread you obtain when match funding loans is ultimately up to you. Ask yourself several key points or questions before making a decision: Is this a quality customer that utilizes other profitable services? Who is the competition, and what is the rate we are up against? Can we offer a different structure that may be more attractive to the customer with a higher profit margin? What spread is my institution comfortable with? Spreads most often mentioned fall in the range of 200 to 300 basis points, but can be as narrow as 100 and as wide as 400. Once again, consider what type of credit, customer, competition and comfort level your institution is willing to accept.
Where can I find the Overnight Deposit rate and/or the opening Line of Credit rate?
Both the OND and LOC rates can be found under the Rates section of Members Only.
Which is better, a ladder of bullets (fixed rate advances) or an amortizing advance?
The shape of the advance curve is a big factor in determining which advance type gives you the most profit. Laddering bullets simply creates a customized amortizing schedule in which certain amounts of principal are reduced at different maturities. The effective advance rate of a ladder ultimately depends on the amounts placed in each bucket. The effective rate will be lower if more principal is placed in the shorter term buckets in a positively sloping yield curve. Keep in mind, there will be more tail risk with this type of transaction if your customer has a standard mortgage payment schedule. Ultimately, an amortizing strategy should be compared to a bullet strategy in terms of total interest paid over the life of the transaction. Another consideration is that an amortizing advance can only to paid in full, whereas bullets are comprised of several advances and can be paid in full or part. Our Lending Desk has tools to help you determine which funding vehicle makes more sense for your transaction.
How do I request information for my auditors?
Access our website to request information for your auditors. For further questions, contact our Internal Audit department at 866.837.7435.
Do I have to call in to renew my short-term borrowing?
Yes, unless you ask to set the borrowing up as an adjustable rate advance indexed to one of our short-term advance rate. If you know the borrowing will be outstanding for a long period of time, this is a great time-saving option.
What are Residential Housing Finance Assets (RHFAs), and how do they affect my borrowing position?
Any advance with a term greater than five years must be supported by an institution’s RHFAs. Advances exceeding five years are considered long term and can only be made for the purpose of enabling a member to purchase or fund new or existing Residential Housing Finance Assets. As a result, the sum of an institution’s advances with original maturities greater than five years cannot exceed the sum of the RHFAs held by the institution.
RHFAs include any of the following:
- Loans secured by residential real property
- Mortgage-backed securities
- Participations in loans secured by residential real property
- Loans financed using Community Investment Cash Advance Program
- Loans secured by manufactured housing, regardless of whether such housing qualifies as residential real property
- Any loans or investments which the Federal Housing Finance Agency in its discretion, otherwise determines to be RHFAs.
FHLBank automatically determines each institution’s RHFAs from quarterly call report data; however, an institution may have additional RHFAs available in other categories (listed above) that cannot be readily determined with call report data. In these cases, additional RHFAs may be certified to support current and future long term advances.
How do we eliminate the risk of our customer prepaying a loan that has matched funding associated with it?
We recommend incorporating FHLBank prepayment language into your loan documents whenever possible. This allows you to pass any fee on to your customer making you indifferent to the prepayment of your advance. The language can be found in the Member Products and Services Guide.
Why does the rate increase with monthly payments compared to annual payments when doing an amortizing advance?
Almost every customer who asks for amortizing advance rates for different payment frequencies has been concerned that the rate increases as the frequency increases, i.e., a monthly-payment amortizing advance with other characteristics identical to a semiannual-pay amortizing advance will show a slightly higher rate. On the surface this does appear to be contradictory, as one usually assumes that the faster you pay off a loan, the cheaper it will be. In the case of our amortizing advance however, the rate very properly increases with payment frequency.
We construct the amortizing advance rate by generating an internal rate of return that is equivalent to the individual rates on a series of bullet loans, one for each payment. By increasing the frequency of payment, the borrower accelerates payment on the least expensive money (the shortest-period bullets in the amortizing advance calculator), and the average interest rate rises. However, just as a homeowner can lower the total interest paid on a mortgage loan by making more frequent payments, so can our borrowers lower their total interest cost by increasing the frequency of payments. The rate difference is usually small, on the order of a basis point, and faster payment of principal should more than make up for the difference in rate.
How do I apply for a letter of credit?
A one-time Letter of Credit Agreement must be in place before you can apply for a letter of credit. Once the Agreement is in place, complete the Standby Irrevocable Letter of Credit application and email it to Lending (FHLB.Lending@fhlbtopeka.com)The application will be underwritten to ensure adequate collateral and you will receive a fax confirmation upon approval. The original letter of credit will be mailed to your customer. Visit our Letters of Credit page for the agreement, application, fee calculator and state-specific materials.
How does membership at FHLBank Topeka benefit my institution?
We provide wholesale funding, related services and technical expertise to member commercial banks, thrifts, credit unions, insurance companies and housing associates in Colorado, Kansas, Nebraska and Oklahoma.
FHLBank promotes housing, jobs and general prosperity by offering products and services that help our members provide affordable credit in their communities. Accordingly, FHLBank’s core business is to provide members and housing associates with funds for home mortgage financing, liquidity, asset/liability management and community development.
FHLBank’s products, programs and services assist Tenth District members and housing associates in providing affordable credit in their local markets to support housing, small farms,small businesses and community development.
For a complete listing of our products and services please refer to the Credit Products and Services section of our Member Products and Services Guide.
What are the Community Housing and Community Development Programs?
The Community Housing Program (CHP) and the Community Development Program (CDP) are special advance programs authorized by the Community Investment Cash Advance (CICA) regulations of the Federal Housing Finance Agency. These programs provide members with wholesale loans (advances) priced below our regular advance rates. The CHP is designed to help finance owner- and renter-occupied housing in their communities. The CDP is designed to increase members’ involvement in their communities through the financing of commercial loans, small business and other community and economic development loans.
How do I qualify for subsidized funding under the Community Housing and Community Development Programs?
To qualify for either program, an application must be submitted to the Housing and Community Development department. Applications for CHP and CDP can be found on our website.
How does the Line of Credit work?
The Line of Credit is a daily borrowing. The rate of interest applicable to each individual draw is established at the time of each funding request. The minimum amount of each Line of Credit draw is $100,000. At the beginning of each business day, all outstanding balances from the previous day are combined and re-priced to the opening line of credit rate Line of Credit draws remain outstanding until a pay down is requested and are pre-payable anytime without fee. Repayments are not accepted if funds have been drawn on the same day.
For more information, please refer to the Credit Products and Services section of our Member Products and Services Guide.
Can I complete transactions online?
Our current online offerings include OND account transfers as well Line of Credit paydowns. To conduct online transactions, individuals are required to log in to our secure website, Members Only. Online transactions are available from 8 a.m. to 4 p.m. CT. To obtain a Members Only log in, please contact your institution’s web administrator. If you aren’t sure who the web administrator for your institution is, please contact Lending (FHLB.Lending@fhlbtopeka.com).
How much Capital Stock am I required to hold?
We require members to maintain 0.10% of total assets in Class A stock with a minimum of $1,000 and maximum of $500,000. The amount of Class B Common Stock a member must maintain is 4.5% of its credit obligations less the member’s Class A stock held.
For more information, please refer to the Capital Stock section of our Member Products and Services Guide.