Member Products Policy Changes and an Update on FSA Guaranteed Loans
November 7, 2018
At its recent meeting, FHLBank Topeka’s board of directors approved changes to its Member Products Policy. Details are available in the online Member Products and Services Guide (MPSG). Policy changes become effective December 1. Lending values for loan collateral reported via the Qualifying Collateral Determination (QCD) form will be effective with the filing of the Dec. 31, 2018, QCD form.
Schedule of Eligible Collateral Changes
Loan Section - Appraisals
- Increased Minimum Loan Amount for Certified Appraisal for Recent Loans – For multifamily, commercial real estate, multifamily construction and commercial construction loans, the minimum required for a certified or licensed appraisal went from $250,000 to $500,000 for loans originated on or after April 9, 2018.
- Uniform Mortgage-backed Securities (UMBS) – Starting in mid-2019, the GSEs will issue a new common security, UMBS. This security type will be eligible under the Agency Residential Mortgage Pass-through Securities Category.
Changes Applicable only to Non-depository Community Development Financial Institutions (CDFIs)
- Maximum Term on Credit Obligations Increased to 15 Years– Previously, our guidelines did not allow us to extend credit to non-depository CDFIs with a term in excess of two years without prior written approval. The maximum has been extended to 15 years. Additionally, if the CDFI’s unrestricted net asset to total asset ratio falls to less than 20%, any new extension of credit is prohibited.
- Maximum Amount of Credit Available – FHLBank can extend credit obligations (advances, letters of credit, draws on standby credit facilities, exposure on derivatives and MPF credit enhancement obligations) up to 20% of a non-depository CDFI’s total assets. The ratio can be increased up to 30% with prior written approval from FHLBank.
Lending Value Changes
Secured credit risk exposure arising from the extension of credit to members and nonmembers is managed by employing multiple strategies and processes, known as FHLBank’s Member Credit Methodology (Methodology). One component of the Methodology is periodic evaluation of the lending value assigned to each type of asset. Based on management’s recent review of the lending values under its Methodology, various lending value changes were made.
An Update on Loans with a Farm Service Agency Guarantee
As you may recall, FHLBank Topeka changed its Member Products and Services Guide on April 1, 2018, to no longer accept pledges of agriculture loans with a Farm Service Agency guarantee. This change impacted the following collateral types within the schedule of eligible collateral: guaranteed loans backed by the full faith and credit of the U.S., agricultural real estate, operating loans and equipment loans.
Recently, FHLBank Topeka resumed communication with the USDA Farm Service Agency to find an alternate process that would allow us to perfect our security interest in the pledged collateral while becoming the holder of the guarantee, if needed. However, we were unable to successfully address this matter with the USDA Farm Service Agency, as the agency is unwilling to consider that FHLBank may need to become a holder of the guarantee at some point in the future. This was not the outcome we were hoping for and leaves us unable to resolve the issue. However, we remain committed to working with members to find other eligible collateral sources that can be pledged.
If you have any questions about any of these changes, please contact Lance Liby, chief credit officer, or Tom Bliss, director of member credit analysis, at 785.233.0507.