Collateral FAQ

What are the advantages of pledging Mortgages as Blanket Collateral and Specific Collateral?
Blanket Collateral reporting normally requires less frequent reporting; less data is also required. Specific Collateral Listing allows for a lower “haircut” when determining a “lendable value.”

Can we pledge Second Mortgage loans and Commercial Loans as collateral?
Approval is required to pledge Second Mortgage loans and Commercial Real Estate loans as collateral. A member must pledge all eligible 1-4 Family Mortgage loans and Multifamily Mortgage loans before pledging Second Mortgage and Commercial Real Estate loans.

What is the 50% test? Is it possible to have this test waived?
Second Mortgage loans and Commercial Real Estate loans pledged under the “high haircut” blanket lien program will be limited to a lendable value maximum of 50% of conventional collateral. A member can request to have this rule waived. For this to occur, an on-site collateral review must take place.

On the Blanket Collateral Report, are Non-Qualifying loans, found during an On-site Audit, included in the “less ineligible loans & assets pledged to others” section?
No, loans deemed non-qualifying from an on-site audit are to be excluded from the Blanket Collateral report. Ineligible loans are loans that are not allowed by FHFB regulations. Non-qualifying loans meet FHFB regulatory definitions but do not meet FHLBI guidelines.

What is the difference in having a pledged security held in Safekeeping versus held at a Third Party Custodian?
In order for members to pledge Category 2 (Government & Agency Securities) and Category 3 (Private MBS and Mutual Funds) as collateral, the securities must be held in a safekeeping account with the FHLBI or with an approved third party custodian that enters into a Third Party Custodian Agreement. Securities held in Safekeeping are pledged at a lower “haircut” than third party
held securities.

Updated: February 25, 2008