Additional Clarification of Changes Made to the Member Products Policy
April 15, 2013
On April 1, 2013, FHLBank Topeka announced several changes to the Member Products Policy. In response to members’ inquiries, management has determined additional clarification may be helpful in regards to the changes made to the following underwriting requirements, specifically identified in the Schedule of Eligible Collateral in the Member Products and Services Guide.
- The note (including extensions, modifications, assumptions, endorsements and/or renewals) must have “wet” signatures from all borrowers and the original document must be retained.
FHLBank currently requires ALL original documents related to the note to be retained and to contain a “wet” signature. We understand that many members are using or exploring the use of digital record retention systems and electronic signatures to execute loan documents, and we agree the practices are generally accepted as legally binding. However, our concern relates to the transferability of the loan, specifically our ability to liquidate the asset, if needed, and the marketability of the loan to prospective buyers.
- All notes tied to same mortgage must be eligible and pledged to FHLBank.
- FHLBank’s intent in adding this underwriting requirement was to address situations where a mortgage references multiple properties and the member has elected to create a note for each property identified on the mortgage. If a mortgage contains multiple properties and each property has a separate note, all notes would need to be considered eligible and pledged to FHLBank. The underwriting requirement was not intended to eliminate assets from being pledged where the NOTE includes provisions for cross collateralization.
- Appraisals must be prepared by licensed or certified appraiser for loans with an original amount of $250,000 or above.
- If a member’s loan does not comply with this requirement but is in compliance with the exemptions identified in Interagency Appraisal and Evaluation Guidelines, which became effective in December 2010, the loan will be considered eligible collateral. Management will propose to its board of directors in June additional changes to further clarify FHLBank’s position regarding appraisal requirements.
If you have any questions regarding this information or collateral eligibility, please contact Sonia Betsworth, chief credit officer, Tom Bliss, director of member credit analysis, or Kylie Mergen, collateral review manager, at 800.905.2733.