New Collateral Process to Address Eligibility and Reporting Errors

last updated on Wednesday, August 5, 2020 in Business News

Federal Home Loan Bank of Des Moines knows it can sometimes be a challenge to meet our collateral eligibility and/collateral pledging standards. We frequently monitor for trends or patterns in reporting errors in Member Collateral Verifications (MCV) and/or in collateral pledging. 

Examples of repeat collateral eligibility and pledging challenges can include, but are not limited to: 

• Misidentification of the collateral pledgor; 
• Reporting collateral that does not meet eligibility guidelines; 
• Reporting collateral information that does not tie to the pledged collateral note or security agreement; or
• Other errors that impact the Bank’s lien or ability to accurately value the pledged collateral. 

When we identify a pattern of repeat challenges with meeting these standards, we may initiate additional action steps to help ensure collateral eligibility and/or reporting get back on track.  

These action steps can include, but are not limited to: 

• Increasing the frequency members have a MCV performed;
• Expanding the scope of collateral reviewed at a MCV;
• Requiring collateral pledged be reported monthly on listing or delivered to our custodian;
• No longer permitting a collateral category or categories to be pledged; and
• Applying an additional discount to reduce pledged collateral value

Additionally, instances of a single collateral eligibility or collateral reporting error may result in one of the above corrective actions being taken when the challenge is material to the member’s pledged collateral value. 

We don’t expect to take these actions frequently. Members will receive notice when instances of reporting errors are becoming a trend or a pattern, permitting an opportunity to correct the situation and avoid their Advance Equivalent (AE) value being reduced. The reduction in a member’s AE will remain in place until the identified problem trend/pattern is no longer present for the lesser of six months or the next MCV.

Questions?

Contact your Relationship Manager.