4/14/2020 All-Member Webinar

last updated on Tuesday, April 14, 2020 in General

During times of uncertainty, the Federal Home Loan Bank of Des Moines will always remain a stable and reliable partner to you, our members. Please know that our number one priority continues to be meeting our member’s needs through these challenging times. Each day brings new information and questions to light.

To keep our members as informed as possible, our President and CEO Kris Williams, along with representatives from the Bank hosted a live webinar on Tuesday, April 14, for all members. During this webinar we addressed the impact of the current COVID-19 situation and all the steps we are taking to remain your reliable source of funding. 

Note: Information discussed in this webinar was current at the time of the webinar. For the most recent member updates relating to the COVID-19 situation, please visit our COVID-19 Updates and Resources page.

Member Call Questions: April 14, 2020

• Does FHLB Des Moines remain committed to the current collateral LTV/haircut levels going forward?

  We, too, are experiencing market-induced volatility that is causing the value of pledged collateral to generally be less than it was before the crisis. As a secured creditor, we monitor collateral valuations closely and we are taking actions to ensure our collateral valuations remain up to date. We are evaluating taking such actions as increasing the frequency of valuing our collateral and ensuring these values correctly capture the stressed market liquidity to ensure our collateral values are current in this volatile market.

  At this time, we plan to follow our established annual review and update schedule for collateral Loan-to-Values (LTVs)/haircuts, currently scheduled for implementation in early July for Blanket Advances, Pledge and Security Agreement (APSA) members. Any changes in their collateral LTVs/discounts will be communicated at least 30 days prior to being effective.

  Non-Blanket members should anticipate pledged residential and commercial real estate loan collateral being priced at least monthly. Members will be made aware of the effective dates of updated pricing in advance of applying the updated prices. We are monitoring the need to adjust the frequency for updating loan collateral LTVs/haircuts for loan collateral pledged by Non-Blanket members and will notify members in advance should the timing of updating these collateral LTVs/haircuts change. 

• Does FHLB Des Moines expect that with the current or future volatility in the capital markets, there might decreased availability of funding for member institutions?

  Over the last month, the market has experienced volatility not seen since the last financial crisis. Similar to the last crisis, the Bank is here to provide liquidity for our member institutions and has positioned itself to do so.

• Many dividend paying organizations are stopping or reducing during this time of volatility. What plans does FHLB Des Moines have with regards to paying the dividend?

  Our current dividend philosophy is to pay a dividend that strikes a balance between providing a reasonable return to members while preserving our financial position, flexibility and ability to serve as a long-term liquidity provider. This includes looking at a variety of factors, including historical trends and outlook on income, interest rates and the level of capital we need to support safe and sound operations of the cooperative. During the current crisis, interest rates have declined. As we noted, changes in interest rates are a factor we consider and it would be reasonable to expect this could lead to a lower dividend in the future as well.

• View questions about electronic signatures and wet signatures:
  1. When do you expect FHLB Des Moines to allow electronic signatures on notes on eligible pledged collateral?
  2. Does the Bank have any plans to lift the restriction for wet signatures on Notes in the near future?
  3. Why do wet signatures continue to be required in today's environment when technology has evolved to use of electronic signatures and they are considered legally binding by many states? 

  FHLB Des Moines continues to work diligently on the eNotes project. As a secured lender, we have one more layer beyond enforceability, or legally binding, to consider. We have to ensure the collateral pledged is also a transferable record and meets the requirements laid out under the federal Electronic Signatures in Global and National Commerce Act (E-Sign) and state Uniform Electronic Transfer Act (UETA) laws. In the paper note world, there is just one true copy evidenced by the wet-ink signature. In the electronic world, that one true copy, known as the “Authoritative Copy”, is evidenced by the “location” of the eVault in the Mortgage Electronic Registration Systems, Inc.®  (MERS®) eRegistry, the system of record for eNotes. 

  We have a page dedicated to eNotes under the Collateral section of our web site. There you will find the requirements, as well as other valuable eNote resources. We are on target to accept 1-4 Family Residential eNotes that meet the posted requirements in the second half of 2020. 

  "MERS®" is a registered trademark of MERSCORP Holdings, Inc.

• View questions about the CARES Act and the MPF Traditional Program:
  1. How can FHLB Des Moines justify having a forbearance program that does not comply with the CARES Act for the MPF Traditional Program? If you stay with the current guidance will member institutions be "held harmless" for any legal action against us for violating the law? While we fully appreciate all the moving parts to the program, please provide the legal guidance you are making the basis of your decision for violating the CARES Act.

  FHLB Des Moines is working very closely with the Mortgage Partnership Finance® (MPF®) MPF Provider/Chicago and the various MPF Banks on this issue.

  As many of you know, the MPF Program provides for the sale of many different loan types into the various MPF products. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) does not specifically apply to all of the loans sold into the MPF Program. Where the CARES Act does apply, the MPF Program Announcements have clearly stated that MPF originating and servicing Participating Financial Institutions (PFIs) must comply with all applicable laws and guides relevant to the loans sold and serviced.

  MPF Traditional (i.e. risk-sharing) conventional loans, in particular, are not covered under the CARES Act. We are currently assessing the “gaps” between relief provisions offered under the MPF Traditional Guides and those provided under the CARES Act. This effort will help us understand the implications and impact of additional relief provisions under the MPF Traditional Program. 

  “Mortgage Partnership Finance” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.

• View questions about SBA loans as collateral:
  1. Currently FHLB Des Moines does not accept SBA loans as collateral. In light of the recent PPP legislation with the SBA guaranteeing about $350Billion in short term loans for small businesses, are you considering allowing SBA loans to be pledged for collateral? 

  FHLB Des Moines is working with the rest of the Federal Home Loan Bank System to expedite subordinating Small Business Administration (SBA) Paycheck Protection Program (PPP) loans to the Federal Reserve Banks so they may lend against these assets. In order for us to accept PPP loans as collateral, SBA would need to allow FHLB Des Moines to realize upon the guarantee and they have not done so to date. If this should change, we will communicate it to our membership.

• How do we keep assets eligible to pledge if we modify to interest only or defer payments?

  Loans that are modified permanently to require only interest for the remaining life of the loan will no longer be eligible per our collateral eligibility guidelines. Loans that temporarily permit interest-only payments, or defer payments during an agreed upon short-term period due to COVID-19 stress, will be eligible during the temporary period.

• What is the biggest risk to FHLB Des Moines right now?

  The unintended consequences of the stimulus measures utilized to offset the economic impact of the COVID-19 virus. This could come in the form of higher short-term Treasury rates, like what we’ve seen recently with Treasury Bills (T-Bills), or how public and private debt loads will weigh on the economy for years to come.

• View questions about DocuSign and remotely signed notes or documents:
  1. Now that we are doing a significant amount of business remotely what is your position on remotely signed notes/documents using services such as DocuSign?
  2. Is there a special collateral consideration if the loan documentation is not ink signed?

  DocuSign® is one of many technology vendors offering solutions so lenders can take advantage of the many benefits of eNotes. As previously mentioned, as long as eNotes are originated and stored under the proper standards, we are looking forward to the day we can accept them as collateral in the coming months.

  In addition to being an enforceable note, collateral considerations include the ability to value the collateral as well as liquidate the collateral. Therefore, the collateral must be a transferable record and meet the E-Sign and UETA laws. Technology vendors are even partnering with each other to help lenders meet the requirements of an eNote.

  "DocuSign®" is a registered trademark of DocuSign, Inc.

• Are institutions borrowing more and is FHLB Des Moines expecting increase in advances due to the stimulus package?

  In the month of March, we saw more broad-based member advance usage across all charter types (banks, credit unions, thrifts, community development financial institutions and insurance companies). While we have not experienced an overall increase in advances to date, we anticipate that this broad-based member advance usage is likely to continue and have taken the requisite steps to ensure we will have the ability to fund all of these requests.

• Is the deadline for the BBC's going to be extended with some financial institutions being half staffed?

  The Bank will work with members who need additional time to post collateral reports (Borrowing Base Certificate (BBCs) and Listing files) in eAdvantage. Additional information can be found here.

• Where is the language for the electronic/facsimile signature clause located?

  The language is located here.

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1. COVID-19