Adjusted Eligibility Guidelines for Pledged Collateral
last updated on Monday, May 18, 2020 in General
As a part of our overall response to COVID-19, we've temporarily adjusted our eligibility guidelines on pledged collateral to align with our member financial institutions who are implementing loan forbearance or loan modification agreements for their borrowers.
January 2021 update:
Given the significant impact of other natural disasters in 2020, the Bank will now extend these accommodations to any loan adversely affected by a major disaster occurring in 2020. Refer to the Frequently Asked Question link below for additional details and clarifications.
Loan forbearance or loan modification
- Forbearance Agreement
A Forbearance Agreement is a suspension or reduction in principal and/or interest payments for a period of time, which result in no changes to the original wet-inked promissory note. If no changes to the original wet-inked promissory note take place, no signature is required to witness acknowledgment and consent to the forbearance.
- Modification Agreement
A Modification Agreement is a suspension or reduction in principal and/or interest payments for which repayment changes the original terms and conditions of the original wet-inked promissory note. If changes to the original wet-inked promissory note take place, signatures from all borrowers are required; please see FHLB Des Moines Covid-19 modification.
Loan forbearance or loan modification agreements executed with electronic signatures (see below for requirements) will be accepted as long as an original wet ink signed promissory note from origination is still in full force, in effect, and in possession of the member.
Most importantly, loan forbearance or loan modification agreements must be evidenced by a written agreement (Agreement) with the borrower with evidence of the borrower’s acceptance and reference to the related note. These Agreements should be available if/when the loan is selected for FHLB Des Moines regular Member Collateral Verification (MCV) process. Members need to include the UPB for pledged loans in forbearance in their pledging and reporting.
Necessity of Electronic Signatures
Additionally, we understand some members are using electronic signatures to safely process loan forbearance and loan modification agreements. Assuming loans meet all other eligibility guidelines we will temporarily allow electronic signatures in order to:
- maintain the eligibility of the existing pledged loan
- allow the eligibility of new loan originations until a wet-inked signed copy can be obtained
Additional requirements for loan modification agreements depend, in part, on how the member’s borrower provides its signature:
- 1. If the member requires the borrower to provide an ink-signed signature on an original Agreement:
No additional steps need to be taken.
- 2. If the member allows the borrower to return a copy of the Agreement, rather than the original:
As an example, if the member sends the Agreement to the borrower, and the borrower is allowed to sign and return a scanned copy rather than the original document, the Agreement must include the following or similar electronic/facsimile signature language:
The parties hereto agree that delivery of a signature page to, or an executed counterpart of, this document by facsimile, email transmission of a scanned image or other electronic means, shall be effective as delivery of an originally executed counterpart, and shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based record keeping system, as the case may be, to the extent and as provided for in any applicable law.
- 3. If the member allows the borrower to provide an electronic signature:
As an example, if the member sends the Agreement to the borrower, and the borrower is allowed to use an electronic signature software service to provide a digital signature, the Agreement must include the electronic/facsimile signature clause noted above.
- 4. If the member emails the Agreement to the borrower and the borrower is unable to e-sign or to print/scan the Agreement to provide a signature:
The borrower may acknowledge their acceptance via email (without any signature) if the following steps are taken:
- A member includes the text of the entire Agreement into an email message to the borrower (i.e., the Agreement cannot be in an attachment to the email);
- The email message must include the FHLB Des Moines electronic/facsimile signature clause noted above, and
- The email message must conclude by asking the borrower to:
Please acknowledge and agree to the terms and conditions set forth in this email by replying to this message: “I agree to the terms and conditions set forth in the email below.” Each borrower must then type his or her name below such statement.
Frequently Asked Questions
Additional information regarding this guidance can be found on this resource:
Frequently Asked Questions
If your institution needs to utilize these available adjustments to your eligible loan collateral, please contact our Collateral team: email@example.com or 800.544.3452, ext. 2500. We look forward to the day when business can resume as normal for our members.
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