Bulletin No.: 2006-22
December 6, 2006
SUBJECT: Anti-Predatory Lending Policy
The Federal Home Loan Bank of Dallas (Bank) has modified the Anti-Predatory
Lending Collateral Policy contained in the Bank's Member Products and Credit
Policy. As previously announced in Bulletin 2006-01 (dated January 4, 2006),
the Bank requires that residential mortgage collateral comply with applicable
federal, state and local anti-predatory lending laws, as well as predatory
lending laws, regulations and other similarly binding documents issued or
enforced by the member's primary regulator.
Any residential mortgage loan collateral that does not meet these
requirements will be ineligible as collateral to support advances or other
credit activity with the Bank. In addition, under the Bank's modified policy,
single family mortgage loans with any of the following characteristics will not
be eligible to secure advances or other obligations from the Bank:
- Loans that have, at the time of origination, annual percentage rates or
points and fees exceeding the annual percentage rate or points and fees
thresholds of the Home Ownership and Equity Protection Act of 1994 and its
implementing regulations (Federal Reserve Board Regulation Z), as such annual
percentage rates or points and fees thresholds may be adjusted from time to
- Loans that require prepayment penalties for early payoff beyond the first
five years of the loan; or,
- Loans that require the borrower to obtain prepaid, single-premium credit
life or similar insurance; or,
- Loans that contain mandatory arbitration clauses with respect to dispute
resolution, to the extent that such requirements are prohibited by applicable
state and federal Anti-Predatory Lending Laws.
The Bank will monitor members' compliance with applicable anti-predatory
lending laws in part by reviewing members' examination reports and regulatory
enforcement actions. The Bank will monitor compliance with the elements of the
policy that address specific loan characteristics by reviewing relevant loan
documents for certain loans pledged to the Bank.
For members borrowing under the blanket lien, beginning in 2007 the Bank
will monitor compliance with this policy as part of all on-site collateral
verifications conducted in accordance with the Bank's collateral verification
policy described in the Collateral Verification section of the Member Products
and Credit Policy.
For members delivering residential mortgage loans to the Bank, the Bank will
verify compliance of single family loans in custody as of December 1, 2006 by
reviewing loan documents for a single representative sample of loans from the
aggregate portfolio of all single-family mortgage loans in the Bank's custody.
Members pledging loans selected as part of this sample will be required to
provide the Bank the documents necessary for testing.
Beginning in 2007, samples of loans for each member with residential
mortgage loans held in custody by the Bank will be tested annually for
compliance with this policy. To facilitate that testing, beginning January 1,
2007, documentation necessary for the Bank to test compliance with this APL
Policy will be required for all single-family mortgages delivered into the
Bank's custody. A list of the specific documents required for loans that are
delivered into custody can be found in the Bank's Loan Pledging Instructions
that can be found on the Bank's web site (www.fhlb.com).
In cases where an affiliate of a member has pledged single family
residential mortgage loans as collateral to secure the member's advances and
other extensions of credit, the affiliate pledgor will be required to execute
and deliver to the Bank a certification as to the pledgor's compliance with
For additional information or to discuss the Bank's anti-predatory lending
collateral policy, please contact the Member Sales Group at 800.442.9841.