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FHLB Bulletins

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 time; or,
  • 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 this policy.

For additional information or to discuss the Bank's anti-predatory lending collateral policy, please contact the Member Sales Group at 800.442.9841.


Terry Smith



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