Effective July 1, 2007
The Federal Home Loan Bank of San Francisco (“Bank”) supports the expansion of fair and equitable home ownership opportunities. To discourage predatory lending practices, which are inconsistent with such opportunities, and to protect the Bank from potential liabilities, the Bank has established the following anti-predatory lending policy (“APL Policy”) with respect to residential mortgage loans (one-to-four units) and securities backed by residential mortgage loans (one-to-four units) pledged to it as collateral (“Residential Mortgage Collateral”).
The Bank requires that Residential Mortgage Collateral comply with applicable federal, state and local anti-predatory lending laws and other similar credit-related consumer protection laws, regulations and orders designed to prevent or regulate abusive and deceptive lending practices and loan terms (collectively, “Anti-Predatory Lending Laws”). Any Residential Mortgage Collateral that does not comply with all applicable Anti-Predatory Lending Laws will be ineligible as collateral to support advances or other activity with the Bank. Additionally, the Bank will not give collateral value for any Residential Mortgage Collateral that has any of the following:
- An annual percentage rate, or points and fees, that exceed the thresholds of the Home Ownership and Equity Protection Act of 1994 and its implementing regulations (Federal Reserve Board Regulation Z); or
- A requirement that the borrower obtain prepaid, single-premium credit life, credit disability, credit unemployment, or other similar credit insurance (applies to originations after July 1, 2007); or
- Loan documents that contain mandatory arbitration provisions with respect to dispute resolution (applies to originations after July 1, 2007); or
- A prepayment penalty beyond the early years (five years) of the loans unless the member can show that all of the following criteria are met (applies to originations after July 1, 2007):
- The mortgage provides a benefit to the borrower such as a rate or fee reduction for accepting the prepayment penalty provision; and
- The borrower was offered a choice of another mortgage product that did not require a prepayment penalty; and
- The terms of the prepayment provision were disclosed to and acknowledged by the borrower in writing; and
- The prepayment penalty may not be charged when the mortgage debt is accelerated as the result of the borrower’s default; and
- The prepayment provisions comply with all applicable Anti-Predatory Lending Laws.
Pledgors are responsible for avoiding all unlawful practices and terms prohibited by applicable Anti-Predatory Lending Laws, regardless of whether they originate or purchase the Residential Mortgage Collateral being pledged to the Bank. The Bank will take those steps it deems reasonably necessary in order to confirm or monitor pledgors’ compliance with this policy. In addition, the Bank reserves the right to require evidence reasonably satisfactory to the Bank that Residential Mortgage Collateral does not violate applicable Anti-Predatory Lending Laws. With respect to Residential Mortgage Collateral purchased by the pledgor, the pledgor is responsible for conducting due diligence that it deems sufficient to support its certification and indemnification agreements with the Bank.
Per the terms and conditions of the Bank’s Advances and Security Agreement (as amended, modified or supplemented from time to time, “Advances Agreement”), each pledgor has represented and warranted to the Bank that it: (1) will comply at all times with the Bank’s Credit and Collateral policies, which include this APL Policy; (2) will comply at all times with the requirements of all applicable laws, rules, regulations and orders, which include all applicable Anti-Predatory Lending Laws; and (3) will maintain eligible collateral and (a) will substitute eligible collateral for any Residential Mortgage Collateral that does not comply in all material respects with applicable laws, rules, regulations and orders, which include applicable Anti-Predatory Lending Laws, or this APL Policy; and (b) will indemnify, defend and hold the Bank harmless from and against all damages, liabilities, losses, claims, causes of action, and expenses (including attorneys’ fees and expenses of the Bank’s counsel), that result from the pledge of any Residential Mortgage Collateral that does not comply in all material respects with applicable laws, rules, regulations and orders, which include applicable Anti-Predatory Lending Laws, or this APL Policy. In addition, each member must periodically certify to the Bank that it understands and complies with this APL Policy and all applicable Anti-Predatory Lending Laws.
The Bank will not knowingly accept as eligible collateral Residential Mortgage Collateral that violates applicable Anti-Predatory Lending Laws or this APL Policy. If the Bank knows or discovers that such Residential Mortgage Collateral violates applicable Anti-Predatory Lending Laws or this APL Policy, the Bank may, in addition to all available rights and remedies at law or in equity (1) require the pledgor to substitute eligible collateral, (2) value such Residential Mortgage Collateral at zero for collateral purposes, and/or (3) require the pledgor to undertake a review of its policies, practices, and procedures for complying with the Bank collateral policies.
For residential mortgage loans (one-to-four units) sold to the Bank by members participating in the Mortgage Partnership Finance (MPF) Program, eligibility criteria are set forth in the MPF Program Origination Guide (OG) and applicable MPF Program agreements and documents, as amended from time to time. Chapter 2 of the OG specifies prohibited predatory practices. The Bank will consider all available rights and remedies, including repurchase, with respect to mortgage loans that do not meet MPF Program eligibility criteria.
Adopted January 26, 2007
Mortgage Partnership Finance” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.