Products and Solutions Guide - Federal Home Loan Bank of Boston

Appendix A – Eligible Collateral and Collateral Valuation cont’d.Eligible Collateral and CollateralValuation• The Bank does not accept as collateral derivatives of eligible securities that contain excessive interest-rate and/or otherfinancial risk, including, but not limited to, interest-only or principal-only strips of securities, or residual or “Z” tranches ofcollateralized mortgage obligations.• The Bank does not accept as collateral securities that are backed by properties encumbered by private transfer fee covenants,and securities backed by the income stream from such covenants ― except for certain allowed transfer fee covenants.• The Market value for securities is determined on the basis of market bid-price quotations for the same or comparable securitiesas determined by, or in a manner satisfactory to, the Bank.Eligible Collateral Valuation CommentsU.S. Government and AgencySecurities, (excluding FNMA andFHLMC mortgage-backedsecurities (MBS)FNMA and FHLMC MBS, andAgency CMOs97 percent of market value (remainingterm to maturity three years or less);95 percent of market value (remainingterm to maturity greater than threeyears93 percent of market valueNon-Agency MBS 50 percent of market value Only depository institution members may pledge thiscollateral.Limited to AAA-rated securities backed by prime loancollateral as determined by the Bank.Borrowing capacity limited to the amount of the member’sGAAP capital.Must represent an unsubordinated interest in whole firstmortgageloans on improved residential property not morethan 90 days delinquent.All underlying mortgage loans must meet the other eligibilityrequirements for residential loans as outlined in this guide.Securities representing an equityinterest in collateral eligible foradvancesValuation is determined in accordancewith the valuation applicable to the underlyingassetsMust represent an undivided equity interest in underlyingassets of a security corporation subsidiary, all of whichqualify as eligible collateral under the guide.Note: Insurance company members and non-depository community development financial institutions that execute a specific lienagreement may only pledge as collateral (i) cash on deposit in a collateral account at the Bank, (ii) securities issued or guaranteed by theU.S. government or an agency thereof, including MBS issued or guaranteed by FNMA or the FHLMC, and (iii) private-label commercialmortgage-backed securities. In each case, such securities must be delivered to the Bank or a third-party custodian. The eligibility criteriafor pledging private-label commercial mortgage-backed securities are as set forth in this guide. Discounts applied to securities collateralare increased by 20 percent. For example, a discount of 10 percent increases to 12 percent.Appendix AMain Telephone: 617-292-9600 • Customer Service: 1-800-358-9709 • Money Desk: 1-800-357-3452 • Relationship Managers, MPF, and Housing & Community Investment: 1-888-424-3863 46