Eligible Collateral

Each member is required to pledge sufficient eligible collateral to secure advances (both new and outstanding), lines of credit, letters of credit, and other amounts payable to FHLBank Boston, as well as to participate in the asset purchase program, and to enter into derivative transactions.

Collateral Types and Guidelines

Below is an overview of the types of collateral accepted.

Please note that the collateral valuation will vary depending on your institution type. Full details can be found in the Products + Solutions Guide. You may also contact our Collateral team.

Cash:

  • For members that sign the Specific Lien Advances Agreement and choose to pledge only cash, a 2% collateral maintenance level is required.

Securities:

  • U.S. Government-Backed Securities
    • Interest-only or principal-only strips of securities, residuals and Z tranches are not considered eligible.
  • Fannie Mae/Freddie Mac Mortgage-Backed Securities & Agency Collateralized Mortgage Obligations (CMOs)
    • Interest-only or principal-only strips of securities, residuals and Z tranches are not considered eligible.
  • Commercial Mortgage-Backed Securities (CMBS)
    • The total discounted value of this collateral cannot exceed 2 times the member’s GAAP capital.*
    • The lowest rating by Moody’s, S&P, or Fitch will be used.
    • A rated CMBS will be limited to a discounted amount of 20% of total CMBS pledged. Domestic CMBS deals only.
    • The maximum threshold is 25% for any single loan or borrower.
    • This collateral must be publicly traded, and a daily market price must be available.
    • Minimum of 50 loans in the issue.
    • Only senior tranches are eligible.
    • All loans must be secured by a first mortgage.
    • The maximum weighted average loan-to-value is 80%. Minimum weighted average Debt Service Coverage Ratio is 1.2 times.
  • Municipal Securities
    • The total discounted value of this collateral cannot exceed 2 times the member’s GAAP capital.*
    • Proceeds of the security have been or will be used to finance the acquisition, development or improvement of real estate;
    • Documentation substantiating the proportion of bond proceeds used to finance the acquisition, development or improvement of real estate (the “real estate nexus”) must be provided by the member;
    • Bonds with issuance sizes greater than or equal to $25 million:
      • Must have a rating from at least two of the following NRSROs: Moody’s, S&P, Fitch or Kroll;
      • Long-term rating of A3/A- or better and equivalent Securities Valuation Office rating (for insurance company member assets); and
      • Bonds rated A3/A- cannot be on negative watch by an NRSRO.
    • Bonds with issuance sizes greater than or equal to $5 million and less than $25 million:
      • Must have at least one rating from the following NRSROs:  Moody’s, S&P, Fitch or Kroll; and
      • Long-term rating of Aa2/AA or better.
    • If split rating, the lowest rating is used
    • Must be publicly registered and traded and a daily market price must be available 
    • Not Eligible:
      • IO, PO (zero coupon), leased backed, tender option bond, variable rate demand note 
      • Private placement securities 
      • Certificate of participation, variable rate product or short-term product that involves auction rate
      • Third-party support/enhancement other than U.S. government/ agency collateralized 
      • The following type of revenue bonds: pension obligation, tobacco settlement, special revenue/assessment, tax increment/ allocation, and industrial development

Loans:

  • ​Fully Disbursed Whole First Mortgages Secured by Residential properties
  • Fully Disbursed Whole First Mortgages Secured by Commercial Real Estate
    • The total discounted value of this collateral cannot exceed 2 times the member’s GAAP capital. (Use statutory capital if you do not file GAAP.)
    • Certain participation loans are considered eligible.

Please see Products + Solutions Guide for the specific criteria that applies to residential properties.

Ineligible Collateral

FHLBank Boston does not accept as collateral derivatives of eligible securities that contain excessive interest-rate and/or other financial risk, including, but not limited to:

  • interest-only or principal-only strips of securities,
  • residual or “Z” tranches of collateralized mortgage obligations,
  • securities backed by reverse mortgage loans (HECMs),
  • private placement securities,
  • certificates of participation,
  • variable rate products or short-term products that involve auction rates, and
  • third-party support/enhancements other than those collateralized by the U.S. government/agent and the following types of revenue bonds: pension obligation, tobacco settlement, special revenue/assessment, tax increment/allocation, and industrial development bonds.

Collateral Frequently Asked Questions

We often receive questions from members about collateral and collateral management. Here are some of our more Frequently Asked Questions.

* Use statutory capital if you do not file GAAP.

eNotes Coming Soon!

In the coming year, eNotes will be eligible as collateral for residential mortgage loans. Contact your relationship manager for future interest or review the preliminary guidelines and requirements.