FHLBank Gets OK for ADC Collateral

The Federal Home Loan Bank of Des Moines has received regulatory approval to accept one- to four-family construction loans as collateral for advances at a time when many members have stepped up their borrowings from the bank.For many community banks, "construction loans are an important part of their lending portfolio," said Richard Swanson, president and chief executive of the Iowa-based FHLBank. Expanding the list of eligible collateral will help to "maximize their borrowing capabilities," he said. In August, members of the Des Moines bank borrowed $2 billion in advances. During the first six months of 2007, the Des Moines bank's advance business grew by only $700 million. Mr. Swanson noted that several other FHLBanks take construction loans as collateral, and his members expressed an interest. So an application was filed with the Federal Housing Finance Board six months ago. "We have determined that the proposed activity has sufficient controls that minimize the risk to the Bank," the approval letter says.