The Federal Home Loan Bank of Chicago ("Bank") supports the expansion of fair and equitable home ownership opportunities. To discourage practices which are inconsistent with such opportunities and to support the Bank's accomplishment of its housing finance mission in a safe and sound manner, the Bank has adopted this Anti-Predatory Lending Policy. Guidelines concerning the Bank's acquisition from members of residential mortgage loans are addressed in Part I below, and Part II addresses residential mortgage loans pledged by members as collateral to the Bank (“Residential Mortgage Collateral”).

Part I: Acquisition of Mortgage Loans
The Bank has acquired residential mortgage loans from members through the Mortgage Partnership Finance^® (MPF^®) Program since 1997. In 2000, the Bank and other Federal Home Loan Banks participating in the MPF Program adopted MPF Predatory Lending Guidelines which identify practices and product features which cause loans to be ineligible for the Program. As MPF Provider, the Bank has included in the MPF Program Origination and Servicing Guides provisions to assure compliance with all applicable federal, state and local anti-predatory lending laws and other similar laws, regulations and orders designed to prevent or regulate abusive and deceptive lending practices and loan terms (collectively,"Anti-Predatory Lending Laws").

The anti-predatory lending provisions in the MPF Origination Guide, among other things: (i) provide an overview of the MPF Program predatory lending policy, (ii) require compliance with applicable Anti-Predatory Lending Laws and MPF Program requirements, (iii) prohibit the delivery of loans which violate such laws or requirements, and (iv) outline repurchase and indemnification obligations of participating members. Procedures for ensuring compliance with these requirements are incorporated into the application process for participating members, annual certifications and ongoing quality control review processes.

Part II: Residential Mortgage Loans as Collateral
In connection with acceptance of Residential Mortgage Collateral in its advances or other credit programs, the Bank requires that members comply with applicable Anti-Predatory Lending Laws. Such laws may prohibit or limit practices and characteristics such as the following:

• Requiring the borrower to obtain prepaid, single-premium credit life or other similar credit insurance;
• Including mandatory arbitration provisions in loan documents; or
• Charging prepayment penalties for pay off beyond the early years of a loan.

Any Residential Mortgage Collateral that does not comply with all applicable Anti-Predatory Lending Laws is ineligible as collateral to support advances or other credit extensions by the Bank. Additionally, the Bank will not give collateral value for any Residential Mortgage Collateral that exceeds 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).

Bank members 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 may require members to provide evidence reasonably satisfactory to the Bank that Residential Mortgage Collateral does not violate applicable Anti-Predatory Lending Laws or this Policy. With respect to Residential Mortgage Collateral purchased by a member, the member is responsible for conducting adequate due diligence to support its certification to and agreements with the Bank. The Bank will adopt appropriate procedures to monitor and confirm members' compliance with applicable Anti-Predatory Lending Laws and this Policy.

In addition to the terms and conditions of the Bank's Advances, Collateral Pledge, and Security Agreement ("Advances Agreement"), each member will certify quarterly to the Bank that the member: (1) understands and is in compliance with this Policy and with all applicable Anti-Predatory Lending Laws; (2) will maintain required levels of qualifying collateral and will either: (a) substitute eligible collateral for any Residential Mortgage Collateral that does not comply in all material respects with this Policy, or (b) indemnify, defend and hold the Bank harmless from all losses, liability, costs and expenses including legal fees and expenses that result from the pledge to the Bank of Residential Mortgage Collateral that does not comply with this Policy.

The Bank will not knowingly accept Residential Mortgage Collateral that violates applicable Anti-Predatory Lending Laws or this Policy. If the Bank knows or discovers that any Residential Mortgage Collateral violates applicable Anti-Predatory Lending Laws or this Policy, the Bank may in addition to all available rights and remedies at law or in equity (1) require the pledging member to substitute eligible collateral, (2) value such Residential Mortgage Collateral at zero for collateral purposes, and (3) require the member to undertake a review of its policies, practices, and procedures to ensure its compliance with the Bank's collateral policies.