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| Membership Requirements |
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To become a member of the Chicago Federal Home Loan Bank, the financial institution must meet a
number of requirements, including:
As your institution begins the process of completing the membership application,
please review the various requirements described in this section to determine
whether your institution meets each one. Please contact the New Member
Coordinator at (312) 565-5375 with questions about any of the requirements or if
you need clarification on any related issues.
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| Statutory Eligibility Requirements |
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The statutory eligibility requirements for membership in the Federal Home Loan
Bank System are:
- Duly Organized: The institution is duly organized under federal or state laws.
- Subject to Inspection and Regulation: The institution is subject to
inspection and regulation under banking or similar laws of a state or federal
regulatory agency.
- Makes Long-Term Home Mortgage Loans: The institution either purchases or
originates long-term home mortgage loans. Long-term home mortgage loans are
defined as home mortgage loans with a maturity of five years or more. (An
institution may also qualify by purchasing and holding mortgage-backed
securities or through a mortgage banking operation.)
- 10% Requirement: The institution has at least 10% of its total assets in
residential mortgage loans. Residential mortgage loans may include: first-
and junior-lien home mortgage loans, multifamily mortgage loans, manufactured
housing loans, home equity loans, mortgage-backed securities, residential
construction loans, dormitory, retirement home, nursing home, and single-room
occupancy loans. Insurance companies and Community Financial Institutions
(CFIs), are exempt from this requirement. A CFI is defined as an institution
whose deposits are insured under the Federal Deposit Insurance Act (FDIA) and
has less than $587 million in average total assets over the three preceding
years.
- Financial Condition: The institution's financial condition is such that
advances may be safely made.
- Character of Management and Home Financing Policy: The character of the
institution's management and its home financing policy is consistent with
sound and economical home financing.
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| Underwriting Review Standards |
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The underwriting review standards that will be used to evaluate each
applicant are described below.
- Regulatory Examinations: The institution has a composite CAMELS rating of
1 or 2 within the last two years. (Institutions with a CAMELS 3 rating with
compensating factors are also likely candidates for membership.)
- Community Reinvestment Act Performance Evaluations: The institution has a
CRA rating of Outstanding or Satisfactory. Insurance companies and credit
unions do not receive CRA ratings and are therefore exempt from this standard.
- Capital: The institution meets or exceeds all current regulatory capital requirements.
- Earnings: The institution has been profitable in at least four of the last six quarters.
- Enforcement Actions: Neither the institution nor its management is subject to
any enforcement action. (If an enforcement action exists, the institution
should call the Chicago FHLB to discuss the status of the action and the
progress made to date in complying with the terms of the action. An
enforcement action may not prevent an institution from becoming a member if
proper documentation is available.)
- Audit Opinion: The institution has received an unqualified opinion, an
agreed upon procedures audit, a holding company audit, internal audit, or a
published financial statement relating to their most recent financial
statements.
- Performance Trends: The institution has not experienced significant
deterioration in its financial condition since its last regulatory examination.
- Character of Management: Neither the institution nor any of its
directors or senior officers have been the subject of any relevant criminal, civil,
or administrative proceedings reflecting on credit-worthiness, business judgment, or
moral turpitude since the last regulatory examination. In addition, there are no
known potential monetary liabilities, material pending lawsuits, or unsatisfied
judgments against the institution.
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Please note that de novos and institutions that recently merged or are about to merge
are subject to special review criteria. Call the New Member Coordinator at
(312) 565-5375 for further information.
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| Stock Purchase Requirements |
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| Initial Stock Purchase |
Once an institution has been approved for membership, it must, within 60
calendar days, purchase capital stock in the Chicago FHLB equal to the greater of:
- 1% of its residential mortgage loans, or
- $500.
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| The Bank has registered its capital stock with the Securities and Exchange Commission, but the capital stock is not publicly traded. |
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| Stock Purchase to Support Borrowing from the Chicago FHLB |
The amount an institution may borrow depends on that institution's financial
condition and on the amount and type of collateral pledged. In addition, by
statute, all borrowings from the Chicago FHLB must be supported by capital stock
holdings not less than 5% of borrowings.
Members may request redemption of capital stock in excess of their required amount only during redemption windows announced by the Bank for specified amounts of capital stock from time to time. All capital stock redemptions are subject to the Bank maintaining its minimum regulatory capital and leverage requirements and applicable regulatory approvals.
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| Annual Review |
| In the first quarter of each year, the Chicago FHLB is required by statute to
recalculate the members' stock requirement based on each member's December 31
data. Members are notified of the new minimum stock requirement. |
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| Ongoing Membership and Borrowing Requirements |
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In addition to capital stock requirements, two other factors determine how much a
member can borrow from the Chicago FHLB: the member's financial condition and the
amount of collateral pledged. To maintain access to the Chicago FHLB's long-term
funds (defined for this purpose as greater than one year), the member must also
submit a Community Support Statement.
The extension of all member credit is made on the security of collateral. Upon
receiving the application for membership and other financial information,
including the most recent regulatory examination report, the Chicago FHLB staff
performs a credit review and determines the potential new member's borrowing
capacity.
Borrower capacity is based upon a comprehensive review of all elements of a
member's financial performance including, capital adequacy, liquidity, trends in
operating ratios, future earnings prospects, interest rate risk, non-performing
assets, valuation reserves, asset composition, and management. Please call your
Relationship Manager for further information.
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Community Support Statements |
To further the FHLB System's mission of promoting affordable and accessible
housing finance, Chicago FHLB members are required to submit a "Community
Support Statement" once every two years. Institutions submit a form that
indicates their latest CRA performance evaluation and details information on
assistance to first time homebuyers.
The Chicago FHLB is eager to work in partnership with members to help fulfill
this statutory requirement. The Chicago FHLB's Community Investment Group
provides technical assistance to all interested members. In addition, the
Affordable Housing Program and Community Investment Program may be of interest to
members that want to expand their involvement in providing affordable home finance
and community development loans in the communities they serve.
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