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Pledging Loans to Support Longer-Term Needs [Scenario]

Challenge

A FHLB of Des Moines member was approached about making a commercial real estate loan to construct a new convenience store. The owners of the convenience store wanted a longer-term fixed rate loan to finance the construction of this convenience store that would be located on a busy exit off of a major interstate.

Pledging Commercial Real Estate loans are a way for you to increase borrowing capacity to support local businesses or any other longer-term funding needs. You can turn illiquid loan assets into liquidity through a broad menu of collateral options that includes over 50 eligible loan and securities types.

Solution

10-year fixed rate loan on a 25-year amortization schedule.

The member was initially reluctant to offer a longer term fixed rate loan due to the inherent interest rate risk, but after reviewing several blended funding scenarios with their VP/Relationship Manager, the member decided on an advance product that worked for them.

Results

Member

  • Mitigated interest risk while locking in a good spread.
  • Expand collateral capacity and increase liquidity availability

Borrower

  • Received a lower-cost loan and built the convenience store

Community

  • Several permanent jobs were created