Introducing the Principal-Deferred Advance ("PDA")
A New Hybrid Advance Product:
The HLB has created the perfect blend – the Principal-Deferred Advance (”PDA”) – a hybrid advance combining the Fixed-Rate Advance and the Amortizing Advance. With the PDA, principal payments are deferred for a predetermined period, while the interest rate is locked in for the life of the advance. It begins as a Fixed-Rate Advance, allowing members to choose a specific amount of time they would like to defer the principal payment of the advance, up to 5 years. When the lockout, or principal-deferred period ends, the advance becomes an Amortizing Advance, where the member makes principal and interest payments on the loan up to another 30 years. This structure can be used to match or pool fund a variety of loan programs, including interest-only-to-amortizing residential loans and construction-to-permanent loans.
PDA Structure:
With this new blend, members can enjoy the benefits of both advances. The PDA was designed to help members manage through an uncertain interest-rate environment with the added smoothness of an integrated advance that combines an interest-only structure for the beginning of the loan and a customizable amortizing backend, all at a rate that remains unchanged for the life of the advance.
PDA Features:
- Rate: fixed over the life of the advance
- Day Count Basis: 30/360
- Initial Payment Frequency: first business day of each month
- Term: 1-30 years after principal-deferred period
- Maximum Principal-Deferred Period: 5 years
- Maximum Settlement: 12 months out
- Prepayable: yes
PDA Benefits:
- Valuable asset/liability management tool
- Fully amortizing backend with a choice of varying balloon terms
- Mirrors characteristics of a typical construction deal with a permanent take-out
- No embedded options in the advance
Brewed Especially For:
- Members who match fund construction-to-permanent loans
- Members who want to pre-fund a branch
For more information on how our new Principal-Deferred Advance can help meet your institution's funding needs, contact a Calling Officer at (212) 441-6700.
View related link:
HLB Advantage Newsletter 09/2007
*Note: Advances may be collateralized with eligible mortgages or securities identified in the Member Products Guide.
The information provided by the Federal Home Loan Bank of New York ("FHLBNY") in this communication is set forth for informational purposes only. The information should not be construed as an opinion, recommendation or solicitation regarding the use of any financial strategy and/or the purchase or sale of any financial instrument. All customers are advised to conduct their own independent due diligence before making any financial decisions. Please note that the past performance of any FHLBNY service or product should not be viewed as a guarantee of future results. Also, the information presented here and/or the services or products provided by the FHLBNY may change at any time without notice.