By Terry Cox
The Federal Home Loan Bank’s Mortgage Partnership Finance (MPF) Program is proving quite attractive to credit union members across the country. As an example, of the 14 Federal Home Loan Bank of San Francisco members approved to participate in the MPF Program since the spring of 2014, 12 are credit unions, and 16 more credit unions have recently begun the application process.
The FHLBank San Francisco serves financial institutions headquartered in Arizona, California, and Nevada. In many parts of our district property values are quite high, so gaining access to a program that enables credit unions to sell mortgage loans with higher balances is a distinct advantage in helping them provide the kind of loan products their members need.
MPF Original, our most popular product, gives member credit unions the ability to sell high-balance conforming mortgages with balances up to $625,500 and delivers very competitive execution compared to Fannie Mae and Freddie Mac. And it’s easy to use, since members can process loans as they do for other secondary market investors and do not have to rework their underwriting process.
As the product name implies, MPF Original has been offered since the MPF Program was launched. But it remains timely, especially given the current industry trend to explore options for risk sharing in the secondary mortgage market process. Under MPF Original, the FHLBank manages the liquidity, interest rate, and prepayment risks of the loans and shares in the credit risk, which is managed by the member. Loans sold into MPF Original are credit enhanced by the member, with credit enhancement fees paid to the member. And unlike other secondary mortgage market programs, MPF Original does not charge guarantee fees or require loan level price adjustments.
Delivering Jumbos
TheFHLBank also offers the MPF Direct product, which enables members to deliver jumbo mortgage loans with balances up to $2.5 million for concurrent sale to Redwood Trust, Inc., a real estate investment trust. MPF Direct can benefit credit unions serving high cost areas by allowing them to offer jumbo residential mortgage loans to their members while transferring the interest rate risk, prepayment risk, and credit risk of the loans to an investor.
And MPF Direct allows credit unions to sell jumbo loans with loan-to-value ratios up to 90% without requiring mortgage insurance. The types of loans eligible have recently been expanded to include certain hybrid adjustable rate mortgages, in addition to fixed rate mortgages, and acceptable property types include 1- to 4-unit owner-occupied, investment properties and condominiums.
Access to the MPF Program through the FHLBanks is easy. We work with our members every step of the way to get them started, and we work with credit unions of all sizes, including those relatively new to selling their loans in the secondary market. And we don’t require a minimum commitment amount—a member can sell us one loan or 100 loans, because it’s not a volume game for us. Like our credit union members, we are a cooperative, and we are here to serve our members.
Terry Cox is Vice President, Mortgage Partnership Finance Sales, at the Federal Home Loan Bank of San Francisco. For info: www.fhlbmpf.com.