MPP Overview

The FHLBanks have provided reliable and attractively priced credit to its members since 1932. The FHLBI offers another funding tool, the Mortgage Purchase Program (MPP). MPP provides members the ability to sell qualified 5 to 30 year conforming, fixed-rate mortgages with LTVs up to 95% at a competitive rate with potential to recognize additional revenue if the loans perform well.

MPP is unique in that it provides increased revenue potential. Instead of charging guarantee fees, the FHLBI protects itself against credit loss through a feature called the lender risk account (LRA). Under the LRA, funds are set aside to cover potential loan losses. If the funds are not needed, they are returned to the seller over time. The seller has the potential of a higher all-in return if it originates and sells mortgages of high credit quality. With the MPP Advantage structure, a greater LRA is established for potential return to the seller, which provides a higher value. To learn more about the expected cash flow and value of the LRA, click here to access the MPP Advantage LRA Model.

MPP is similar to other secondary market mortgage purchase programs in its operation. The member executes a best efforts master commitment contract (MCC) to sell mortgages to the FHLBI. Then, the member originates home mortgages meeting secondary market standards using delegated underwriting authority. Qualifying mortgages are easily delivered via the Internet under a mandatory delivery contract (MDC). Sellers with established secondary sales operations will typically need only minimal technical changes to deliver to MPP. Sellers may choose between retaining or selling servicing to an approved servicer.

With the MPP, all FHLBI member banks, thrifts, and credit unions both big and small can benefit from FHLBI’s purchasing power and individualized member support. To learn more, contact an MPP representative at 1-800-274-4636 or your designated FHLBI account manager at 1-800-442-2568.

Updated: December 15, 2010