|
MPP Overview
The FHLBanks have provided reliable and attractively priced credit to insured depositories since 1932. Now, the
FHLBI offers another major funding tool by purchasing qualified 15, 20, or 30 year conforming, fixed-rate mortgages
with LTVs up to 95%. Established in 2001, Mortgage Purchase Program (MPP) is offered by three FHLBanks.
MPP is similar to other secondary purchase programs in operation. The member executes a master commitment contract
(MCC) to sell mortgages to the FHLBI on a best efforts basis. Then, the member originates home mortgages meeting
industry standards using automated underwriting, or delegated underwriting. 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.
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. Under the FHLBI's capital plan, members may need to buy stock for the
mortgages sold.
Historically, when an insured depository sold mortgages in the secondary
market it faced
A limited pool of buyers
Little price competition
MPP is changing that. The funding power of the FHLBanks can improve your long-term price and execution. Smaller
institutions are no longer shut out of the market. All FHLBI member banks, thrifts, and credit unions in Indiana and
Michigan are eligible to apply to participate in MPP.
What do FHLBI members do best?
They make high credit quality loans based on their knowledge of local people and local conditions.
What does the FHLBI do best?
It raises money at low cost and hedges its market risk.
MPP lets members benefit from their credit expertise while using the funding and hedging ability of the FHLBI.
Updated: May 23, 2008
|
