One of the benefits that FHLBI's MPP participants value most is the consistency of FHLBI’s underwriting standards. As proof of that consistency, the bank issued an revised MPP Guide in April, the first update since 2010. While our underwriting starts with an automated underwriting system (AUS) approval, our focus is on providing a consistent outlet for loan sales with the least amount of disruption to your current work flow. The update is intended to give you as much guidance as needed while keeping it simple and easy to understand. Your feedback is always welcome to help us improve this important tool.
Appraisals & Comps
The appraisal review continues to be the greatest challenge for our sellers, and we rely on our community financial institutions that know their local markets to determine whether they have a property value that reflects market conditions. It is important that you review the comps to be sure they are similar to the subject, and that the adjustments are appropriate for each one. While it is difficult in today’s sluggish purchase market to find comps, it is even more important that the appraiser explain major differences and large adjustments and not simply include the “boiler plate” language of the past. The challenge for FHLBI is to be able to purchase as many of your originations as possible while ensuring we are buying investment-quality loans to protect your dividend.
Following the new QM Rules
Qualified mortgage (QM) guidelines were published in January 2013 go into effect January 10, 2014. We continue to get clarification notices on this comprehensive legislation. As preparations begin for the changes, FHLBI has already implemented the 43% debt-to-income limitation as outlined in the new rule. The bank will continue to make the changes necessary to comply with both Dodd-Frank and QM rules. There has been much concern over the lengthy rule and the impact it will have on the industry’s willingness to make loans that do not clearly meet every aspect of the QM designation. Some within the industry fear that it will reduce access to credit that qualified borrowers need to buy homes, potentially constraining the housing market recovery. The underlying premise of a key component of the rule, the “ability to repay,” can be supported and is one that we feel our community lenders have embraced and adhered to all along.
While the third round of quantitative easing continues, FHLBI's MPP pricing has remained competitive in most cases. We are committed to providing a competitive alternative for secondary market loan sales with a simple pricing structure, excellent customer service and a potential reward for making good quality loans via the Lender Risk Account.
As Congress and FHLBI's regulatory agency - the Federal Housing Finance Agency - work on future plans for the role of government sponsored enterprises and the secondary market, our bank is positioned to continue providing a stable resource for mortgage loan sales. We welcome your thoughts and ideas on how we can improve and expand our MPP to fit your needs not only today but, into the future.
MPP staff currently supports a portfolio balance of $6 billion and over 100 active sellers. We pride ourselves on our excellent customer service. We encourage you to contact us and put us to the test.