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Paul Cappello is senior
vice president/lending at the Pawtucket Credit Union in Pawtucket,
Rhode Island. Since becoming a participating financial institution
in the Mortgage Partnership Finance ® (MPF ®) program
in 2005, the Pawtucket Credit Union has sold more than $16 million
in mortgages to the program.
Pawtucket Credit Union was looking for secondary market outlets
in addition to typical outlets such as Fannie Mae and Freddie Mac.
We decided to take a closer look at the Federal Home Loan Bank of
Boston’s (the Bank) MPF program to give us the option to compare
prices and have a choice.
We also spoke with another member that had been approved for the
MPF program and was very happy with the result. Their success made
us more interested in using the program.
We started using MPF a little over a year ago. Once we made the
commitment, the process went quickly. The servicing of the loans
is basically the same as that of other outlets. The most attractive
feature of the program has been the pricing, which is generally better
than Freddie and Fannie’s. A few additional basis points here
and there really make a difference. That difference can be significant — at
times as much as 10 to 12 basis points better than the competition.
I wouldn’t want the Bank to change
how it’s pricing MPF because it has been working well for us.
Also attractive is the extra 10 basis points earned through the
credit enhancement fee, which is always in the back of our mind.
Rather than getting 25 basis points for servicing the loan, we think
of ourselves as getting 35 basis points. I think the credit enhancement
fee is an attractive feature given the contingent liability component
of the program.
Although the risk is layered down, we are responsible in part if
the loan goes into default. Every loan is put through a risk profile
to determine our contingent liability. The way the deal is structured
determines the amount — if any — of the contingent liability.
I don’t have a real problem with that because we haven’t
had any delinquencies on the mortgage side. I would rather have the
current pricing along with the contingent liability than a less favorable
pricing and no contingent liability.
Part of the attraction of the MPF program was the relationship we
already had with the Bank. I believe
we were the first credit union in Rhode Island to become a member
of the Bank. We also received an Affordable Housing Program award
from the Bank in the late 1990s. Based upon the relationship we already
had with the Bank, it made sense to take the next step and become
a partner in the MPF program.
When and how we use MPF depends on a number of factors, including
our ALM policy and our liquidity. I anticipate using the program
more in the future. It’s a great program and we like using
it. When the need to sell a mortgage arises, we’ll certainly
look at the MPF program to see if it’s the right fit for us
at the time. In fact, we made our most recent commitment yesterday
(July 17).
The Pawtucket Credit Union was established in 1928. We’re
a community credit union, so we’re basically open to anyone
living in Rhode Island and southeastern Massachusetts. We have nine
branches (with two more set to open by yearend), 64,000 members,
and assets of more than $800 million. We’re
the second-largest credit union, asset-wise, in Rhode Island.
For more information about the Bank's MPF program, please call 888-675-0556,
Mark Sullivan at 617-292-9672, William Dolan at 617-292-9691,
or Paul Pouliot at 617-292-9641.
"Mortgage Partnership Finance" and "MPF"
are registered trademarks of the Federal Home Loan Bank of Chicago.
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