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Funding-Strategy – Details


15-Year Fixed Rate Mortgages at 3.50%

March 30, 2012

The national average for a fixed rate 15-year mortgage has been ranging between 3.00 and 4.00 percent. Members posting aggressive mortgage rates may attract a larger market share and still make a profitable spread by relying on long-term advances as the funding source for originations. Retaining mortgage originations in the portfolio provides an annuity stream of interest income and adds organic growth to the balance sheet, rather than the one-time fee income generated by selling the mortgages into the secondary market.

If rates rise, it is likely the prepayments would slow, thereby extending the average life of the mortgage. If rates fall, prepayments would likely accelerate, leaving excess funding to be reinvested at prevailing market rates. These strategies assume the rate changes ramp up evenly over the first 24 months, and then remain at that level for the remaining term.

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