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Funding-Strategy – Details

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15-Year Fixed-Rate Mortgages at 3.50%

September 24, 2013

We have spoken with several members recently who are facing a challenge they haven't encountered over the last few years. Due to increased lending opportunities along with some deposit outflow, on-balance-sheet liquidity has evaporated and they will be looking to the Federal Home Loan Bank of Boston to fund future loan originations. We recently presented several strategies for holding 15-year fixed-rate mortgages to a member interested in funding the current month's originations while protecting against rising interes rates. Members currently have an opportunity to generate attractive spreads and minimize the volatility of net interest income.

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 18 months, then remain at that level for the remaining term.

Below are three examples of common funding scenarios for fixed-rate mortgages. One of them might be right for you.

View the funding strategies Adobe PDF icon

 

 

 
 
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