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The MPF® Program provides an alternative to holding
fixed-rate loans in portfolio or selling them to the
secondary market.
Summary of Benefits
- Competitive Execution
- Credit enhancement fee income paid monthly
- Economic value for quality loans
- Same day funding
- Closed loan delivery flexibility
- Servicing fee income
- Servicing released options available
- Electronic processing through the eMPF® website
Under MPF 125, the risks associated with home mortgage
finance are shared with the Federal Home Loan Bank (FHLB)
to maximize comparative advantages. With MPF 125, members
can market and service fixed-rate, residential mortgage
loans - and instead of getting charged a fee by the
secondary market investor, members receive a fee
for their credit expertise. The FHLB manages the
liquidity, interest rate, and prepayment risks of the
loans while the member manages the credit risk of the
loans.
Who would benefit from MPF 125?
Any member actively engaged in mortgage lending that:
- Values the income derived from originating and servicing
loans
- Is currently a member of a participating FHLB
Would you value the economic
advantages of selling your mortgage assets while retaining
your customer relationships and servicing cash flow
streams?
| FEATURES
OF MPF 125 |
| Term |
Up to 30 years fully amortizing |
| Maximum LTV |
95% |
| Loan Limits |
Agency conforming |
| Occupancy |
Owner occupied (1-4 units) and second
homes |
| Property Type |
All types (except co-ops and investment) |
| Underwriting |
Follow MPF Origination guidelines
(LP/DU decisions considered) |
| Remittance |
Actual/Actual, Actual/Actual Single
Remittance, Scheduled/Scheduled |
| Master commitment size |
$5 million minimum, optional delivery |
| Delivery commitment |
3, 10, 20, 30, and 45 business days,
mandatory delivery |
| Pricing |
Premium & discount pricing available |
| Credit enhancement fee |
Typically 7-10 bps paid on outstanding
master commitment balance; adjusted for loan losses |
Under MPF 125, the first layer of losses for each master
commitment (following any primary MI coverage) is paid
by the FHLB up to the amount of the First Loss Account
(FLA) which is 100 bps of the delivered amount. The
member then provides a second loss credit
enhancement obligation (CE Obligation) for each master
commitment. Loan losses beyond the first and second
layers are absorbed by the FHLB. The member's minimum
CE Obligation is 25 bps based on delivered amount. The
member is paid a performance-based credit
enhancement fee for providing the CE Obligation.
Depository institution members participating in MPF
125 must hold risk-based capital equal to 100% of their
CE Obligation, or 4% of the unpaid principal balance
of the loans in their master commitment, whichever is
lower. There is no leverage capital requirement for
loans
sold under the MPF 125 product.*
* The FHLB is not providing accounting
or legal advice with respect to the accounting treatment
of MPF Program asset and liabilities. The participating
member is expected to consult with its own accountants
and attorneys for advice on this matter.
"MPF," "Mortgage Partnership Finance," "eMPF," are registered trademarks and "MPF Xtra" is a trademark of the Federal Home Loan Bank of Chicago.
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