Frequently Asked Questions for Permanent Rate Buydown Product

PFIs must have a current Master Commitment for either MPF 35 or MPF Original and must verify income eligibility to ensure borrowers’ incomes do not exceed 80% of AMI. A unique subproduct (Fixed 30 Yr Permanent Buydown FHLB) has been created in eMPF. Only loans in this subproduct will receive the product benefits. Additional underwriting requirements are noted below.  

FHLBank Boston is allocating a subsidy to purchase income-eligible loans through the MPF Program. The subsidy is defined as the difference in premium earned by the PFI between a market-rate loan and a loan up to 2% below market. The product will be available on a first-come, first-served basis until the subsidy is exhausted.  

FHLBank Boston will post a single interest rate under the subproduct code FX30PBFHLB. The interest rate will be available across all commitment terms (five to 60 days). 

​For example, with a current interest rate of 7.00%, the PFI locks the loan by taking down a Delivery Commitment (DC) at 5.00%. The Delivery Commitment serves as the reservation of the buydown funds. The borrower receives a Note Rate of 5.00%.  When the loan is funded, FHLBank Boston will pay the difference between the price at 5.00% and the Permanent Buydown Price of 1.500% that includes the FHLBank Boston contribution. In many cases, this will be in excess of seven points. 

Once you identify an income-eligible borrower, you should execute a DC to lock in subsidy funds for your borrower. FHLBank Boston will honor all unexpired DCs for this subproduct (Fixed 30 Yr Permanent Buydown FHLB). PFIs that have not executed a DC are not guaranteed subsidy funds to cover the sale of the loan at a premium. 

Eligible loans include 30-year conventional fixed-rate loans for one- to four-family owner-occupied residential properties. The loan purpose must be a purchase transaction. Second home loans are not eligible. As noted above, PFIs must have a Master Commitment for MPF 35 or MPF Original. No third-party originations are permitted.

Initially there is a cap of 35 loans per PFI subject to subsidy availability. A DC should be executed only after the PFI identifies an eligible borrower. The cap will be re-evaluated periodically, and changes will be announced. 

Although you may see slight pricing differentials for different commitment terms, the net price the PFI will receive is 101.50, regardless of the commitment term you choose. PFIs are encouraged to use a commitment term that allows sufficient time to close the loan. Extension fees will apply if a DC needs to be extended. 

No. PFIs may take down DCs under an existing Master Commitment for MPF 35 (including the Credit Enhancement Upfront option) or MPF Original.

Yes. FHLBank Boston will honor all unexpired DCs under this product, as long as the loan is funded on or before December 31, 2025. A DC should be executed only after you identify an eligible borrower. If you have not executed a DC, you are not guaranteed subsidy funds to sell the loan at a premium.  

PFIs must obtain IRS tax transcripts (through your approved vendor) to validate income and must maintain them in the file for quality control reviews. The tax transcripts must be in your file prior to requesting loan funding from MPF. PFIs must ensure that income is calculated using all income of all borrowers. Everyone listed on the deed must be on the note. All other standard underwriting requirements apply. For additional information, see the section below under “Permanent Rate Buydown Income Requirements and Income Calculation Scenarios.” 

No. During the initial offering, the loan purpose must be purchase. This will be evaluated and at a later date, it may be opened to refinance transactions. If and when that occurs, FHLBank Boston will notify PFIs.

FHLBank Boston requires PFIs to create a separate DC for each loan. 

Pair-off fees will be charged. However, FHLBank Boston will refund any pair-off fees if the PFI provides details regarding the loan that failed to close, including documentation of the income eligibility.

If the loan has already been sold to the MPF Program, FHLBank Boston will require the PFI to repurchase the loan, including returning the amount of the subsidy received. 

Both servicing released and servicing retained options apply. For loans sold servicing released, use the lowest note rate on the NewRez, LLC SRP grid. 

Loans are subject to normal Quality Control (QC) requirements, but FHLBank Boston reserves the right to perform additional QC at any time. Loans that do not meet the income requirements are subject to repurchase, and the PFI must return the subsidy received at loan funding. 

Yes. The product can be combined with Equity Builder Program, Housing Our Workforce or Lift Up Homeownership provided the loan and borrowers meet the income requirements of each of the programs.

• No. The intent of the program is to make homeownership available to those with income up to 80% of AMI. All verifiable income from all borrowers must be included.

• No. Household size is not a factor used for the Permanent Rate Buydown product.

• Both title holders would be required to be borrowers on the loan, and all income of both borrowers must meet the requirements of the Permanent Rate Buydown product.

• All income for borrowers must meet the Permanent Rate Buydown product requirements. Occupants who are not title holders are not required to be borrowers on the loan.

• Since all title holders are required to be on the loan, if a title holder needs to be removed from the loan due to credit qualifications, the loan would not be eligible for the Permanent Rate Buydown product.

• Please refer to the MPF Traditional Selling Guide for variable income. If income could be used to qualify the loan, it must be used for this product.

• Yes. If one of the units is currently rented, use the income from the rental agreement. If it is not rented, use the rental income from the appraisal. Please refer to the MPF Traditional Selling Guide for the requirements related to document rental income.

• Do not include the adult dependent’s income when determining if it meets the Permanent Rate Buydown product requirements if the dependent is not a borrower.

• Only the income that could be used for loan qualification should be used to determine if the Permanent Rate Buydown product requirements are met. Please refer to the MPF Traditional Selling Guide for guidance on variable income.

• Document the file to support how the annual income was determined. The income calculation will be requested when/if a file is requested for QC purposes. If a borrower is not planning to use a retirement income distribution in the current year but one or more distributions were taken in prior years (as documented on the tax transcripts), it will be important for there to be documentation to support the income is not recurring in the file and/or for there to be proof that the retirement account has been closed.

• A letter of explanation is not sufficient. There must be a previous VOE or a verbal VOE in the loan file with the previous secondary employer confirming the borrower is no longer employed.

• If the loan does not qualify for the Permanent Rate Buydown due to the additional undisclosed income, the PFI must repurchase the loan and return the subsidy amount received. For the Permanent Rate Buydown product, all income for all borrowers must be included, and all title holders must be borrowers. As a reminder, tax transcripts are required for each loan funded under the Permanent Rate Buydown product. The tax transcripts must be in the file prior to requesting loan funding from MPF.

• For underwriting the loan, follow normal underwriting guidelines. If there is income that could have been used to underwrite the loan, it must be used even if it’s not needed for loan qualification, to determine if the loan meets the Permanent Rate Buydown product requirements. A PFI needs documentation to satisfy that all income for all borrowers is included and that all title holders are borrowers. Otherwise, the loan is subject to repurchase, and the subsidy amount received must be returned.

• Please follow normal underwriting documentation and guidelines. The application will show the spouse as not employed or as a homemaker. Tax transcripts will support the spouse who is not employed. Document the file to support how you arrived at the Permanent Rate Buydown income calculation. 

• Unfortunately, MPF does not look at income for your mortgage loans prior to purchase, as we are not the underwriter of the loan. It is important that PFIs are sure to include ALL qualifiable income, even if the loan does not require all income for approval.