FHLBanks Offer Value in Mortgage Partnership

After years of sustained low interest rates, community banks are facing a highly competitive market with decreased demand for mortgage loans. While many experts agree that current fixed rates will not precipitate another refinancing boom, FHLBank members still have an opportunity to remain competitive by extending fixed-rate loans to borrowers and sharing the risk through the FHLBanks’ Mortgage Partnership Finance^® Program.

Since 1997, the FHLBanks have assisted participating member banks with a local solution to the mortgage needs of their customers. The MPF^® Program has already helped hundreds of thousands of households nationwide with home financing.

The MPF Program – The Power of Partnership

The MPF Program combines the credit expertise of a local member with the funding advantages of a regional FHLBank to provide a more profitable alternative to funding mortgages. Members can sell their fixed-rate mortgages but pay no guarantee fees.

Moreover, FHLBank Pittsburgh pays a credit enhancement fee to participating members for continuing to manage the credit risk of the loans. As the volume of loans sold grows, so does the additional fee income, becoming a steady stream of income each month, a big benefit for community banks operating with narrow margins. Since 1999, FHLBank Pittsburgh has paid more than $80.3 million to members in credit enhancement fee income.

Since the MPF Program allows member banks to retain servicing, banks can maintain healthy customer relationships without worries that customers will become frustrated by a revolving door of loan servicers, as is often the case when banks sell their mortgages in the secondary market. To date, FHLBank Pittsburgh has paid participating members more than $251 million in MPF Program servicing fees.

Partnering with community banks to offer a competitive mortgage solution, the MPF Program is one more good way the FHLBanks add value to community banks nationwide.

“Mortgage Partnership Finance” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.