The Federal Home Loan Bank of Chicago is seeking approval to buy home loans and issue mortgage-backed securities guaranteed by Ginnie Mae, according to the Residential MBS Weekly newsletter published by structured products research at Wells Fargo (WFC).

“Details are not known yet; however, based on news reports, this program could result in additional GNMA residential mortgage-backed securities supply,” said the research report, written by analysts Greg Reiter, Mark Fontanilla, Randy Ahlgren and Maria Mascia.

The note adds that the Chicago federal home loan bank is also seeking an alliance with Redwood Trust (RWT).

The joint program reportedly “will allow FHLBank members to deliver eligible residential high-balance mortgage loans through the Mortgage Partnership Finance Program’s operational platform to subsidiaries of Redwood Trust,” the note states.

"Membership in the FHLBC marks an important development for our company and adds to our financing and distribution options for residential mortgage loans," said Brett Nicholas, president of Redwood Trust.

"This additional financing source should enable Redwood to expand the types of residential mortgage loan products we can acquire from mortgage loan originators," Nicholas added.

"Ultimately, we believe that mortgage loan borrowers, and the communities in which they live, will benefit from the additional liquidity Redwood is able to provide, consistent with the mission of the FHLBank System," he said.