The Mortgage Partnership Finance, a group of Federal Home Loan Banks announced that it issued its first mortgage bond guaranteed by Ginnie Mae.
The $5 million security is backed by mortgages originated by community lenders through the MPF Government MBS product, the MPF said in a release.
Through the MPF Government MBS product, the MPF Program purchases fixed-rate mortgage loans originated by Federal Home Loan Bank members that are insured or guaranteed by the following government agencies: FHA, VA, USDA through its RHS Section 502 loan program, and HUD through its Section184 loan program.
MPF Government MBS provides participating community lenders competitive pricing, which they can pass on to their borrowers.
“This is an important milestone for the MPF Program,” said Matt Feldman, president of the Federal Home Loan Bank of Chicago, which operates the MPF Program on behalf of nine Federal Home Loan Banks.
“Ginnies are among the most liquid financial instruments in the world, and this new product allows us to enable FHLBank members to offer competitive FHA, VA, and Government Guaranteed Native American and Rural Housing mortgages,” Feldman added.
The initial securitization is built from of a mix of loans, with more than 50% in the RHS category. VA loans make up the next largest issuance and FHA rounds out the balance, the MPF said.
“Community lenders are uniquely situated to fulfill the hopes and dreams of everyday families,” said U.S. Department of Housing and Urban Development Secretary Julián Castro. “Ginnie Mae is committed to providing our local partners with the resources they need to expand housing opportunity for all Americans.”
The MPF Program said that it anticipates incremental growth in all categories as additional FHLBanks begin offering the product.
The MPF Program allows participating members of the Federal Home Loan Bank System to sell fixed-rate, conventional loans into the secondary mortgage market.
To participate in the MPF Program, a financial institution must be a member of a Federal Home Loan Bank that offers the MPF Program.
Currently, new loan purchases are available through the following Federal Home Loan Banks: Atlanta, Boston, Chicago, Dallas, Des Moines, New York, Pittsburgh, Topeka, and San Francisco.
“This agreement is a great example of how the Ginnie Mae MBS program continues to level the playing field by allowing community based financial institutions to effectively compete with mega banks for homebuyers in their communities,” said Ginnie Mae President Ted Tozer.
“Now they can connect directly to the capital markets, improving the home financing options they can offer to their customers without the burden of having to individually obtain and maintain Ginnie Mae approval,” Tozer said.
“Looked at another way, it allows Ginnie Mae to distribute its program more broadly without dramatically increasing the number of counterparties we must manage,” Tozer added. “In this sense, it is a model for how Ginnie Mae should operate in the future.”
Leaders from throughout the mortgage finance industry hailed the program.
“This is a good model for how the FHLB System can partner with industry,” said Mortgage Bankers Association President and CEO Dave Stevens. “It is important to continue to create new opportunities which enhance access for all lenders so that they can utilize the capital markets directly, reducing costs and increasing originations.”
The American Bankers Association also welcomed the effort.
“ABA applauds this innovative collaboration between Ginnie Mae and the MPF Program,” said Bob Davis, executive vice president for the American Bankers Association.
“Ginnie Mae securitization of certain MPF loans will greatly enhance the effectiveness of mortgage consolidation activities by the FHLB System, reducing capital costs and providing more competitive pricing to consumers,” Davis said. “Early leadership at the Chicago and Atlanta FHLBs is improving liquidity access for community banks in a meaningful way that will benefit the borrowers and communities they serve.”