BofA, United Midwest bundle loan pools for securitization
In an attempt to ignite the sedated secondary market, Bank of America (BAC) and privately held United Midwest Savings Bank have bundled first-mortgage loans into pools for securitization. Bank of America pooled about $32.1 million of loans purchased from other lenders and United Midwest assembled a pool of nearly $8 million, according to the Small Business Administration. This marks the initial attempt to provide some liquidity to lenders through MBS or fixed-asset financing under the First Mortgage Loan Pooling program that is part of the American Recovery and Reinvestment Act passed last year. The SBA will back about $25.7 million of the loans in the BofA pools and $6.4 million of the United Midwest pools. The federal agency provides a government guarantee on pools of eligible 504 first-mortgage loans assembled by approved originators who sell them to third-party investors. Lenders retain at least 15% of each loan, pool originators assume 5% of the risk, and the SBA guarantees the remaining 80%. "The 504 loan pool guarantee program is one more tool we've added to SBA's toolbox to expand access to capital for America's small businesses," SBA administrator Karen Mills said. "By jump starting the 504 secondary market, more banks will have greater opportunity to strengthen their liquidity and in turn increase their lending to small businesses and entrepreneurs." Write to Jason Philyaw.