Notes From the Mortgage Desk: Borrowers Benefit From Current, Attractive Pricing
April 14, 2021
Borrowers Benefit From Current, Attractive Pricing
Housing activity has remained resilient through 2021, even with a modest increase in mortgage rates since last year. This may be the last chance to offer historically low rates to your customers as mortgage rates inch higher, weakening the incentive for borrowers to refinance. Mortgage Partnership Finance® (MPF®) pricing remains very competitive for mortgage rates below 3%, where Participating Financial Institutions (PFIs) can lock-in some premium on 30-year MPF Traditional Conforming loans and receive aggressive pricing on High Balance loans and 20-year loans to facilitate term refinances for your customers. MPF Traditional sellers would avoid loan-level price adjustments (LLPAs) charged by other agencies and earn additional credit enhancement in the form of long-term fee income. With mortgage rates seemingly on a new, steady upward trajectory, there may not be another mortgage refinance boom like this in the foreseeable future.
Take Another Look at Traditional
Pricing for MPF Xtra® compared to our MPF Traditional product has continued to tighten into 2021, driving Traditional prices to become more attractive to our members. In addition to an attractive up-front price in MPF Traditional, PFIs receive additional income for sharing the credit risk with FHLBank Chicago. Combining this with other features such as the lack of a Refinance LLPA and great delivery tolerance, your institution can have the flexibility it needs without sacrificing priceOther Trends and Market Activity
Across the industry, we have noticed conversations regarding restrictions by Fannie Mae and Freddie Mac on loan attributes. We are monitoring the risks and opportunities that these Fannie and Freddie changes are having on our PFIs, and potentially on us, and issuing updated policy changes in a timely manner.
Also, in case you missed it earlier this year, our Bank announced we will begin requiring activity stock on MPF Traditional products and letters of credit. With this new activity stock requirement, PFIs will earn additional dividend income on loans sold into the program. To learn more, watch our on-demand webinar to learn more details about our new activity stock requirements and the excess capital stock repurchase process. To access the webinar, log onto eBanking and navigate to the bottom of the page, click “Solutions,” click the “Weekly Market Update” drop down, and select “March 11, 2021 Capital Plan Webinar.”