Pricing Advantages with MPF® Traditional Products: Q3 2016
In a challenging rate environment with contracting net interest margins, non-interest income—of which mortgage banking fees constitute a significant portion—is increasingly important. With over 65% of our mortgage-originating members selling into the secondary market, providing secondary market solutions to our membership is an important goal of the Federal Home Loan Bank of Chicago (FHLBank Chicago). Through the Mortgage Partnership Finance® (MPF®) Program, the FHLBank Chicago can help your institution earn additional fee income, attract additional customers, and obtain best execution on selling loans into the secondary market.
The Pricing Advantage
The MPF Traditional products offer attractive pricing for loans of good credit quality that are penalized by loan-level price adjustments (LLPAs) in other secondary market programs. The MPF Traditional products charge no LLPAs, so you can reduce the rate and fees for your borrowers. This could mean winning more customer loans.
For illustration purposes only. CE income estimate assumes expected losses of 4 basis points. Pricing is as of June 20, 2016. Estimate is for a 30-year, 3.5%, conforming, owner-occupied, single-family, 720 FICO, 80% LTV purchase loan.
Reduce Income Volatility
The MPF Original, MPF 125, and MPF 35 products allow your institution to share the credit risks associated with your mortgage loans with the FHLBank Chicago. For sharing in this risk, an institution earns credit enhancement (CE) fees of up to 10–12 basis points. By paying CE fee income over time, the MPF Program helps your institution smooth earnings volatility during mortgage origination downturns.
To Learn More
Visit eBanking to read the Secondary Market Lending white paper.
For further information, contact your Sales Director at membership@fhlbc.com to find out more about the products, strategies, and tools you can use to develop competitive lending solutions for your secondary market customers.
Contributors
Ashish Tripathy
Managing Director, Member Strategy and Solutions
Kyle Schirmann
Director, Member Strategy and Solutions
“Mortgage Partnership Finance” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.
Federal Home Loan Bank of Chicago | Member owned. Member focused. | September 2016