MPF Connection
Volume 6 | Issue 14
“Why Isn't Every Member Participating in the MPF® Program?”
With economists predicting at least one more year of low interest rates, now may be a good time to consider hedging the inherent risks in your long-term loan portfolio with the Mortgage Partnership Finance® (MPF®) Program. Declines in interest rates and volatility in the financial markets have created a quandary for the lending industry. The amount of new, revised, and emerging compliance policies from regulatory agencies has both directly and indirectly affected many community lenders and continues to foster an element of uncertainty.
The question "why isn't every member participating in MPF?” was recently posed by the CEO of a member institution that actively sells in the MPF Program. The member was utilizing other secondary market outlets, but the advantages of the MPF Program outweighed the competition. The MPF Program allows community lenders to offer competitive lower-rate mortgages. It combines the credit expertise of a local member with the funding/hedging strengths of the FHLBNY to provide a more profitable alternate way to fund mortgages.
Another member that recently joined the MPF Program shared the story of being able to offer a mortgage to a local teacher in their community whose family had been customers for generations. Jerry J. Silvi, SVP/Residential Lending Division at 1st Colonial National Bank said, "She banked with us for 35 years prior; we were able to offer her a competitive mortgage rate and keep her deposit business by selling the mortgage into the MPF Program.” In the low interest rate environment, being able to stay competitive and retain business is crucial. This is the best time for local lenders to affirm their customer relationships and provide solutions for customers to help them with home-ownership. The FHLBNY’s offering of the MPF Program can help you to maintain that vital customer relationship.
The FHLBNY handles the funding, interest rate and prepayment risks while members receive additional income for taking on a portion of the credit risk of the loans sold into the MPF Program. Our partnership combines our respective strengths to better manage the risks inherent in long-term mortgages, resulting in an efficient and mutually beneficial structure.
The FHLBNY is owned by its member-lenders. Therefore, the FHLBNY shares all financial advantages with its stockholders, including competitive MPF pricing, earned fee income, and the potential of FHLBNY dividends, leading to an improved bottom line for members. So, the question remains — why aren't you actively participating in the MPF Program?
If you would like more information on the MPF Program or are interested in participating, contact Tom Doyle at (212) 441-6712 or Heather Gostomski at (212) 441-6701.
E-mail us if you would like to be added to our pricing distribution list, sent via e-mail each business day.
The FHLBNY Dividend — An Added Benefit for Members
On May 17, 2012, the FHLBNY declared a cash dividend for the first quarter of 2012 at 4.50% (annualized). Members that participate in the MPF Program are required to purchase activity-based FHLBNY capital stock on any new MPF delivery commitments issued.
The stock requirement can be viewed as an additional benefit when comparing the dividend levels being paid to other earning assets in the market. For example, if you took down a Delivery Commitment for $1,000,000, you would be required to buy 4.5% of the delivery amount or $45,000 in B2/Activity-Based capital stock. Based on last year’s dividend average of 4.50% (annualized), you would have earned a cash dividend of $2,025.
Note: There is no guarantee that the level of future dividends will reflect the level of dividend payouts currently being made.
Member Loan Connection (MLC) — the FHLBNY's FREE Loan Participation Network
Seeing loan opportunities that are larger than your legal lending limit or just too large to feel comfortable originating?
Do loans-to-one borrower limitations restrict your origination efforts for commercial real estate or multifamily loans?
Read more about how the MLC network can provide you with a solution.
