WASHINGTON (9/19/14)--The Federal Housing Finance Agency (FHFA) has given approval to start a pilot program that would allow Federal Home Loan Bank (FHLB) member institutions to originate and sell government backed loans into Ginnie Mae mortgage-backed securities (MBS), according to a report in American Banker.
The program, first proposed in September 2013, will initially be available to eligible participating members of the FHLB Chicago in Illinois and Wisconsin, with a wider rollout expected to follow (News Now Sept. 9).
The new product, called Mortgage Partnership Finance (MPF) Government MBS, aims to provide mortgage lenders, particularly smaller institutions that currently lack direct access to the secondary mortgage market, a new option when creating mortgage products for home-buying consumers.
According to Ginnie Mae, "lenders will be able to choose whether to retain or release servicing on the government loans they originate and they will have a reliable channel for selling their loans that removes hurdles low-volume originators face in today's competitive market."
With the new authority granted by the FHFA, the Chicago FHLB will now be able to purchase government-insured loans, hold these loans on-balance sheet and then pool them into securities guaranteed by Ginnie Mae which may then be sold to investors.
Ginnie Mae currently guarantees more than $1.4 trillion of mortgage-backed securities.