The Federal Home Loan Bank of Topeka has dropped its activity-based stock purchase requirement when members sell their mortgages to the FHLB.
Member banks and thrifts participating in the
“We decided, with the approval of the board of directors, to eliminate the stock purchase requirement for mortgages,” said Dan Hess, senior vice president at the Topeka bank. (Members still have to purchase stock when they take out advances.)
The stock purchase requirement was equal to 2% of the loan amount of the mortgages. Some Topeka members liked getting the 3.5% dividend on the FHFB stock. But for members selling two or three loans at a time it was “kind of a nuisance from an accounting prospective,” Hess told NMN.
Meanwhile, the Topeka FHLB has experienced significant growth in retained earnings due to steady profitability over the past several years, Hess said. “We are essentially capitalizing the mortgage portfolio with retained earnings and eliminating the capital previously required of members to support the MPF Program loans.”
The Topeka FHLB held nearly $6 billion in mortgages on its balance sheet as of June 30. This portfolio has been relatively stable due to prepayments and an ongoing loan participation arrangement with the Indianapolis FHLB.
Topeka MPF members originated $654 million in single-family loans in the second quarter, including $38 million in MPF Xtra loans that were sold to Fannie Mae.
Via the participation arrangement, the Topeka bank sold $122 million in loans to the Indianapolis FHLB in the second quarter. In the first quarter, the Topeka bank sold $130 million in loans to the Indianapolis bank.
“That has worked well for us. We expect to keep the size of the portfolio fairly stable,” Hess said in an interview.
