Chicago FHLBank to Stop Buying MPF Loans

The Federal Home Loan Bank of Chicago has announced that it will stop purchasing single-family loans after July 31 but will continue to provide operational support for mortgages it has already bought from members and other FHLBanks. Effective immediately, the Chicago FHLBank will "no longer enter into new master agreements or renew existing master commitments to purchase mortgage loans" under the Mortgage Partnership Finance program, the Chicago bank's acting president, Matthew Feldman, says in a letter. The FHLBank has a $34.6 billion mortgage loan portfolio that has become a serious drag on earnings. The Chicago bank, which is operating under a supervisory order, says it expects to report a loss in the first quarter. Mr. Feldman's letter indicates that the bank is looking for a way to restart deliveries of MPF loans by selling them to third-party investors. But they will have to get the Federal Housing Finance Board to approve this "off-balance-sheet funding alternative." The FHLBank launched the MPF program in 1997, and its regulator has blocked the securitization of the MPF loans for the past seven years.