FHLBanks Buy MBS Tranches

Three Federal Home Loan Banks have purchased the senior tranches of a $475 million mortgage-backed securities deal as part of a new program called Shared Funding that is designed to meet the secondary market needs of the FHLBanks' largest members.It is the first MBS transaction under the Mortgage Partnership Finance program, and it is backed by conventional fixed-rate residential mortgages originated by National City Mortgage and Wells Fargo Home Mortgage. A subsidiary of Bank One issued the highly rated mortgage certificates to the Chicago, Des Moines, and Pittsburgh FHLBanks, and the subsidiary, One Mortgage Partners Corp., will retain the subordinated tranches. "Shared Funding will help the MPF program develop to its full potential as a strategic alternative for our members," Chicago FHLBank president Alex Pollock said. Steve Bartlett, president of the Financial Services Roundtable, said the Shared Funding initiative "will attract additional capital to the mortgage market, lower mortgage rates for consumers, and diversify credit risk throughout the financial system."