MPF Fundings Plunge

The Federal Home Loan Banks funded only $2 billion in originations under the Mortgage Partnership Finance program in the second quarter, down from $7.6 billion in the same quarter of 2004, according to the Chicago FHLBank.MPF single-family originations totaled $72.1 billion in 2003, $18.4 billion in 2004, and only $4.8 billion in the first half of this year. Chicago FHLBank officials attribute the decline to a shift in the market to adjustable-rate mortgages and new products such as interest-only loans. The MPF program provides a secondary market solely for standard fixed-rate mortgages. The Chicago FHLBank launched the MPF program in 1997, and it is the biggest investor in MPF loans among nine participating FHLBanks. However, the Chicago bank has been under a Federal Housing Finance Board supervisory agreement for the past year. In addition, the MPF program is being strangled because it does not have a mechanism for selling loans to investors outside the FHLBank System. "Until the Finance Board works with the FHLBanks to develop a way for them to manage and sell the [MPF] assets, it would be imprudent for the FHLBanks to grow their assets," one industry source said.