MPF® Traditional products allow you to earn additional income based on the performance of your loans by sharing in the credit risk associated with home mortgage finance. With MPF Traditional, you can originate, sell, and service fixed-rate, residential mortgage loans. FHLB Des Moines manages the liquidity, interest rate, and prepayment risks of the loans while you manage the credit risk of the loans.
What makes MPF Traditional unique?
- Risk Sharing
With MPF Traditional, you have added security against loan losses. After borrower equity and private mortgage insurance (PMI), MPF Traditional offers an additional layer of loss protection called the First Loss Account (FLA), which is absorbed by FHLB Des Moines.
Here’s how FLA differentiates between products:
- MPF Original: The monthly accrual rate of the FLA is 4 basis points (0.04%). The FLA starts at zero and builds over time, calculated and accrued monthly, on the outstanding principal balance of the loans in a Master Commitment.
- MPF 125: The amount of the FLA is equal to 100 basis points (1.00%) of the funded amount of all the loans in a Master Commitment.
- Credit Enhancement
Credit enhancement determines the amount of support that the loan needs to meet the target credit enhancement rating. Here’s how CE differentiates between products:
- MPF Original: Credit enhancement fee is not performance-based.
- MPF 125: Credit enhancement fee is performance-based.
- Economic reward for quality loans
- Credit enhancement fee income, paid monthly
- Activity stock dividend potential
- No secondary market fees
- No agency Loan Level Price Adjustments (LLPAs)
- Same-day delivery and funding
- High-balance pricing available