Income Potential of MPF Traditional

Last Updated on February 18, 2021

Learn more about MPF Traditional's income potential in both the secondary sale of loans and the ancillary income post-sale.

The primary features that makes MPF Traditional an attractive mortgage product are the income potential in both the secondary sale of the loan and the ancillary income post-sale.

MPF Traditional is a different mortgage product than what is sold to other market investors or the GSE aggregators.  The typical secondary sale, regardless of investor, requires assessing Loan Level Price Adjustments to cover the perceived risk in each loan and allow the investor to be compensated for assuming that risk at sale.  The partnership with the FHLB Des Moines allows our members access to MPF Traditional which waives these LLPAs, providing a greater profit margin at sale. In lieu of the waiver of the LLPAs, the member shares a small amount of the credit risk in each loan with FHLB Des Moines.

Additionally, MPF Traditional allows for an income stream after the loan has been funded.  Because of the member’s confidence in the quality of their originations and the fact that they have elected to share in a small portion of the credit risk, FHLB Des Moines will pay them 7-9 bps annually on the performing UPB of the pool of loans purchased.  This pool performance income continues through the life of the loan, while it remains in the pool with FHLB Des Moines.  Further, all member activity with the FHLB Des Moines requires the purchase of Activity Stock in the amount of 4% of the advance or MPF loan sale.  The dividends on the activity stock is paid quarterly and has been very generous over the past many quarters. Our dividend history can be viewed here.

Contact your Mortgage Relationship Manager to learn more.