Throughout the past year, I’ve shared Ginnie Mae’s ongoing plans to broaden and deepen its Issuer community. We continually strive for a diverse Issuer base to mitigate our risk and extend the benefits of the full faith and credit guaranty across communities. In pursuit of this goal, we have explored the concept of creating a model where smaller lenders can participate in a cooperative or aggregator facility to gain better access to the Ginnie Mae program. I am proud to announce that one such effort has come to fruition. Last month we announced that the Federal Home Loan Bank of Chicago (FHLBC) will begin to issue Ginnie Mae mortgage-backed securities (MBS) as an approved Ginnie Mae Issuer.
With the FHLBC’s acceptance into Ginnie Mae’s Issuer program, smaller lenders (members of the FHLBC) will have more direct access to the secondary mortgage market. The FHLBC’s conduit product, referred to as the Mortgage Partnership Finance® (MPF) Government MBS, will initially be made available to eligible members of the FHLBC in Illinois and Wisconsin, prior to rolling out the model more broadly next year.
The product is simple. FHLBC will acquire government loans from its member institutions. FHLBC will then pool those mortgages together and sell them as Ginnie Mae guaranteed MBS to a broad domestic and international investor base.
The FHLBC conduit will help level the playing field for smaller lenders that do not individually meet Ginnie Mae’s Issuer eligibility requirements. Benefits to FHLBC member institutions will include an effective, reliable channel in which to sell their loans and the resulting interest rate protection on those loans. The FHLBC will essentially operate as a quick and efficient cash window that member banks will be able to access without having to engage directly with Wall Street mortgage dealers. Further, members will have the choice to retain or release servicing on the loans they originate. Most importantly, member banks will benefit from Ginnie Mae’s high MBS pricing levels, which, in turn, will provide borrowers lower mortgage interest rates for their home purchases.
I am very proud of this partnership. We are already seeing great support throughout the industry, including interest from the other FHLBs across the country. As housing reform continues, Ginnie Mae remains a stabilizing force in the U.S. housing finance system. Permitting regional bank members of the FHLBC to sell loans into the secondary market using the Ginnie Mae platform demonstrates that we are flexible and responsive to the market. Further, this collaboration reinforces that the simplicity of our business model continues to serve a vital public mission: to support affordable housing in America by linking global capital markets to our nation’s housing markets.