Succeeding Through Servicing: Mitigating Risk with the MPF Program
posted on Monday, July 22, 2019 in Mortgage Partnership Finance
Hawaii State Federal Credit Union is a not-for-profit financial cooperative owned and operated by its members, who are state employees, their immediate families and household members. Founded in 1936, Hawaii State FCU has grown to be one of the state's largest credit unions, offering a full range of financial services. Hawaii State FCU serves members through eight branches, and belongs to the Hawaii Network, a shared-branch service of over 30 other credit union locations, statewide.
“Based on our experience with MPF Xtra, it seems to be an easier way to deliver loans than with secondary market providers.”
Hawaii State FCU faces competition when it comes to attracting homebuyers. “We have experienced local banks who are very aggressive, offering customers fixed rates at or below secondary market 30-year pricing,” said Victor Brock, vice president - Consumer & Mortgage Lending.
Being able to service the loan is a competitive advantage for lenders, especially in Hawaii, where residents value local servicing and being able to reach customer support at convenient times. However, many options for selling mortgages on the secondary market are based on servicing-released agreements. “Before, we were brokering applications to a local lender. The other bank was servicing the borrower,” explained Brock, a situation that can be less than ideal as customers work with a potential competitor.
By selling mortgages through the FHLB Des Moines Mortgage Partnership Finance® (MPF®) Xtra® Program, Hawaii State FCU is able to retain servicing and improve customers' experience. “Our strategic preference, without a doubt, is using service-retained products. Now we are able to maintain critical relationships,” said Brock.
“Even though we have an appetite for retaining 15-year fixed long-term mortgages on-balance sheet, FHLB MPF Xtra program allows us to offer competitive 30-year mortgages while eliminating interest rate risk.”
After only a few months in the MPF Xtra program, Hawaii State FCU has been one of the top MPF Xtra sellers. The credit union is seeing several benefits. Hawaii State FCU is able to charge lower fees and lower origination costs, ultimately creating a better deal for its members. According to Brock, “The pricing passed thru the MPF Xtra Program is really competitive. We can extend those savings onto our credit union members.”
Not only are customers being rewarded, Hawaii State FCU has seen a process improvement as well. “Based on our experience with MPF Xtra, it seems to be an easier way to deliver loans than with other secondary market providers,” said Brock. “The transmission is easier, you have a week to deliver your collateral post purchase, the pricing is competitive, and the process is cleaner.”
Brock also addressed the convenience of working with FHLB Des Moines. “We are protected on the quality control side. If there's a request for repurchase, FHLB Des Moines is in there with us.”
In the next 9 to 15 months, Hawaii State FCU anticipates being able to expand into selling VA loans through the MPF Government product, “without having to work directly with Ginnie Mae.” Whether it's MPF Government or MPF Direct for jumbo loans, Brock looks forward to being able to diversify its offerings. By adding the MPF Program, Hawaii State FCU has been able to expand volume, without using up portfolio loan capacity, thus keeping on-balance sheet capacity for loans that don't meet agency guidelines. “We can stick things in our portfolio that don't quite conform, and potentially offer better pricing for the future.”
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