Acquired Member Assets
Overview
The FHLBanks provide liquidity to their members through Acquired Member Asset (AMA) and other secondary mortgage purchase programs. The FHLBanks operate four AMA programs: the Mortgage Partnership Finance (MPF) Program currently operates across 6 FHLBanks and is administered by the FHLBank Chicago; the Mortgage Purchase Programs (MPP) Programs operated by FHLBanks Cincinnati and Indianapolis; and the Mortgage Asset Program (MAP) operated by FHLBank New York.
AMA regulations allow the FHLBanks to acquire member assets, typically residential 1-4 single family mortgage loans, as a means of advancing their housing finance mission. The regulations also establish the eligible parameters for such purchase programs, which includes various credit enhancement requirements that take the form of collateralization or premium hold-backs that serve to align interests with the members and their FHLBank operating the AMA program. Selling institutions receive additional compensation from this credit enhancement and benefit from strong credit performance. Once purchased, these AMA-funded purchases are retained on the balance sheet of the participating FHLBank.
The principal benefits to members of the AMA programs arise from allowing members to:
- Sell loans to their FHLBank thereby receiving funding;
- Avoid interest rate risk to their balance sheet;
- Remove prepayment risk;
- Reduce credit risk;
- Retain servicing income and connection to the borrower;
- Get compensated for credit quality; and
- Increase returns to shareholders.
The programs also provide a substantial benefit to mid-size and smaller originators by reducing complexity, minimizing hedging risk and providing a competitive capital markets execution, which allows them to be competitive with larger market participants.
As an additional source of liquidity, under the MPF Program, loans can also be purchased from members for subsequent sale in the secondary mortgage market, typically to Fannie Mae, Ginnie Mae or private label securitization programs. While technically not AMA purchases, these products provide additional liquidity to members and have many of the same benefits of the AMA programs, as well as offering a funding alternative for members if certain FHLBank balance sheet or concentration constraints are close to being met.
By the Numbers
In 2020, the FHLBanks purchased nearly $32 billion of mortgage assets or more than 150,000 loans from nearly 1,000 participating financial institutions (PFIs). As seen in the chart below, the FHLBanks purchased more than $5.2 billion of mortgage assets during Q2 2021, compared to $10.2 billion for Q2 2020, which represents a 49% decline year over year, corresponding to the decrease in overall volumes as the refinance market has slowed. Despite this decline over the course of the COVID-19 pandemic, the FHLBank mortgage programs have remained a core and stable resource for FHLBank members.
Over the last six quarters, almost $43 billion of mortgage liquidity was provided through the FHLBank mortgage programs, of which over $24 billion has been held on the FHLBank balance sheets. Further, during Q2 2021, the FHLBanks supported more than 2,860 first-time homebuyers and supported home purchases in every state and two US territories. Community Financial Institutions (CFIs), which are bank members with assets under $1.239 billion, hold a significant position in the AMA programs. These organizations are dedicated to delivering best-in-class mortgage products and services to their communities and through the last six quarters, on average, nearly 75% of the AMA loans were originated by CFIs.
Disclaimer: Data presented in this section may not comport with CFR data and should be viewed independently