Diversifying with the MPF® Program: The Long View of Secondary Market Strategy
by Matt Gerber, Vice President, Mortgage Lending, Royal Credit Union
Change is a constant in our business as markets fluctuate and credit unions evolve. Royal Credit Union started in 1964 with 100 employees of the Uniroyal tire company in Eau Claire, Wisconsin. Since then, we’ve grown to serve more than 300,000 members in Wisconsin and Minnesota, and in 2022 we made an acquisition that expanded our reach in the St. Paul metropolitan area. For years, we’ve relied on Fannie Mae and Freddie Mac as secondary mortgage market outlets. But our recent growth, together with changes at these Government-Sponsored Enterprises (GSEs), made it clear that we needed to diversify. To ensure that we’d have long-term financing options regardless of market shifts, we needed a third investor, and the Mortgage Partnership Finance® (MPF®) Program was a strategic choice. Less than two years after we sold our first mortgage through the MPF 125 product, we now deliver over 50% of our saleable mortgages through the MPF Program.
Relationships That Pay
Any relationship with a secondary market financing institution is about strategy, and it’s important to think long-term. The Federal Home Loan Banks have been long-standing advocates for credit unions, and Royal already had a solid relationship with our FHLBank Chicago representative. He’d witnessed our expansion, he understood where we were and where we wanted to be, and he knew the MPF Program presented a key opportunity for us, both at that time and for the future. Those ongoing, proactive conversations—together with the MPF team’s support as we learned about the products and streamlined our delivery process—set the stage for the success we’re having today.
Income for the Credit Union, Savings for Members
Royal Credit Union has a history of low loan-loss ratios, and we’re confident in our credit decisions. With the MPF Traditional products, we can take advantage of our prudent underwriting practices by receiving credit enhancement income for sharing in the credit risk of the loans we sell. This, together with the fact that these products don’t charge loan-level pricing adjustments (LLPAs), means we can price loans competitively and pass savings on to the member. This is particularly important because affordability is the biggest barrier to homeownership in our communities as home prices and interest rates continue to rise. And by pairing the MPF Program with FHLBank Chicago’s Downpayment Plus® Programs, we can also help members with down payment and closing costs, which can do even more to prevent payment shock—especially for first-time homebuyers.
In the face of volatile markets, we need to have strategic conversations about diversifying our secondary market options, ensuring that no matter how the market fluctuates, we can continue to offer our members the best products and pricing available. If you’re considering adding the MPF Program to your portfolio, I recommend that you take time to understand the products and their benefits. Start the conversation with your FHLBank representative, or learn more at fhlbmpf.com.