BOSTON – The Federal Home Loan Bank of Boston said unrealized losses on its private mortgage-backed securities climbed to $1.3 billion in the third quarter.
But the Boston FHLB’s management said it does not currently believe a write-down is necessary on those investments. Net unrealized losses were $1.3 billion at the end of September, up from $1.1 billion three months earlier.
The Boston Bank holds about $3.8 billion in securities backed by so-called Alt-A mortgages. Delinquencies and defaults among these types of mortgages have escalated over the past year.
"The deterioration of mortgage loan credit performance and house prices, combined with the market effects of distressed MBS liquidations by major holders of mortgages, caused a sharp decrease in (mortgage-backed securities) prices and resulted in an increase in the FHLB’s net unrealized loss," the bank said in a filing with the Securities and Exchange Commission.
The bank’s third-quarter income fell slightly to $49.7 million, down from $50.2 million in the year-earlier quarter. The decrease was mostly because of higher operating expenses and an $8.3 million increase in net losses on derivatives and hedging activities. That was partially offset by higher net interest income, the FHLB said.
At the end of 2007, the FHLB’s unrealized losses on mortgage-backed securities were only $155.4 million.
The Boston Bank has about 450 members, including about 40 credit unions.
