WASHINGTON — A program that allows some Federal Home Loan Bank members to sell jumbo loans to Redwood Trust is starting to build momentum.

The initiative, part of the Mortgage Partnership Finance conduit program, finally got under way in the first quarter at the Federal Home Loan Bank of Chicago, and the Boston and San Francisco Home Loan banks are next in line.

"We had 10 active MPF sellers in the first quarter and approximately a 100 more under application," said Marty Hughes, chief executive of Redwood Trust, a mortgage real estate investment trust based in Mill Valley, Calif.

Hughes acknowledged in a conference call last week that the rollout has been slow, but said "we do expect a pickup later this year."

He noted that other Federal Home Loan banks will be participating in the program, dubbed MPF Direct, but did not name them. The Boston bank announced in April that it had been approved to participate; National Mortgage News has learned the San Francisco bank has also been cleared by the Federal Housing Finance Agency.

The Topeka Home Loan Bank, meanwhile, is also considering the jumbo program.

"We have not yet filed a request with the FHFA. We think the product provides value to a portion of our membership and are working to better understand the opportunity and needs in our district," said Julie DeVader, a spokeswoman for the Topeka FHLB.

Redwood did not disclose the amount of jumbos that it purchased from the 10 Chicago FHLB members. But Hughes noted the sellers are small lending institutions.

In the first quarter, the firm purchased $1.1 billion in jumbo loans from its correspondent seller network of 180 lenders.

Redwood has a captive insurance company that is a Federal Home Loan Bank member. Redwood transferred $447 million in jumbo loans to its captive insurer during the first quarter. That brings "our total whole loan investments in the captive to $1 billion that are financed with Federal Home Loan Bank borrowings," Hughes said.

The FHFA issued a proposal last year that would phase out Federal Home Loan Bank membership for captive insurers over five years. The FHFA's proposal has run into significant opposition and it's unclear when it will issue a final rule.

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