WASHINGTON — Ginnie Mae President Ted Tozer is urging credit unions and community banks to contact their Federal Home Loan Bank so they can participate in a conduit program for government-backed loans.

Under a pilot program with the Federal Home Loan Bank of Chicago, members will be able to sell their Federal Housing Administration, Department of Veterans Affairs and Rural Housing Service guaranteed loans into Ginnie Mae pools.

Tozer told a National Association of Federal Credit Unions conference in Washington that the Chicago FHLB is still in the pilot stage, where participation is limited to FHLB members in the Chicago district.

"They plan to open it up to the whole [FHLB] System by the end of the first quarter of 2015," Tozer said Friday.

He noted that 10 of the 12 FHLBs are interested in participating in the conduit, which the Chicago regional bank calls its Government Mortgage Partnership Finance program.

However, Tozer's timetable seems to be a little bit ahead of the officials at the Chicago Home Loan Bank.

"We are getting the pilot up and running and will share more information when we are ready to launch the product nationally," a Chicago FHLB spokeswoman said in a statement.

The Ginnie conduit will allow small depositories to originate and securitize FHA and VA loans without going through the process of being approved as Ginnie Mae issuer. The Chicago FHLB will serve as the aggregator and Ginnie Mae as issuer for MPF-participating FHLBs and their member institutions.

Credit unions and community banks will be able to retain the servicing when they sell their loans into Ginnie Mae pools. The agency wants that kind of hands-on servicing to keep defaults low.

Tozer noted that community based lenders engage in "relationship lending" as opposed to viewing the mortgage deal as a one-time transaction.

"You want the consumer to succeed," he told the conference.

Dan Berger, the president and chief executive of NAFCU, noted that CUs are very interested in the Ginnie Mae/FHLB program. Tozer first announced the Chicago conduit initiative at NAFCU's Washington conference last September.

Tozer also stressed that a Ginnie Mae execution treats all lenders the same.

A credit union or bank can sell one or two loans at a time and get the same pricing as a large Ginnie Mae issuer that securitizes 1,000 loans.

"It democratizes the process," Tozer said.

The Chicago Federal Home Loan Bank is expected to test the waters and securitize its first Ginnie Mae pools by the end of this year.

 

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