How 1 CU Is Able to Offer 30-Year Mortgages to Members

By Jaime Jordan 

Jordan Jaime

Sandia Laboratory Federal Credit Union’s (Sandia) membership at the Federal Home Loan Bank of Dallas (FHLBank) has enabled the credit union to offer the 30-year fixed-rate mortgage to its members through the FHLBank’s MPF Program.

“Our members want the safety of having a fixed rate and they need the lower payment of a longer amortization,” said Julie Nielsen, Vice President and Investment Officer at Sandia Laboratory FCU. The Albuquerque, N.M.-based CU, with assets of $2.5 billion, serves employees at Sandia National Laboratories and their families, as well as other customers.

For many financial institutions, the 30-year fixed-rate mortgage can present challenges, with a main one being interest-rate risk. While credit unions can opt to keep these mortgages on portfolio, they can avoid interest-rate risk, achieve liquidity, improve return on capital and keep their balance sheet diversified by selling these assets into the secondary market. 

How It Works 

With the MPF Program’s traditional products, the FHLBank purchases closed mortgage loans from members, such as Sandia. FHLBank member financial institutions earn monthly premium income, known as a credit enhancement (CE) fee, that the FHLBank pays to the institutions over the life of the loans. The FHLBank and the member share in the credit risk of the loans, with the FHLBank taking on the majority of risk associated with the mortgage loans purchased. 

“Having the annuity of the credit enhancement fee is very helpful to us because we are willing and able to maintain our share of the credit risk,” Nielsen said. 

Fueling Member Relationships with Servicing-Retained Feature

The ability for Sandia to retain servicing on the loans sold has enabled it to maintain valuable member relationships with their members through the life of the loan. 

“We are the ones that retain the relationship with our member. The Federal Home Loan Bank is our investor but we are the servicer of the loan. It’s very important to us,” Nielsen said. “So, when a member has a problem or a question on their mortgage loan, they come to us. They don’t go to the Federal Home Loan Bank.”

Fueling Future Growth

The MPF Program is also helping Sandia expand its mortgage offerings and attract more members.

“Offering the 30-year mortgage has helped us to capture more of the mortgage purchase market,” Nielsen shared. 

Using the MPF Program has given Sandia the best of both worlds – the mortgage product their members wanted and the member relationship retention Sandia desired.

“Federal Home Loan Bank of Dallas has been a great partner for Sandia Laboratory Federal Credit Union,” Nielsen said. “The partnership with FHLB Dallas has afforded us the opportunity to offer the products that our members want while mitigating the interest-rate risk on those longer-term assets, and we can service their loans right here in this building.”

Jaime Jordan is director of corporate Communications with the FHLB Dallas.

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Word Count: 592
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Copyright Year: 2019
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