CUNA Mutual Stresses Limited Nature of Fed Bank Action
FHLBB announced the policy change, which takes place October 19, after Standard and Poor's lowered the rating for the company from A to BBB+ on July 29.
But CMG MI pointed out that the move only impacts those loans that the bank buys through the Mortgage Partnership Finance program and plans to hold on its own books. The FHLBB will continue to accept CMG MI certificates on loans submitted under the MPF Xtra program. The MPF Xtra program buys loans destined to be sold on the secondary market and represent the bulk of the loans the bank buys, the insurer said.
"The FHLB Boston recognizes CMG MI is a sound and creditworthy counterparty for the credit union loans we insure and that our loss and default ratios compare favorably to the rest of the industry," a spokesman for the insurer wrote about the FHLBB move.
"However, FHLB has a long-standing internal policy that requires it to limit mortgage insurance exposure based upon the S&P rating and claims paying resources (capital) of each insurer. Currently, the FHLB Boston has reached its exposure limits with regard to CMG MI. Therefore, for portfolio loans only, the FHLB Boston can no longer accept CMG MI mortgage insurance certificates. When S&P adjusted our rating to BBB+ in July, it triggered their internal policy," he added.