CMG MI is as a 50/50joint venture between PMI Mortgage Insurance Co. and CUNA Mutual Insurance Society.
The bank made its decision in the wake of Standard and Poor's July 29 downgrade of CMG MI's rating from A to BBB+, according to a spokesman for the bank. The bank announced the move, which takes effect Oct. 19, on Aug. 19.
Mark Zelermyer vice president for corporate communications for the bank said the rating drop had been part of the process the bank used to come to its decision and that none of the loans currently in the pipeline for sale would be affected.
Zelermyer explained that the FHLBB joins with other federal home loan banks to use the Mortgage Partnership Finance program to buy mortgages from member financial institutions that may be too small to sell them on the broader secondary market. These are the loans that will be impacted by the bank's decision and they represent a very small part of the loans the bank buys each year. Loans purchased in the MFP Xtra program are destined for resale on the secondary market and these can still carry the CMG MI insurance.
Zelermyer reported that 134 of the bank's 461 member financial institutions participated in the MPF program in 2008 and that the bank purchased just over $620 million in mortgages.
He also indicated that other Federal Home Loan banks may or may not follow the Boston Bank's policy. Calls to other banks for comment were not returned as of press time.
For its part, CMG MI emphasized that the bank's recent move affects only a very limited number of loans and has expressed confidence in the company, despite the policy change.