Magazine article American Banker

Smaller Thrifts' CMOs Get a Break on Terms for Swapping Mortgages

Magazine article American Banker

Smaller Thrifts' CMOs Get a Break on Terms for Swapping Mortgages

Article excerpt

NEW YORK -- Thrift institutions participating in the Capital Access program -- which helps smaller thrifts issue collateralized mortgage obligations -- will receive preferred terms when swapping mortgages into Federal National Mortgage Association and Federal Home Loan Mortgage Corp. securities under an agreement announced Monday.

The U.S. League of Savings Institutions, which co-sponsors Capital Access along with Salomon Brothers Inc., said that both Freddie Mac and Fannie Mae have agreed to offer a special price concession and a streamlined process to institutions that participate in Capital Access. The thrifts can swap whole loans into Fannie Mae mortgage-backed securities and Freddie Mac mortgage participation certificates.

Capital Access is one of several CMO conduit programs formed this year as a way for small and midsize thrifts to tap the capital markets. The consuits allow these thrifts to pool their below-market-rate mortgages to back a large CMO offering.

In July, Freddie Mac announced a deal with Epic Financial Services Inc., another conduit company, in which Freddie Mac would offer special rates on its guarantee fee to participants in the Epic program. That deal was announced before problems developed at Community Savings & Loan Association in Maryland and its Epic group of subsidiaries.

Large thrifts have issued CMOs on their own, but an institution making its own offering generally requires an issue of at least $100 million to be economical. That leaves out the small thrifts.

In June, Capital Access made its first offering, an issue of $315 million in CMOs backed by mortgages from 12 thrifts in eight states. The U.S. League said the conduit will make another offering this month.

Both Fannie Mae and Freddie Mac will provide Capital Access members with a range of options and fees to choose from, the U. …

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