With the recent introduction of a servicing released option in the Mortgage Purchase Program (MPP), Seattle Bank members can sell their mortgage loans to the Seattle Bank and the servicing of those loans to the Seattle Bank’s designated service provider—and receive a servicing released premium for doing so.

MPP Servicing Released offers several important benefits for Seattle Bank members—particularly those looking to manage balance sheet sensitivity.

	Competitive Pricing: The combined value of our loan pricing, Lender Rebate Account (LRA) and the dividend earned on your Seattle Bank stock add up to a highly competitive offering.
	Additional Fee Income: Receive a servicing released premium (SRP) for selling your servicing to our mortgage service provider.
	Cost Savings: Sell your loan servicing to reduce or eliminate the need for in-house loan servicing staff and operations.
	Reliable Loan Servicing: Our loan servicer, Principal Residential Mortgage, is a reputable, nationally recognized service provider.
	Choice: Retain the servicing of loans to your key customers, if you so desire, or sell the servicing of other loans you do not want to retain in a servicing portfolio. The choice is yours.

According to Greg Teare, the Seattle Bank’s director of mortgage purchase, having the option to retain or sell loan servicing along with their loans “offers our members a great deal of flexibility. Those looking to strategically optimize their balance sheets can now sell their mortgages—and the servicing of those mortgages—to reduce duration and increase asset sensitivity.”

Many of our members have expressed interest in the MPP Servicing Released program. Take a look at the following frequently asked questions—and answers—about the MPP Servicing Released program to find out if it might be right for you.

MPP Servicing Released Q & A

Q: Generally, how does the Seattle Bank’s MPP Servicing Released program work?

A: Under MPP Servicing Released, participating Seattle Bank members can sell their mortgages to the Seattle Bank under the terms of our existing Mortgage Purchase Program and concurrently sell the servicing of those mortgages to a mortgage service provider—and receive a servicing released premium for doing so.

Q: Who will service the mortgages purchased by the Seattle Bank?

A: The Seattle Bank has selected Principal Residential Mortgage, Inc., a company of the Principal Financial Group®, as its loan-servicing provider. Principal Residential Mortgage is a nationally recognized firm with specialists in every functional area of mortgage servicing and more than six decades of servicing experience. The company currently services more than $100 billion in loans and is the eleventh largest mortgage servicer in the nation. Members may arrange for another servicing provider subject to the approval of the Seattle Bank, but the Seattle Bank will not be able to provide a similar level of support for the servicing transfer.

Q: Why did the Seattle Bank choose Principal Residential Mortgage as its servicing provider?

A: After an extensive review of financial service companies, the Seattle Bank selected Principal Residential Mortgage because of the company’s broad range of servicing capabilities, its capacity to service a large volume of loans and its market reputation for high-level customer service.

Q: How can the Seattle Bank offer more competitive pricing than other secondary market agencies and third-party providers?

A: The Seattle Bank’s “all-in” pricing translates into a very competitive offering for our members. Our competitive, upfront pricing delivers immediate value at the point of sale. Our unique Lender Rebate Account (LRA) returns a financial premium based on the performance of your loans. And, as MPP grows the profitability of the Seattle Bank, it grows the dividend you earn through your membership in our cooperative. In addition, we’ve negotiated very favorable servicing pricing with Principal Residential Mortgage. When considered together, these components can offer an important competitive advantage to member institutions wishing to sell their mortgages and mortgage servicing rights.

Q: Can I retain the servicing for some of the loans I sell, or do I have to sell all of my loans on a servicing released basis?

A: You can retain the servicing of some loans and sell the servicing for others. You decide which loans you wish to keep and which you want to sell.

Q: Is there an additional MPP approval required to participate in the MPP Servicing Released program?

A: No. The loan sale is governed by the same agreements that are used for MPP. The loan servicing is governed by:

	The Servicing Rights Transfer Agreement among the Seattle Bank, Principal Residential Mortgage and the Seattle Bank member
	A Tri-Party Custodial Agreement among the Seattle Bank, the Custodian and the Seattle Bank member.

Q: What is the pricing structure for MPP Servicing Released?

A: Principal Residential Mortgage will make a one-time servicing released premium payment (SRP) in exchange for the right to service your loans. The amount of the SRP will depend on the amount of the loan and the location of the property. Please contact your Seattle Bank account manager for a review of SRPs for your market area.

Q: Is the SRP deposited directly to my institution’s account with the Seattle Bank?

A: Yes. Principal Residential Mortgage will send payment to the Seattle Bank, and the Seattle Bank will deposit directly into the member’s Demand Deposit Account (DDA).

Q: Can I use the Loan Acquisition System (LAS) on the Seattle Bank’s Web site to sell my servicing released loans to the Seattle Bank?

A: Yes. The loan sale to the Seattle Bank will rely on the same process used for a servicing-retained loan, so Seattle Bank members will continue to use LAS for that purpose. Members will have to provide additional data via the Seattle Bank to Principal Residential Mortgage, so that they can efficiently begin servicing the loans. The Seattle Bank will add functionality to LAS to support the additional data elements required for the sale of the servicing in the future.

Q: Will my Lender Rebate Account (LRA) transfer with the servicing to Principal Residential Mortgage?

A: No. Rebate of credit enhancement fees remain an asset of the Seattle Bank member and will be paid based on the performance of their loans.

Q: What happens if there are losses because Principal Residential Mortgage does not perform?
A: Principal Residential Mortgage will be responsible for servicing errors.

Q: Is the commitment to sell loans under the Seattle Bank’s MPP Servicing Released program a mandatory or best-efforts commitment?

A: Member loan commitments are mandatory.

Q: What kind of information do I have to provide to Principal Residential Mortgage, so that they can begin servicing my customers’ loans?

A: Principal Residential Mortgage will require specific loan information, delivered electronically, to service the loan, as well as customer loan files. The Seattle Bank will provide Principal Residential Mortgage with a loan data file received from the Seattle Bank member.

Q: How and when do I let my customers know that the servicing of their loans will be transferred to another institution?

A: You must comply with applicable mortgage servicing transfer laws and regulations. For example, under the federal regulations when you sell the servicing rights to a customer’s loan, you must notify the customer, in writing, at least 15 days prior to the effective date of the transfer of the servicing. We suggest that you review the mortgage servicing transfer laws and regulations that apply to you with your legal and compliance advisors.

Q: How will this new program impact my operations?

A: Typically, when an institution sells its mortgages servicing released, the investor purchasing the loan and the servicing rights makes the credit decisions. With MPP Servicing Released, your institution makes the credit decisions. The loan purchase is handled through the Seattle Bank’s Web-based Loan Acquisition System (LAS), and the Seattle Bank will assist Principal Residential Mortgage with the purchase of the mortgage servicing rights on a monthly basis.

Q: How will the Seattle Bank support us in training our staff in this new program?

A: The Seattle Bank has a training Web site available, so that our members’ employees can practice using our Loan Acquisition System (LAS). Training sessions via conference call and the Web will cover all components of the servicing-released option. These training sessions can be customized to meet your specific concerns.

Q: How can I find out about the specific financial benefits MPP Servicing Released will offer my institution?

A: Your Seattle Bank account manager can help you assess your institution’s particular situation. They have a financial model that can help you compare the benefits of our all-in pricing versus the competition.

For more information about MPP Servicing Released or any of our financial services products, please contact your Seattle Bank account manager at 206.340.2300 or 800.973.6223, or visit our Web site at www.fhlbsea.com.

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