What is the credit-enhancement process and what does it entail operationally?
The credit-enhancement feature represents the basic difference between MPF and other sold-loan programs. Under MPF, the credit-enhancement obligation represents the limit of the member’s exposure in the event of a chargeoff, and is determined after a loss runs through the prior protection levels equity, primary property mortgage insurance, and the First Loss Account borne by the FHLBBoston. It is, in effect, the loss-sharing necessary to bring the loan rating up to required standards for purchase by FHLB Boston. It is calculated using the S&P LEVELS® model. Using selected information from the loan application, the S&P LEVELS model evaluates the probability that a loan will go into default. The credit-enhancement process is performed in an automated format uploaded nightly to the Federal Home Loan Bank of Boston or on a loan-by-loan basis via the member’s computer terminal on the eMPF® Web site. Does MPF have a “box” that approves loans that are sold into the secondary market? No. MPF g
