MPF Xtra: Reminders on Calculations and Reporting
Written by: Heather Papows, Senior Loan Servicing & Secondary Market Consultant
Last week, FHLB’s Mortgage Partnership Finance (MPF) program released Announcement 2024-29[i] , which issued a reminder to MPF Xtra servicers regarding payoffs and liquidations and the calculation of interest due. The reminder serves as a good opportunity to review your core servicing platform parameters to ensure optimal setup for MPF Xtra loans. As a reminder, the MPF Xtra product mirrors that of Fannie Mae actual/actual portfolios, so much of this may be familiar if you have a direct Fannie Mae servicing portfolio as well. Requirements include the following:
Interest on payoffs must be calculated using the UPB as of the LPI (last paid installment) date, up to but not including the actual payoff date.
A full month of interest will always be based on a 30 day month/360 day year (called the interest basis), whereas a partial month’s interest in the payoff/liquidation month is based on actual days/ 365 day year.
When a curtailment occurs in the payoff month, the borrower’s interest due must be based on the reduced UPB; however, the servicer’s interest due to the investor is based on the UPB as of the LPI date. This often results in a variance between interest collected and interest passed on to the investor, which the servicer is required to cover (often considered a “cost of doing business” with the investor).
This last reminder related to the handling of curtailments and the different calculations of interest to the borrower versus the investor is often where core servicing platforms struggle to align. As the servicer, you are ultimately responsible for ensuring accurate reporting, which in many cases may require manual adjustments when there are payoffs with curtailments in the same month.
If you are unsure whether or not your servicing platform is appropriately handling unique payoff situations like the calculation of interest with curtailments, or would like to discuss how SCA can provide training and guidance on reviewing and managing your investor servicing process, please contact our Director, Bill Dolan, at WDolan@scapartnering.com or by phone at (617) 694-2617.
[i] https://www.fhlbmpf.com/docs/default-source/2024-mpf-announcements/mpf-announcement-2024-29.pdf?sfvrsn=6375cf29_1
