3.1 Seller Approval Procedure
After a Seller is approved, in order to participate in MPP, it must execute a master agreement and, pursuant to the master agreement, an MCC.
3.2 Program Documents
1. Master agreement. The Seller must execute the master agreement as provided by the FHLBI.
2. MCC. Pursuant to the master agreement, the Seller must execute an MCC, as provided by the FHLBI. This contract establishes a best efforts agreement between the FHLBI and the Seller for the Seller to sell mortgages to the FHLBI. The MCC details the expected composition of the portfolio to be sold to the FHLBI. This contract also includes the LRA rate (fixed or spread) and SMI rate, if any, for the mortgages to be sold.
3. MDC.
a. Pursuant to the master agreement and the MCC, the Seller must execute an electronic transaction using FHLBI’s LAS in order to enter into an MDC. The MDC shall establish the following contract terms:
i. Contract commitment amount ii. Type of mortgage product
iii. Note rate delivery range (in 1/8% increments) iv. Purchase prices
v. Servicing spread
vi. Delivery period deadline
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b. The Seller’s offer to sell mortgages incorporating the contract terms identified above and the FHLBI’s agreement to purchase such mortgages at the applicable purchase prices established and accepted by the FHLBI establishes the MDC.
3.3 Obtaining Prices
1. Each bond market business day, at 9:30 a.m. eastern time, indicative pricing will be available to the Seller on FHLBI’s LAS.
2. The indicative purchase prices will be quoted for mortgages with 15, 20, or 30-year terms to maturity.
3. For each Settlement Date, the indicative purchase prices will be quoted for eligible note rates in 1/8% increments.
4. The Seller may select a range of note rates for delivery under an MDC. The range parameters will be specified by the FHLBI on the MDC.
5. The FHLBI may change indicative purchase prices and range parameters, or suspend accepting MDCs at any time at its sole discretion.
3.4 Hours during Which Contracts May Be Obtained
Purchase prices will generally be established at 9:30 a.m. eastern time each bond market business day. MDCs for the sale of mortgages to the FHLBI may be obtained during normal trading hours each bond market business day, or such other time as determined by the FHLBI at its sole discretion.
3.5 Required Mandatory Delivery Contract Information
1. The following information must be provided by the Seller to the FHLBI at the time each MDC is entered into. This information is provided to and verified through LAS.
a. MCC number
b. Username and password information, which is tied to the authorized Seller representative’s name, title, and telephone number in LAS
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c. Mortgage product d. Delivery period
e. Contract commitment amount f. Note coupon range
3.6 Mandatory Delivery Requirements
1. Prior to the Settlement Date, the Seller must electronically deliver to the FHLBI mortgages that meet the requirements of the MCC, the MDC, this guide, and documentation criteria in effect at the time the MDC was established.
2. The Seller must ensure that the mortgages are originated far enough in advance of the settlement date to permit any document corrections which may be necessary prior to the FHLBI’s purchase of the mortgages or, if allowed by the FHLBI, substitution for any defective mortgages.
3. The aggregate UPB of such mortgages delivered for purchase by the FHLBI may not vary from the contract commitment amount by more than the purchase variance, i.e., the greater of 1.0% of the contract commitment amount or $10,000.
4. FHLBI reserves the right to extend or pair off any MDC not certified and delivered the day before the Settlement Date.
3.7 Defective Delivery
1. The Seller may obtain a settlement date extension as provided in Section 3.8 of this guide. If the Seller fails to deliver mortgages to the FHLBI as and when required by the terms of the MDC and has not obtained an MDC extension, the Seller may pay a pair-off fee as provided in Section 3.10 of this guide.
2. If any mortgage received by the FHLBI in connection with an MDC is not in
purchasable form or does not conform to the MDC requirements, the mortgage will be deemed not to have been delivered for purposes of satisfying the Seller’s obligations
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under the MDC. The FHLBI may, at its sole and absolute discretion, reject any mortgage for purchase for any reason including, but not limited to the following:
a. The mortgage is a defective mortgage;
b. Failure of the mortgage to satisfy all FHLBI guidelines;
c. Suspected fraud in the origination of the mortgage; or
d. A breach of any other representation, warranty, or covenant made with respect to the mortgage as stated in the program documents.
3. If the defects which cause the mortgage not to be purchasable are not cured on or before the applicable settlement date, the Seller may elect one of the following options:
a. Decrease the purchase proceeds, request extension of the settlement date, or cure the defects on or before the extended settlement date, all in accordance with Section 3.8 of this guide.
b. Pay a pair-off fee as provided in Section 3.10 of this guide.
c. Replace defective loan with a Mortgage loan that meets the terms of MDC.
3.8 Extending the Settlement Date
1. The Seller may extend, at the option of the FHLBI, the settlement date for an active MDC once the Seller has determined that it will not be able to deliver the mortgages necessary to satisfy the MDC prior to the applicable settlement date.
2. Extensions may be requested before the applicable settlement date by calling the FHLBI.
3. If an extension is granted, the purchase price, as established in the MDC, may be adjusted based upon current prices, except in the following circumstance: If at the time the Seller requests an extension, the FHLBI is no longer publishing a price for mortgages having a note rate the same as the note rate of mortgages provided in the MDC, the purchase price shall be the lower of (a) an offer price calculated by the
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FHLBI with reference to the prices and rates that it is publishing in accordance with Section 3.3 of this guide for mortgages with the same characteristics on the bond market business day that Seller requests extension of the settlement date that results in the same yield to the FHLBI as the purchase price initially established in the
applicable MDC or (b) the purchase price initially established in the applicable MDC reduced based upon current market prices. Confirmation of the extension will be transmitted via e-mail to the Seller.
4. The FHLBI shall not be required to purchase mortgages not delivered prior to the settlement date; however, the Seller may pay the FHLBI a pair-off fee as provided in Section 3.10 of this guide.
3.9 Canceling a Mandatory Delivery Contract
1. Prior to the delivery of all of the mortgages that the Seller is required to sell under an MDC, the Seller may cancel an MDC by contacting the FHLBI and indicating the specific reasons for cancellation.
2. The FHLBI will calculate a pair-off fee based upon the amount of the MDC that is not filled.
3.10 Pair-off Fees
1. The Seller may pay the FHLBI a pair-off fee if the sum of the aggregate UPB of the mortgages delivered for sale to the FHLBI prior to the settlement date is less than the sum of the aggregate UPB of mortgages required to be delivered to the FHLBI under the applicable MDC, less the amount equal to the purchase variance under the applicable MDC.
2. A mortgage received by the FHLBI will not be deemed to be delivered to the FHLBI for purposes of this guide if the mortgage
a. Is not in purchasable form, b. Is a defective mortgage,
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c. Does not satisfy the terms or other requirements of the applicable MDC, this guide, or any other program documents,
d. Is suspected of fraud in its origination, or
e. Is in breach of any representation, warranty, or covenant made with respect to the mortgage as stated in the program documents.
3. The pair-off date for an MDC is the earlier of
a. The date the Seller notifies the FHLBI of the cancellation of the MDC, or b. The date on which the MDC expires.
4. The pair-off fee shall be debited from the Seller’s CMS account on the applicable settlement date.
5. Example of Pair-off Fee Calculation.
Lowest MDC note rate, current 7 day offer price
101.95784%
Pair off adjustment (add 1/32) 0.03125%
Adjusted pair off price 101.98909%
Original MDC amount $256,000.00
Variance $10,000
Settlement balance of loans delivered
$181,000.00 Amount to be paired off
(Original amount – variance – loans delivered )
$65,000
Lowest MDC note rate, price at commitment
101.35761%
Price difference (adjusted pair off price- commitment price )
0.63148%
Pair off fee due (amount to be paired off × price difference)
$410.46
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3.11 Increasing the MDC Amount
The Seller may request an MDC increase to accommodate a loan change or loan substitution. The FHLBI reserves the right to assess fees or impose price adjustments based on current market prices if the request is allowed.
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