Four more Federal Home Loan Banks have won regulatory approval to participate in a program that allows member institutions to sell jumbo mortgage loans through a conduit to Redwood Trust.

The Atlanta, Des Moines, Pittsburgh, and San Francisco Home Loan Banks were all recently approved by the Federal Housing Finance Agency to participate in the program, known as MPF Direct, the National Mortgage News has learned.

Since the financial crisis, Redwood Trust has been one of the most active securitizers of residential mortgages.

The four FHLB banks join the Chicago Federal Home Loan Bank, which created the partnership with Redwood Trust, and the Boston bank, which was approved earlier. Others Home Loan Banks that are part of the Mortgage Partnership Finance program are considering whether they should participate.

The MPF Direct program, which began last June, has yet to put up reportable numbers. But Marty Hughes, the chief executive of Redwood Trust, said that should change soon.

During an Aug. 5 conference call, Hughes said the addition of the four Home Loan Banks to the MPF program and the recent announcement that the maximum jumbo loan limit was raised to $1.5 million from $729,500, "should begin to accelerate loan acquisitions toward the end of 2015."

The program allows members of participating Home Loan Banks to sell their jumbo loans to the Chicago FHLB, which in turn sells them to Redwood Trust.

Looking at Redwood's other loan conduit activities, the Mill Valley, Calif., based real estate investment trust acquired $1.4 billion in jumbo loans and $1.4 billion in Fannie Mae and Freddie Mac conforming mortgages during the second quarter.

The mortgage REIT issued two jumbo private-label mortgage-backed securities totaling $712 million during the second quarter and sold $708 million in jumbo loans in bulk sales. The most recent deal, Sequoia Mortgage Trust 2015-2, had a slightly higher share of non-qualified mortgages (QM) than prior transactions. QM loans meet certain ability-to-pay criteria for the underlying borrowers. 

Redwood also entered into a risk-sharing agreement with Freddie Mac during the second quarter. "The new arrangement covers the first 1% of credit losses on $1 billion of new conforming loans we expect to deliver to Freddie Mac during the third quarter," Hughes said.

Redwood completed a similar $1.1 billion risk-sharing transaction with Fannie Mae late last year.

The risk sharing transactions provide a "strong alignment of interest between Redwood and the GSEs and is consistent with the goals set by FHFA, the GSEs' regulator," Hughes said on the conference call.

Redwood also has a captive insurance subsidiary that is a member of the Chicago Home Loan Bank with access to advances.

"During the quarter, we transferred $216 million of jumbo loans to our captive insurance subsidiary bringing our total loans financed with the Federal Home Loan Bank borrowings to $882 million," Hughes said.

The FHFA issued a proposal last year that would phase out Federal Home Loan Bank membership for captive insurers over five years. But the plan has run into significant opposition and it's unclear when the agency will issue a final rule.

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