President Norman Rice of the Seattle Federal Home Loan Bank said at a stockholders' meeting that the Seattle FHLBank is developing a program that would buy closed loans and potentially rival mortgage securitization.

The program would involve a sharing of the credit risk in an apparent variation on the Mortgage Finance Program at the Chicago FHLB, which assumes the interest rate risk, while the mortgage originator assumes the credit risk. The finance program is widely recognized as a competitor to the secondary-market programs at Fannie Mae and Freddie Mac.

The Seattle FHLBank's program would need the approval of the Federal Housing Finance Board, but any application to the FHFB is said to be months away.

The Chicago finance program has grown to include five FHLBanks. - ES

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