Mortgage Loans

6 Months Ended

Jun. 30, 2011

Mortgage Loans

Mortgage Loans

NOTE 5 – MORTGAGE LOANS

The Mortgage Partnership Finance (MPF) Program involves the FHLBank investing in mortgage loans, which are either funded by the FHLBank through or purchased from its participating members. These mortgage loans are government-insured or guaranteed (by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Rural Housing Service of the Department of Agriculture (RHS) and/or the Department of Housing and Urban Development (HUD)) loans and conventional residential loans credit-enhanced by participating financial institutions (PFI). Depending upon a member's product selection, the servicing rights can be retained or sold by the participating member. The FHLBank does not buy or own any mortgage servicing rights.

Mortgage Loans Held for Sale: On December 31, 2010, the FHLBank transferred mortgage loans held for portfolio to held for sale based on its intent to sell specifically identified mortgage loans. All of these loans were classified as conventional mortgage loans. The following table presents information as of December 31, 2010 on mortgage loans held for sale (in thousands):

	12/31/2010
Real Estate:
Fixed rate, medium-term1, single-family mortgages	$16,730
Fixed rate, long-term, single-family mortgages	103,845
Total unpaid principal balance	120,575
Premiums	389
Discounts	(241)
Hedging adjustments2	(113)
Total before fair value adjustments	120,610
Fair value adjustments	(85)
MORTGAGE LOANS HELD FOR SALE	$120,525

1	Medium-term defined as a term of 15 years or less.
2	See Note 7 for a discussion of: (1) the FHLBank's objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

On May 6, 2011, all mortgage loans held for sale were sold at a net gain, which is included in Other Income (Loss) on the Statements of Income. Following are details of the sale (in thousands):

	Three- and Six-month Periods Ended 06/30/2011
Net proceeds	$111,444
Cost basis	(107,019)
NET REALIZED GAIN (LOSS) ON SALE OF MORTGAGE LOANS HELD FOR SALE	$4,425

Mortgage Loans Held for Portfolio: The following table presents information as of June 30, 2011 and December 31, 2010 on mortgage loans held for portfolio (in thousands):

	06/30/2011	12/31/2010
Real Estate:
Fixed rate, medium-term1, single-family mortgages	$1,282,910	$1,181,982
Fixed rate, long-term, single-family mortgages	3,242,814	2,952,556
Total unpaid principal balance	4,525,724	4,134,538
Premiums	50,711	43,974
Discounts	(7,648)	(7,497)
Deferred loan costs, net	2,572	2,514
Hedging adjustments2	3,176	2,288
Total before Allowance for Credit Losses on Mortgage Loans	4,574,535	4,175,817
Allowance for Credit Losses on Mortgage Loans	(3,420)	(2,911)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$4,571,115	$4,172,906

1	Medium-term defined as a term of 15 years or less.
2	See Note 7 for a discussion of: (1) the FHLBank's objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

The following table presents information as of June 30, 2011 and December 31, 2010 on the outstanding UPB of mortgage loans held for portfolio (in thousands):

	06/30/2011	12/31/2010
Conventional loans	$4,007,546	$3,666,532
Government-guaranteed or insured loans	518,178	468,006
TOTAL UNPAID PRINCIPAL BALANCE	$4,525,724	$4,134,538