Mortgage Loans Held-for-Portfolio

6 Months Ended

Jun. 30, 2011

Mortgage Loans Held-for-Portfolio [Abstract]

Note 7. Mortgage Loans Held-for-Portfolio.

Mortgage Partnership Finance^® program loans, or (MPF^®), constitute the majority of the mortgage loans held-for-portfolio. The MPF program involves investment by the FHLBNY in mortgage loans that are purchased from its participating financial institutions (“PFIs”). The members retain servicing rights and may credit-enhance the portion of the loans participated to the FHLBNY. No intermediary trust is involved.

The following table presents information on mortgage loans held-for-portfolio (dollars in thousands):


	June 30, 2011						December 31, 2010
				Percentage of						Percentage of
	Amount			Total			Amount			Total
*Real Estate:**
Fixed medium-term single-family mortgages	$	332,717			25.71	%	$	342,081			27.05	%
Fixed long-term single-family mortgages		961,117			74.27			918,741			72.65
Multi-family mortgages		269			0.02			3,799			0.30

Total par value		1,294,103			100.00	%		1,264,621			100.00	%

Unamortized premiums		12,353						11,333
Unamortized discounts		(4,052	)					(4,357	)
Basis adjustment ¹		196						(33	)

Total mortgage loans held-for-portfolio		1,302,600						1,271,564
Allowance for credit losses		(6,349	)					(5,760	)

Total mortgage loans held-for-portfolio after allowance for credit losses	$	1,296,251					$	1,265,804


¹		Represents fair value basis of open and closed delivery commitments.

*		Conventional mortgages constituted the majority of mortgage loans held-for-portfolio.

Acquisitions were not significant and no loans were transferred to the “loan-for-sale” category. From time to time, the Bank may request a PFI to repurchase loans if the loan failed to comply with the MPF loan standards and these have been insignificant in all periods in this report.

The FHLBNY and its members share the credit risk of MPF loans by structuring potential credit losses into layers. The first layer is typically 100 basis points but this varies with the particular MPF product. The amount of the first layer, or First Loss Account (“FLA”), was estimated as $12.7 million and $12.0 million at June 30, 2011 and December 31, 2010. The FLA is not recorded or reported as a reserve for loan losses, as it serves as a memorandum or information account. The FHLBNY is responsible for absorbing the first layer. The second layer is that amount of credit obligations that the PFI has taken on which will equate the loan to a double-A rating. The FHLBNY pays a Credit Enhancement fee to the PFI for taking on this obligation. The FHLBNY assumes all residual risk. Credit Enhancement fees accrued were $0.3 million and $0.7 million for the three and six months ended June 30, 2011, $0.4 million and $0.7 million in the same periods in 2010 and reported as a reduction to mortgage loan interest income. The amount of charge-offs and recoveries from PFIs in each period reported was insignificant.

Allowance methodology for loan losses.

Summarized below are the FHLBNY’s assessment methodologies for evaluating credit losses on mortgage loans. These methodologies have not changed from those reported and discussed in the audited financial statements included in the FHLBNY’s most recent Form 10-K filed on March 25, 2011.

The Bank performs periodic reviews of individual impaired mortgage loans within the MPF loan portfolio to identify the potential for losses inherent in the portfolio and to determine the likelihood of collection of the principal and interest. Mortgage loans that are past due 90 days or more past due or classified under regulatory criteria (Sub-standard, Doubtful or Loss) are evaluated separately on a loan level basis for impairment. The FHLBNY bases its provision for credit losses on its estimate of probable credit losses inherent in the impaired MPF loan. The FHLBNY computes the provision for credit losses without considering the private mortgage insurance and other accompanying credit enhancement features (except the “First Loss Account”) to provide credit assurance to the FHLBNY. If adversely classified, or past due 90 days or more, reserves for conventional mortgage loans, except FHA- and VA-insured loans, are analyzed under liquidation scenarios on a loan level basis, and identified losses are fully reserved.

When a loan is foreclosed and the Bank takes possession of real estate, the Bank will charge any excess carrying value over the net realizable value of the foreclosed loan to the loan loss reserve account.

FHA- and VA-insured mortgage loans have minimal inherent credit risk. Risk of such loans generally arises from servicers defaulting on their obligations. If adversely classified, the FHLBNY will have reserves established only in the event of a default of a PFI, and reserves would be based on the estimated costs to recover any uninsured portion of the MPF loan.

Classes of the MPF loan portfolio would be subject to disaggregation to the extent that it is needed to understand the exposure to credit risk arising from these loans. The FHLBNY has determined that no further disaggregation of portfolio segments is needed, other than the methodology discussed above. The FHLBNY does not evaluate conventional MPF loans collectively. Only FHA- and VA-insured MPF loans are evaluated collectively.

Allowance for loan losses have been recorded against the uninsured MPF loans. All other types of mortgage loans were insignificant and no allowances were necessary.

Allowance for loan losses

The following provides a roll-forward analysis of the allowance for credit losses ² (in thousands):


	Three months ended June 30,					Six months ended June 30,
	2011			2010		2011			2010
Allowance for credit losses:
Beginning balance	$	6,969		$	5,179	$	5,760		$	4,498
Charge-offs		(1,091	)		—		(1,706	)		(34	)
Recoveries		42			17		93			22
Provision for credit losses on mortgage loans		429			196		2,202			906

Ending balance	$	6,349		$	5,392	$	6,349		$	5,392

Ending balance, individually evaluated for impairment	$	6,349				$	6,349

Recorded investment, end of period:
Individually evaluated for impairment — Total impaired loans	$	25,372				$	25,372

Collectively evaluated for impairment¹	$	8,422				$	8,422


¹		All government-guaranteed loans are collectively evaluated for impairment.

²		The Bank assesses impairment on a loan level basis for conventional loans.

Non-performing loans

Non-accrual loans are reported in the table below. Mortgage loans are considered impaired when, based on current information and events, it is probable that the FHLBNY will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreements. As of June 30, 2011 and December 31, 2010, the FHLBNY had no investment in impaired mortgage loans, other than the non-accrual loans.

The following table contrasts Non-performing loans and 90 day past due loans¹ to total mortgage (in thousands):


	June 30, 2011		December 31, 2010
Mortgage loans, net of provisions for credit losses	$	1,296,251	$	1,265,804


Non-performing mortgage loans	$	25,359	$	26,781


Insured MPF loans past due 90 days or more and still accruing interest	$	361	$	574


¹		Includes loans classified as sub-standard, doubtful or loss under regulatory criteria.

The following table summarizes the recorded investment, the unpaid principal balance and related allowance for impaired loans (individually assessed for impairment), and the average recorded investment of impaired loans ^{1 & 2} (in thousands):


							Three months ended				Six months ended
	June 30, 2011						June 30, 2011				June 30, 2011
			Unpaid				Average		Interest		Average		Interest
	Recorded		Principal		Related		Recorded		Income		Recorded		Income
Impaired Loans	Investment		Balance		Allowance		Investment		Recognized²		Investment		Recognized²
With no related allowance:
Conventional MPF Loans¹	$	4,202	$	4,184	$	—	$	4,108	$	—	$	4,353	$	—

	$	4,202	$	4,184	$	—	$	4,108	$	—	$	4,353	$	—

With an allowance:
Conventional MPF Loans¹	$	21,170	$	21,175	$	6,349	$	20,860	$	—	$	21,860	$	—

	$	21,170	$	21,175	$	6,349	$	20,860	$	—	$	21,860	$	—

Total Conventional MPF Loans¹	$	25,372	$	25,359	$	6,349	$	24,968	$	—	$	26,213	$	—


	Year ended December 31, 2010
			Unpaid				Average		Interest
	Recorded		Principal		Related		Recorded		Income
Impaired Loans	Investment		Balance		Allowance		Investment		Recognized²
With no related allowance:
Conventional MPF Loans¹	$	5,876	$	5,856	$	—	$	4,867	$	—

	$	5,876	$	5,856	$	—	$	4,867	$	—

With an allowance:
Conventional MPF Loans¹	$	20,909	$	20,925	$	5,760	$	18,402	$	—

	$	20,909	$	20,925	$	5,760	$	18,402	$	—

Total Conventional MPF Loans¹	$	26,785	$	26,781	$	5,760	$	23,269	$	—


¹		Based on analysis of the nature of risks of the Bank’s investments in MPF loans, including its methodologies for identifying and measuring impairment, the management of the FHLBNY has determined that presenting such loans as a single class is appropriate.

²		Insured loans were not considered impaired. The Bank does not record interest received to income from uninsured loans past due 90-days or greater.

Mortgage loans — Interest on Non-performing loans

The FHLBNY’s interest contractually due and actually received for non-performing loans were as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2011		2010		2011		2010
Interest contractually due ¹	$	377	$	327	$	742	$	637
Interest actually received		347		302		684		587

Shortfall	$	30	$	25	$	58	$	50


¹		The Bank does not recognize interest received as income from uninsured loans past due 90-days or greater.

Recorded investments ¹ in MPF loans that were past due loans and real-estate owned are summarized below (in thousands):


	June 30, 2011									December 31, 2010
	Conventional			Insured			Other			Conventional			Insured			Other
Mortgage loans:	MPF Loans			Loans			Loans			MPF Loans			Loans			Loans
Past due 30 - 59 days	$	20,248		$	644		$	—		$	19,651		$	768		$	—
Past due 60 - 89 days		6,018			68			—			6,437			207			—
Past due 90 days or more		25,372			364			—			26,785			577			—

Total past due		51,638		$	1,076			—			52,873			1,552			—

Total current loans		1,247,654			7,346			270			1,214,725			4,119			3,799

Total mortgage loans	$	1,299,292		$	8,422		$	270		$	1,267,598		$	5,671		$	3,799

Other delinquency statistics:
Loans in process of foreclosure, included above	$	17,246		$	223		$	—		$	14,615		$	284		$	—

Serious delinquency rate		1.98	%		4.32	%		—	%		2.14	%		10.11	%		—	%

Serious delinquent loans total used in calculation of serious delinquency rate	$	25,767		$	364		$	—		$	27,112		$	573		$	—

Past due 90 days or more and still accruing interest	$	—		$	364		$	—		$	—		$	573		$	—

Loans on non-accrual status	$	25,372		$	—		$	—		$	26,785		$	—		$	—

Troubled debt restructurings	$	367		$	—		$	—		$	—		$	—		$	—

Real estate owned	$	344								$	600


¹		Recorded investments include accrued interest receivable and would not equal reported carrying values. Certain comparative data were reclassified to conform to the presentation adopted as of June 30, 2011.