Seattle FHLBank Exits Mortgage Purchase Deals.

Washington -- Under regulatory pressure, the Seattle Federal Home Loan Bank is exiting the mortgage purchase business to reduce its interest rate risk exposure and cut operating costs.

The bank's board of directors and senior management is developing an "exit strategy" for the mortgage purchase program, the government-sponsored enterprise said last week.

The Seattle bank's profitability declined sharply last year and it is currently operating under a supervisory agreement.

As part of that Dec. 10 agreement, the bank agreed to slow the growth of its mortgage purchase program and submit a business and capital plan to its regulator.

The Seattle FHLBank also announced that the Federal Housing Finance Board has extended its deadline for submitting the business and capital plan until April 5. The original deadline was Feb. 28.

This extension appears to recognize that the Seattle bank recently replaced its president, at least temporarily, by bringing back James Faulstich, who served as the bank's president and chief executive from 1979 to 1999.

The Seattle bank developed its mortgage purchase program separately from the Chicago FHLBank's Mortgage Partnership Finance program. And it applied to the Finance Board last summer for approval to start a mortgage-backed securities program called Mortgage Choice.