US - California Public Employees' Retirement System's (CalPERS') Member Home Loan Programme has tripled in size over the last year thanks to its conservative mortgage practices, according to CalPERS' Investment Committee.

The pension fund's programme, which offers members 15- and 30-year fixed rate mortgages, adjustable rate mortgages and low down-payment choices for low-to-moderate income borrowers, sold $1.2bn (€886m) worth of loans in 2008 compared to $415m in 2007.

"The strong performance of our member home loan programme reflects its more conservative, less risky loan products and tighter underwriting standards that protected it from the brunt of the industry's subprime mortgage crisis," said George Diehr, chair CalPERS' investment committee.

The foreclosure ratio for the programme's securitised loans was 0.10% compared with the California State's ratio of 2%.

Joseph Dear, chief investment officer (CIO) for CalPERS, said: "Despite the real estate slump, this programme continues to help CalPERS members who otherwise might not be able to buy their own homes." 

According to CalPERS, the scheme offers members "substantially reduced" closing costs compared to standard market loans and the possibility of an interest float down feature, allowing members to reduce the interest rate if market rates decline.

The home loan programme currently has 30 participant lenders on hand to offer loans to its active and retired members. 

CitiMortgage purchases the loans from lenders and delivers pools of the programme loans to Fannie Mae in exchange for mortgage-backed securities. Fannie Mae assumes credit and default risk and transmits monthly payments to CitiMortgage, which then passes principal and interest payments to CalPERS.

Over 333,000 real estate loans have been provided to members since the programme began in 1981.

CalPERS' real estate portfolio delivered a return of 17.6% for the year to 30 September 2008, though this was driven mostly by negative returns from the housing portfolio and the Real Estate Investment Trust (REIT) programme, which delivered -104.6% and -34.0% respectively.

The pension fund's real estate portfolio was valued at $21.9bn at the end of September 2008.

CalPERS currently administrates retirement benefits for over 1.6 million active and retired members and has approximately $167bn in market assets.

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