CalSTRS Suspends Home Loan Program
CalSTRS seeks a replacement for Bank of America to service member home loans

News release

 WEST SACRAMENTO, CA  – The California State Teachers’ Retirement System (CalSTRS) announced today that members seeking a residential loan through the CalSTRS Home Loan Program must have their applications submitted to participating lenders and have interest rates locked in by September 30, 2011.

CalSTRS is suspending all new loan originations through its home loan program effective October 1, 2011 as it seeks a new master servicing, program administration, and compliance agent. CalSTRS’ partner, Bank of America, has been the program administrator and master servicer for the CalSTRS Home Loan Program, but is in the process of seeking a buyer for its correspondent lending business. Although new originations are ceasing, there will be no impact on the servicing of loans already originated through the home loan program.

“This is a disappointing outgrowth of the many problems confronting the housing and mortgage industries, however CalSTRS is committed to the member home loan program and will resume new loan activity as soon as a new partnership can be established with an administration servicing and compliance agent,” said CalSTRS Chief Investment Officer Christopher J. Ailman. “All our members with existing loans will continue to receive the same outstanding service we have been able to provide through Bank of America.”

The CalSTRS Home Loan Program began in 1984 as a means to help members find affordable financing for homes in California. The program now manages a $388 million portfolio. The program also adds value to the CalSTRS investment portfolio, yielding an 8.86-percent return over the past five years. Since its inception, the program has funded $5.9 billion worth of mortgages, totaling more than 43,000 home loans. CalSTRS intends to resume the program as soon as possible after thoroughly exploring the options available in the home mortgage market and locating a new loan servicing agent.

As the current program administrator and master servicer, Bank of America has played a key role in the CalSTRS Home Loan Program by providing several administrative services in addition to originating and servicing mortgages generated through the program. These administrative areas include:

  • Maintaining a toll-free home loan customer service line dedicated to supporting the CalSTRS Home Loan Program with mortgage experts who assist members seeking information.
  • Helping review correspondent lender marketing materials to ensure compliance with the program’s marketing guidelines.
  • Forming Fannie Mae pools known as mortgage-backed securities from the monthly conforming mortgage loan production to provide continuous liquidity for the portfolio.
  • Providing training and quality control to over 65 correspondent lenders across California which have been approved to originate loans for the home loan program.

The California State Teachers’ Retirement System, with a portfolio valued at $146.6 billion as of August 31, 2011, is the largest teacher pension fund and second largest public pension fund in the United States. CalSTRS administers a hybrid retirement system, consisting of a traditional defined benefit, cash balance and defined contribution plan, as well as disability and survivor benefits. CalSTRS serves California’s 852,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts.