Discover How BLP® Works
Close More Loans with Borrower’s Loan Protection® (BLP)
With BLP, you can satisfy the requirement of your customers for long-term, fixed-rate payment structures, while your institution receives a floating rate over the full term of the loan.
BLP vs. Typical Interest Rate Swap
You issue a floating rate loan — and keep the customer relationship and credit risk
- Floating rate loan is all you have on your books
- You keep the customer relationship
Your customer receives a fixed rate
- Borrower will sign a short legal document with PCBB
- This provides a fixed rate that overlays the floating rate loan with you
- This agreement is the only direct interaction PCBB has with your borrower
PCBB hedges the interest rate risk and hosts a derivative on its balance sheet
- Borrower makes 1 monthly fixed payment to you
- We then settle net payments with you
Example: Typical Structure: 20-year amortization and 10-year term
| Calculate Details | ||
|---|---|---|
| Fixed rate for borrower | ||
| 10Y swap rate: | 3.92% | |
| Credit spread: | + | 2.50% |
| 6.42% | ||
| Initial floating rate for bank | ||
| Index (SOFR, 30 day compounded): | 3.03% | |
| Credit spread: | + | 2.50% |
| 5.53% | ||
The Steps of How BLP Works
This 2-minute video shows you how the simple steps in a typical BLP interest rate swap transaction can result in the satisfaction for both you and your borrower!
Why Choose BLP?
Hedging can be a great solution, yet there are various options available in the market, including the most common back-to-back swap.
BLP is not a back-to-back swap and stands apart from other solutions. With our hedging solution, the derivative sits on PCBB’s balance sheet, so you do not have the administrative or accounting challenges that come with a back-to-back swap, which saves you valuable time and potential labor costs.
| BLP | Other Back-to-Back Solutions | ||
|---|---|---|---|
| Hedge Features | |||
| Eliminates complex ISDA and accounting (ASC 815/FAS133) paperwork | |||
| Ability to generate upfront fee income through swap | |||
| Forward rate lock capability | |||
| Hedge from 5-30 years w/o mutual credit puts | |||
| Eliminates need to post collateral upfront or against mark-to-market of swap | |||
| Eliminates cash collateral for forwards with a secured CRE lien | |||
| Eliminates multiple invoicing and payments | |||
| Borrower Items | |||
| Short and simple loan agreement for borrower’s signature | |||
| Hedge is assumable and assignable | Varies | ||
| One fixed, monthly payment to your institution | Varies | ||
| Training and Support | |||
| Onboarding training geared for lenders | Varies | ||
| Meet with you and your borrowers to answer their questions (as we don’t compete) | |||
| Hedge experts available by phone or in-person | Varies | ||
| Mobile hedging app while you are on the go | Varies | ||
| Customized marketing material for your borrowers with your institution’s logo | Varies | ||
PCBB folks have been very responsive; service has been excellent.
Index Rate Choices
Multiple index alternatives gives the flexibility to use what works best for you. If you need help deciding, our specialists can provide guidance.
We offer:
- U.S. Effective Federal Funds Rate (Fed Funds)
- SOFR (Compound)
- 1-Month Term SOFR
