Lenders are rightfully taking a hard look at service and profitability. We talked to Chris Anderson, the Chief Administrative Officer of Mortgage Capital Trading, Inc. (MCT) about this very issue. Founded in 2001, Mortgage Capital Trading, Inc. (MCT) has grown from a boutique mortgage pipeline hedging firm into the industry’s leading provider of fully-integrated capital markets services and technology. MCT offers an array of best-in-class services and software covering mortgage pipeline hedging, best execution loan sales, outsourced lock desk solutions, MSR portfolio valuations, business intelligence analytics, mark to market services, and an award-winning comprehensive capital markets software platform called MCTlive! MCT supports independent mortgage bankers, depositories, credit unions, warehouse lenders, and correspondent investors of all sizes. Here’s what Chris Anderson told us:
Q: MCT has traditionally been known as a hedge advisory firm but has successfully transitioned into a full-service integrated capital markets services and technology firm. Can you tell us a little about MCT’s genesis and where the company is at today?
CHRIS ANDERSON: MCT was founded in 2001 with the primary focus of helping mortgage bankers make the switch from selling loans at best efforts to the more profitable mandatory trading in the secondary market. A big part of our value proposition has always been using a business model that provides very hands-on, highly service-oriented secondary marketing support and guidance. We have the largest team of in-house traders and analysts in the industry to ensure excellent service and analytics. This is unique in the sense that each of our lender clients has a dedicated team of three traders and analysts to work with who support their hedging program. One differentiator that set MCT apart early on was our recognition of the importance of providing our clients support in very robust best execution analysis and loan sale commitments.
To complement our core services, we have developed into a fully-integrated capital markets services and technology firm with a broader product set to support our client base beyond hedging and best execution. We now offer an array of best-in-class services and software covering mortgage pipeline hedging, best execution loan sales, outsourced lock desk solutions, MSR portfolio valuations, business intelligence analytics, reporting, mark to market services, and an award-winning comprehensive capital markets software platform called MCTlive! We support a number of different mortgage entities that range from independent mortgage bankers to depositories, credit unions, warehouse lenders, and correspondent investors of all sizes.
Today we have a full-time staff of nearly 100 employees, most of which reside in our San Diego-based headquarters, with additional operations offices is in Philadelphia, Los Angeles, Santa Rosa and Dallas. We have consistently been listed on the Inc. 5000, Inc. 500 and San Diego’s fastest-growing private companies list, and each year we earn a spot on the Best Places to Work list. We see additional growth throughout 2018 and have a strategic plan and infrastructure in place to allow us to grow at a healthy, controlled rate that ensures our client service is always second-to-none.
Q: MCT launched its secondary market technology, MCTlive!, a few years back. Can you tell us a little bit about it?
CHRIS ANDERSON: Absolutely. We have traditionally been known as a pipeline hedge firm, but over the years have worked hard to strategically transform into an advisory firm with an extensive set of integrated capital markets services and technology. About seven years ago, we recognized a growing need for more contemporary, robust, completely web-based secondary marketing software than what was currently available on the market. We invested in the necessary R&D and roughly five years ago we did a soft launch of the platform — MCTlive! — to our own client base.
Since the launch, adoption of MCTlive! has been wildly successful. We have mortgage bankers, depositories, credit unions and correspondents of all shapes and sizes leveraging it for daily advisory services, comprehensive reporting, live market color, and ongoing education to implement their hedging and execution strategies.
Whereas the more traditional desktop-based software applications confine secondary market managers to their desks, MCTlive! is purely browser-based — through and through with no installs whatsoever. It can be accessed anytime, anywhere via a secure online interface. We have some clients that have actually executed trades while on airplanes traveling for business in mid-flight. MCTlive! is delivered on a software-as-a-service (SaaS) basis and resides securely in the Cloud, thus avoiding the issues that accompany traditional on-premise systems.
From a usability perspective, our clients can leverage as much or as little of MCTlive! as they need for their specific business models and extent of secondary marketing experience. Some may be “power users” while others may need a bit of hand-holding and coaching, which MCT is well-known for and extremely good at. We didn’t want secondary marketing departments having a ton of technology shoved down their throats all at once, which is one big issue with other secondary technologies that are out there. We don’t want clients drinking from a technology fire hose. As such, we essentially make available a flexible ‘walk before you run’ model whereby lenders can increasingly use MCTlive! as they become more comfortable; or, they can dive right in and immediately start leveraging the entire platform. It’s really what’s best for their secondary marketing department. And, we’re always there to help them.
The addition of MCTlive! takes our business services offering a step further by empowering lenders with real-time online tools, automation, analytics and reporting that gives them enhanced visibility and control over their secondary marketing functions.
Q: When it comes to secondary marketing technology, what do you think the industry could be doing differently to better serve lenders?
CHRIS ANDERSON: This is a great question. One of the things that the industry needs to improve on with secondary marketing technology is being through and through web-based. Many of the systems out there right now require some sort of an install. Put simply, secondary marketing software needs to become more contemporary. Much of what’s out there is dated.
Also, data must be refreshed as frequently as possible. We board clients that have worked with other firms that are still uploading data once or twice per day, or are using systems that can take 45-90 minutes to run a simple hedge position. In volatile markets, this leaves clients with unnecessary market risk.
When a platform needs to be installed, there is of course maintenance that is required by the lender, thus increasing total cost of ownership (TCO). In some cases, it may require internal IT resources to help manage. Further, the systems need to be more user-friendly. Some of the models are basically, ‘You own it and you manage it. Good luck.’ These on-premise installs can be tough to work with, especially for a lender that does not have a large secondary marketing department.
When we developed MCTlive!, we made sure it was completely browser-based and delivered on a SaaS basis. The example that I mentioned earlier where some MCT clients executed trades while on a plane in mid-flight would not be possible with older platforms. Also, some of our clients are using MCTlive! as a capital markets core system-of-record that also includes business-critical analytics and reporting, which is quickly changing the game. We are starting to see some overhauls of existing systems, but they still have a long way to go. Rome wasn’t built in a day.
In addition, we provide a dedicated team of high-value employees to oversee each and every new hedge client, and we try to do as much of the heavy lifting for our clients as possible. For example, despite my many responsibilities, I am still personally involved with every new client that boards to ensure that we do everything we can to prepare our clients up for a smooth, successful transition. We saw a void in the marketplace, one that lacked a solid marriage between technology and people. The industry could be doing a better job of being more hands-on with traders to work with lenders and the technology to support them.
Q: Mortgage loan trading is starting to go digital. Where is the industry at today and where do you see it going?
CHRIS ANDERSON: Obviously, on the origination front, the point-of-sale is quickly being automated with borrowers not having to provide paper docs and scans. Being able to automatically pull things like Verification of Employment (VOE), Verification of Income (VOI), Verification of Assets (VOA), access to the IRS, eSigning capability, etc. is saving a lot of time and enhancing the borrower experience while reducing costs. In the back-office, eClosings are gaining momentum, too.
In our capital markets world, however, the mortgage industry is rather slow to catch up to the age of digital loan trading and business transactions. But over the next 12-18 months we are expecting to see a continued trend in the adoption of digital mortgage loan trading tools. As an example, bid tape transfer platforms for the investor community, which automate the acquisition of tapes from lenders, has really started to gain quick adoption.
Right now lots of lenders are using manual delivery methods and are likely leaving some profits on the table. But we’re moving toward enhanced automation and real-time trading activity across the board for the entire secondary marketing process. What really matters most is how it is executed. Automation brings more granularity with price, more robust best execution, greater transparency, and optimized trading for both buyers and sellers via sophisticated transaction management platforms.
Also, we’re seeing traditional rate sheets changing as the mortgage industry becomes more digitized. Currently, bidding transpires at the tail end of the mortgage manufacturing process. Digitizing this will move the pricing and knowledge about spec pay-ups to the point of origination, thus reducing the need for traditional rate sheets.
Q: What are some of the challenges when lenders make the switch from best efforts to mandatory loan trading commitments?
CHRIS ANDERSON: The biggest challenge for lenders is finding the right firm to work with in their transition. There are changes in underwriting, workflows, technology configurations, and accounting processes, as well as ensuring that there are proper third party relationships with broker dealers and investors.
These shifts can seem overwhelming to a lender if they don’t partner with the right firm for their unique business needs. At MCT, we have invested in significant staffing resources to ensure that we are armed to assist lenders in this transition. We pride ourselves on our educational approach to assisting clients. We make it a priority to recruit business development and implementation staff that have deep expertise in capital markets and have actually sat in the seat that our clients do when they make the transition.
Q: How important are integrations to a lender’s secondary marketing technology?
CHRIS ANDERSON: As we know, on so many levels in the mortgage industry, it’s all about the data. It needs to be clean, accurate, and integrated. Keeping your data in order and being in complete control over it is paramount to the digitization of whole loan trading and better hedging. Having tight, bi-directional integrations between the pricing engine at the point-of-sale to the LOS in the back-office, and ultimately the secondary platform is vital to ensuring data integrity, compliance, profitability, and effective risk management. Sure, good system-to-system integrations always help eliminate manual intervention, reduce costs, decrease errors, speed up processes, etc., but moreover, when using a hedging strategy, integrations are a path to achieve better hedging and greater profitability. It’s the real-time exchange of loan data that ends up creating more profitable loan sales to investors.
At MCT, we recognized the need to proactively develop integrations with leading LOS platforms. We introduced our first direct LOS integration in 2010 and have been steadily adding them ever since, and we now boast integrations with all leading platforms.
Chris Anderson thinks:
1.) The secondary marketing trend we’ve seen over the past few years will continue, with bulk bid tapes as the increasingly dominant delivery channel for whole loans to investors.
2.) Technology automation such as data write-backs will become more prevalent as the mortgage industry recognizes the need to embrace technology and leverage it to reduce manual errors and save labor costs.
3.) As rates continue to rise, we will begin to see a significant increase in non-QM loan volume, and we’ll again be in a purchase market, forcing lenders to shift their marketing strategies.
Chris Anderson is Chief Administrative Officer at Mortgage Capital Trading, Inc. (MCT) where he currently oversees the company’s Lock Desk Division, IT & Programming Division, and Business Operations Division that includes Administrative Operations, Compliance, Human Resources, and Risk Management. He has management experience in both the private and public sectors with expertise in regulatory compliance, organizational development, project management, data systems management, professional development, and public policy analysis. Notable is that in 2013 Chris successfully grew MCT’s Lock Desk Division and established it as the industry standard for outsourced lock desk services.