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Integration Offers Intelligent Best Execution Capability For Fannie Mae Sellers

Mortgage Capital Trading, Inc. (MCT), a mortgage hedge advisory and secondary marketing software firm, has released a new online functionality that automates the process of product selection and delivery of loan commitments directly to Fannie Mae for MCT’s lender clients. The new solution, which was developed as part of MCT’s ongoing technology collaboration with Fannie Mae, is called Rapid Commit and resides within MCT’s secondary marketing platform, MCTlive!.

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Fannie Mae’s Pricing & Execution – Whole Loan (PE – Whole Loan) application is a whole loan committing platform, providing ease of use, flexibility and certainty for sellers. Rapid Commit functionality retrieves pricing directly into MCTlive!, which in turn speeds up the committing process, ensures data integrity, and optimizes best execution for all commitments.

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“We developed Rapid Commit to make our customers’ entire loan commitment process with Fannie Mae more efficient, providing automated, highly accurate best execution analysis that is instant and robust,” stated Phil Rasori, COO of MCT. “Working within MCTlive!, users leverage Rapid Commit to run initial best execution and determine that the loan meets Fannie Mae selling guidelines, followed by product-specific best execution that intelligently analyzes the optimal subset sizes and products to deliver as individual commitments.”

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Last year MCT announced a new integration with Fannie Mae’s technology that delivered real-time pricing from MCTlive! for the benefit of mutual lender clients. Rapid Commit further strengthens MCT’s collaboration with Fannie Mae and advances the integration of their complementary technologies.

Mr. Rasori added, “Rapid Commit enables a Fannie Mae specific best execution within MCT’s overall robust best execution process via a bi-directional exchange of real-time data that is completely automated between MCTlive! and Fannie’s Pricing & Execution – Whole Loan web-based application. Previously, this analysis was a manual, laborious process but it is now completely automated – all with the simple click of a button. We look forward to working closely with Fannie Mae on business and technology initiatives.”

Progress In Lending
The Place For Thought Leaders And Visionaries

MCT Further Automates Secondary Marketing

Mortgage Capital Trading, Inc. (MCT), a hedge advisory firm and developer of MCTlive!, a secondary marketing software suite, announced that it has added a number of new features to its best execution service offering. The enhancements were done to position MCT to capture additional business among lenders. Here’s how:

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“We already enjoy great a deal of ongoing success with our existing best execution model, but the new features we developed in collaboration with our new MSR Services business unit significantly widens opportunity for MCT,” says Curtis Richins, president of MCT.  “Unlike most hedge advisory firms, MCT has always focused on maximizing loan sales value through a robust best execution analysis that considers a wide range of execution options such as mandatory, AOT,  bulk, Agency, co-issue, etc.  Our deep secondary marketing expertise and long-standing focus in this area really gives us a strong advantage that outpaces the competition and takes best execution analysis to the next level.”

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The enhanced tool is an extension of MCT’s existing best execution methodology, which is traditionally offered with its proprietary hedging services. The option to leverage the new feature set is ideal for lender clients that are interested in deepening their retain/release decisioning process and cash management concerns. It offers additional dimensions of time to payback, cash drain, corporate tax structure, subservicing terms and MSR financing possibilities, which are not available in other best execution models.

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“Lenders, especially non-bank mortgage companies, need to be acutely aware of their cash needs and balance sheet liquidity in addition to getting the best economics out of a loan sale,” said Phillip Laren, director of MSR Services at MCT.  “The enhanced best execution tool provides analytics to compute cash loss after adjusting for tax impact, months to breakeven, and any lift through MSR financing. It’s unique in that it analyzes servicing options not just from a secondary marketing perspective, but also from the financial management side of the business by considering cash spent to retain and when it may eventually be recovered.”

The model is completely customizable to actual sub-servicer costs, tax structures, and financing terms. “What if” scenarios can be set to run different scenarios to empower a CFO and secondary trader with data to determine the best decision based on economics, cash, balance sheet, and tax optimization concerns.

The enhanced best execution solution works in conjunction with MCT’s proprietary HALO hedging and loan sale program and with its award-wining capital markets platform MCTlive!

MCT formed its MSR Services Group last year after acquiring the assets of PLar Analytics, LLC and PB Pacific Partners, LLC.  MCT brought on board founder Phillip Laren to head the company’s new MSR Services Group.  The deal significantly added to MCT’s value proposition by expanding its advisory services to include specialization in mortgage servicing rights valuation.

Progress In Lending
The Place For Thought Leaders And Visionaries

Optimal Blue Streamlines Secondary Services

Optimal Blue Secondary Services, a provider of web-based hedging, loan allocation and best execution services to the mortgage industry, unveiled the industry’s first automated bulk bid management module. This functionality is available as a component of the Optimal Blue Secondary Services system, a platform that combines real-time market pricing with accurate investor and market eligibility content to optimize profitability and efficiency for Optimal Blue’s mortgage origination clients.

Optimal Blue Secondary Services’ technology already gives originators the tools to scrub their data for logical and eligibility errors, and obtain accurate pipeline valuations daily. In addition, they’re able to understand the factors causing their pipeline valuations to change and maximize their best execution strategy with a real-time, multiple investor, multiple commitment style best execution and loan allocation platform. The automated bulk bidding functionality further enhances this model by enabling originators to tame unwieldy bulk bidding processes that currently force inefficient and potentially inaccurate spreadsheet manipulation. Rather than rely on spreadsheets, originators can now bring bids into the Optimal Blue system, and compare them against each other and also against existing executions without having to wrestle with spreadsheets.

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“The automated bulk bid functionality enables our customers to send and receive bid files automatically, facilitating their ability to analyze multiple investor bid results and any other execution that is available to them in one, real-time best execution platform,” said Don Brown, Managing Director for Optimal Blue Secondary Services. Brown also noted that this innovative functionality expedites the bulk bidding process for Optimal Blue customers and, more importantly, ensures that these originators find their best execution every day, on every trade, and with every loan.

Patrick Ruybal, Risk Management Specialist at All Western Mortgage explained, “The most immediate impact with this new functionality is time savings. The new bulk functionality offers a clear view of a true execution within the Optimal Blue platform, allowing me to hit winning bids in a much timelier manner against market movement!”

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He continued, “Allocating loans into the different execution types is also much more efficient, and I no longer need to create individual bulk commitments for individual loans.” Ruybal now experiences a significantly simplified process of importing his spreadsheet, viewing individual loan prices and then easily allocating everything under one commitment number.

About The Author

[author_bio]

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Can The Secondary Market Hurt Mortgage Lending?

The Mortgage Bankers Association held their annual Secondary Market Conference in New York City. Much of the discussion was centered on how to revitalize the private securitization market which has not recovered to anywhere near its previous levels since the devastation caused by the mortgage market collapse. While there continues to be some activity in the jumbo market, the remainder of the conventional secondary market is almost exclusively limited to selling loans to Fannie Mae and Freddie Mac. While there are many other factors including regulatory issues and the ability to validate quality levels demanded by investors, many of the sessions and most of the networking involved how the industry could expedite the re-emergence of those investors whose appetite for mortgage loans fueled the robust market of the 2000’s.

It was therefore ironic that one of the lead stories in the New York Times on Tuesday, May 19th was entitled “Wall St. Puts Crisis Behind and Prospers”. The article discusses the fact that the Wall Street financial sector markets have fully recovered from the impact of the crisis much faster than other segments of the financial services industry and most likely faster than anyone suspected they would. Yet the article was not all good as studies concerning the size and position of the financial markets in relationship to the overall economy were not altogether supportive of the robustness that mortgage lenders are seeking.

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Of particular interest are the concerns expressed about the size of the financial sector and whether or not this quick recovery is actually a good thing. The International Monetary Fund recently released a study that concluded that the existence of large financial sectors “may actually crimp economic growth and living standards for most people.” Furthermore since financial sectors can create debt instruments which allow consumers to take on more debt leading to more frequent boom and bust cycles this rapid recovery may lead to more of the underlying issues that caused the crisis in the first place.

In addition to this, studies at the Brandeis International Business School have found that there is a relationship between the size of a country’s financial sector and the growth of productivity and determined that the larger the financial sector the smaller and weaker the growth in other sectors.

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If in fact these concerns are valid, the issues we face are not that there are few private securitizations taking place, but how will this recovery and growth impact our business. Despite the emergence of the jumbo market as a larger percentage of overall originations, the fact remains that the majority of mortgage lending is done by those other than the mega-rich. If large financial sectors detract from the overall economic growth, what does that mean to those individuals who are looking to either get into the housing market or move up to a larger home? How will this impact new housing starts and will first time-homebuyers now hesitate to make the leap to homeownership? And most important, is it time for the industry and housing policy makers to look for other options for selling and securitizing mortgage loans? The risks of losing such a critical option as Wall Street are significant and need to be addressed sooner rather than later.

About The Author

[author_bio]

Rebecca Walzak
rjbWalzak Consulting, Inc. was founded and is led by Rebecca Walzak, a leader in operational risk management programs in all areas of the consumer lending industry. In addition to consulting experience in mortgage banking, student lending and other types of consumer lending, she has hands on practical experience in these organizations as well as having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.

LOS Update Eyes Compliance And Productivity

With an eye on keeping their clients both complaint and more productive, Ellie Mae has updated its Encompass LOS. Encompass 15.1 was designed to ensure mortgage lenders are in compliance with the Consumer Financial Protection Bureau’s (CFPB) RESPA-TILA integrated mortgage disclosures (TRID) rule scheduled to take effect on October 3, 2015.   In addition to the new fields, forms and automation that have been added to address these new compliance requirements, the Encompass 15.1 release also includes new features for correspondent lending and secondary marketing, with specific new capabilities added to the Encompass product and pricing service.

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RESPA-TILA Support

Encompass 15.1 includes new Loan Estimate (LE) and Closing Disclosure (CD) input forms and workflow, new Fee Itemization and Management, Disclosure Tracking handling, Fee Variance and Change of Circumstance handling to help lenders manage RESPA-TILA compliance. Encompass also enables lenders to set the date when their loans will use new 2015 RESPA-TILA forms by default. Lenders will be able to switch to the new forms for loan applications taken on or after the effective date.

Correspondent Lending Support

The new version of Encompass expands the ability to fully manage correspondent and third-party lending commitments, including commitment authority management and master commitment management. It also introduces a full solution for third-party fees and document management.

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Secondary Marketing Enhancements

Encompass 15.1 contains major new tools to enhance product and pricing and secondary marketing activities, including historical pricing, worst-case pricing scenarios and automated rate lock capabilities.

“Despite the shifting of the effective date of the new regulations, we were ready and committed to providing our lenders with our new release, which we began delivering in June, as we know that compliance with RESPA-TILA is much more than adopting new forms. Lenders need real tools and resources to make the necessary changes to the loan production process and manage third-party relationships more effectively,” said Jonathan Corr, president and CEO of Ellie Mae. “The new release of Encompass provides new capabilities using our pricing and secondary solutions along with the necessary automation and resources required for a smooth transition to a post RESPA-TILA environment. Ultimately this major new version of Encompass is enabling our customers to increase productivity and efficiency.”

About The Author

[author_bio]

Tony Garritano
Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

LendersOne Endorses Optimal Blue

The Lenders One Mortgage Cooperative, a national alliance of community mortgage bankers, correspondent lenders and suppliers of mortgage products and services, recently announced the selection of Optimal Blue as a new preferred vendor. Optimal Blue, a cloud-based provider of enterprise lending solutions to the mortgage industry, provides mortgage banks, community banks and credit unions the ability to navigate the complex mortgage process from capital markets, to consumers, and back.

“Lenders One is focused on delivering opportunities for our members to be innovative in the communities they originate in and with the borrowers they serve. Optimal Blue fulfills that with its highly-regarded suite of technology offerings that’s been proven to simplify the origination process for borrowers and help attract more customers,” said Jeff McGuiness, CEO of Lenders One.

Optimal Blue offers a suite of innovative services that help mortgage banks, credit unions and community banks improve efficiencies, manage compliance, reach consumers and boost secondary market performance. Consumers are looking for a new approach to the lending process according to recent study from PwC’s Experience Radar research group, which found that more than one-fourth of consumers (28%) are looking for a purely online mortgage experience. Meeting that demand is the cloud-based eOriginations platform that extends the simplification of mortgage originations to consumers through an online mortgage application experience, providing transparency and greatly reducing the time and effort required from prospective borrowers.

“Optimal Blue’s innovative technology greatly improves a lender’s ability to originate compliant mortgages efficiently, and to engage consumers who are increasingly interested in applying for mortgages online,” said Larry Huff, Co-CEO of Optimal Blue. “We look forward to working with Lenders One to help its members become more efficient, competitive, profitable, and equipped for success in today’s evolving mortgage origination market.”

Progress In Lending
The Place For Thought Leaders And Visionaries

The Secondary Desk: A Paradigm Shift

*Navigating A Changing Market*
**By Ivan Darius**

***The mortgage industry is undergoing a vast and dramatic shift. It’s more than regulations or investor relations; we are looking at an actual shift in the paradigm of how the mortgage product is assembled. While process management still plays an important role, we are seeing a fundamental shift towards more active management and more intense verification of data.

****Most existing “Database-of-Record” systems are not designed for this paradigm; instead they are primarily used to capture the data. But it’s not good enough to just have static, end result, data. Particularly for compliance, mortgage bankers need to understand where the information came from, what the context was when it was collected, and how it might be needed in the future. Of course, if we can all agree that data quality is the key, the questions center around when and how the data is validated. Do a simple Google search on loan data quality and more than 20 million hits are returned, most of them from vendors promoting loan quality. And what is technology’s role?

****Reading some of the articles, it’s clear that most of what is written is based on the perception of how a mortgage is underwritten and processed. In reality, it’s more about the workflow, access to information in the form of data, open systems, seamless unification of platforms, and Software-as-a-Service, or cloud-based environments that promote greater agility to be able to assemble and validate information in an automated fashion. It’s also about drawing a line between the origination process and data quality. Origination focuses on gathering facts about the consumer and the collateral, processing the data, and efficiency. Data quality and validation is (should be) done in parallel. Working symbiotically with the LOS, constructing and validating the mortgage product and loan level information in a separate system or process, that can then be merged with information in the “Database-of-Record”, ensuring a validated loan file that has minimal repurchase and compliance risk.

****For lenders, it makes sense for that parallel system to be an adaptive product-eligibility, pricing and secondary marketing automation platform. In the last few years these systems have evolved from core pricing and eligibility engines, to a much more complex platform. In the early days of PPE’s, it was a loan officer product and search tool that included basic automation of the locking process. Today, the workflow has matured adding things like automated underwriting, mandatory delivery, hedging and loan committing, consumer point of sale, investor credit overlays, etc – all things that have significantly enhanced the origination and lender workflow functionality. This information is so fundamental to creating a mortgage that it needs to be accessible from the consumer to capital markets and any point in the workflow between. By continually validating the loan level data throughout these steps, a lender is ensured that the output is a higher quality and compliant loan. Investor credit overlays are a good example. All of the above allows lenders to manage risk from the standpoint of both origination and capital markets.

****As the mortgage process evolves, and compliance grows in scope and importance, it is imperative that the industry evaluates how the market is changing and adjusts accordingly. Today, alongside LOS and servicing systems, product, pricing and secondary marketing automation platforms are equally, if not more, relevant. In the proper implementation, these platforms work hand-in-hand, creating a workflow designed to support the industry’s move towards data verification and compliance.

ABOUT THE AUTHOR: Ivan H. Darius, Ph.D. is co-founder and co-CEO of Plano, Texas-based Optimal Blue LLC, an Application Service Provider (ASP) for product eligibility and pricing engine (PPE) technology and content management. Dr. Darius founded Optimal Blue in 2002 with more than 30 years of executive experience in technology, product development and operations. In his current position, he is responsible for managing the day-to-day activities of the company as well as focusing on the technical and strategic product direction. He designed the Optimal Blue system to leverage the convergence of technology with content management to seamlessly connect investors, lenders and originators to more efficiently source, manage, price and lock a loan in real time. Prior to founding Optimal Blue, Dr. Darius was president and CEO of Sollen Technologies LLC in Dallas. While there, Sollen became the first successful ASP selling automation and process improvement tools to the mortgage industry.

The Secondary Desk: Track Performance

*Knowing the Details Makes All the Difference*
**By Don Brown**

***Reporting can change the way that mortgage bankers think about and gauge their secondary marketing performance. To be able to manage your company successfully, you need to understand the efficiency of your processes including the pricing, lock desk, loan processing, hedging, and loan commitment functions of your business.  Understanding these efficiencies empowers you to make the incremental process improvements that result in higher profits.

****A challenge we often face is the association of poor secondary marketing performance, or in popular terms – leakage, with an inefficient hedge.  While there is no doubt some inefficiencies in any hedging process, the culprits for poor secondary marketing performance are more likely to result from other structural or operational inefficiencies.

****This is where strong reporting and data management comes into play.  If you can identify, at a loan level, the base pricing, potential sale price at lock commitment, pre-determined profit margin, and final sale price, you can deduce actual performance over margin and how that compares to potential performance.  With good data management practices, you can then dissect what factors caused the leakage.

****Some of these factors are inherent and unavoidable.  For example, the cost of trading a mortgage backed security that is used as a hedge instrument is a necessary and identifiable component that prevents you from realizing the “theoretical” mandatory spread.   While this cost needs to be managed, it never will be eliminated.

****Other factors, however, can be eliminated with good management – if you can identify them.  Identifying how much leakage was caused by free extensions, program changes, loan commitment mistakes and eligibility changes all can help you develop management strategies designed to streamline efficiency.  Further, identifying inefficiencies in the hedge coverage can help you hone your trading to increase profitability.

****Ultimately, the goal is to enable mortgage bankers to identify the specific factors that eroded performance and quantify the fiscal magnitude of each factor.  With this information, mortgage bankers can identify leakage quickly and take action to minimize it.

****SI recently deployed its Mark to Market (“MTM”) Variance report which provides a detailed analysis of how a client’s MTM has changed from day-to-day, along with a detailed quantification of factors that contributed to this change.

****The report also provides loan and trade level details of those quantifications, which is the type of information needed to implement the management strategies necessary to boost efficiency and profitability.

****With the MTM Variance Report, mortgage bankers can understand the fiscal impact of all of the following factors:

****>> Day to day loan valuation variations;

****>> Daily changes to the existing pipeline eligibility;

****>> New loans coming into the pipeline;

****>> Loans that were relocked;

****>> Loans that were cancelled;

****>> Loans that were taken out of commitments; and/or

****>> Loans that were purchased.

****On the trade side, you can now immediately understand the impact of:

****>> New trades;

****>> Changes to existing forward commitments;

****>> New commitments;

****>> Newly filled commitments;

****>> Newly filled; or

****>> Closed trades.

****With reports like the MTM Variance Report, mortgage bankers now have the power to understand what factors are impacting their hedge, and also the magnitude of the impact.  More importantly, they have the power to take the steps necessary correct or address any issues in a surgically precise, loan level manner.

****Knowing this type of information helps mortgage bankers make the right decisions using the right information, at the time when the decision needs to be made.

Don Brown is the Co-President and founder of Secondary Interactive, bringing more than 20 years of business and legal experience to the company. Don pioneered SI’s risk management practice with a vision for leveraging technology to make mortgage and business processes more efficient and more profitable. Don is a frequent speaker at industry event on subjects ranging from hedging strategy, best execution and loan allocation practice, servicing retention strategies and increasing secondary marketing operational efficiency.