Sale Execution Based Rate Sheet Pricing System
Developing accurate daily rate sheets for a lender’s loan officers or third party originator network can be a challenge. Unless the rates the lender offers are based on a very good forecast of its actual secondary market performance, it opens the lender up to substantial risk. This is an unnecessary risk with our service.
Most lenders with any level of sophistication will use an industry data service to get timely market prices for various mortgage backed securities. They will also know the value of their servicing rights. This will allow them to create a base rate sheet based on a model, most likely residing in an Excel spreadsheet. This information can then be sent to a product and pricing engine (PPE) that will allow front-line loan originators to price their loan products for borrowers.
Of course, this method has serious limitations.
One of the most serious limitations is the speed of the origination process. When a loan officer (or a borrower in a digital lending platform) comes into the lender’s PPE, they enter all of the loan parameters required to generate a price. After a few seconds they get a base price and a number of adjustments. These overlays make pricing more complex for originators and it takes them more time.
If the lender is holding its loan production in portfolio, it becomes a simpler problem to solve, but doing this gives away their right to best execution in favor of holding onto the assets. In a tightening market, it may mean leaving money on the table.
Lenders need to know what their best execution is before they originate the loan. By pricing the loan correctly in the first place, they can maximize their return. By missing the market, they risk losing money. We’ve seen clients experience pricing errors that not only cause serious problems for their hedging strategy but also ultimately cost them money.
Lenders aren’t in the business of paying money to originate new loans
A level above portfolio lenders are those lenders who work with a set of investors or correspondent lenders. Typically, these lenders collect rate sheets each day and then price their loans relative to the profit margin they target. Handling this work on spreadsheets is a waste of time and employee productivity and, at the same time, it opens the lender up to risk from transcription errors.
MCM works with lenders, whether they originate their loans for their own portfolios or to sell, by giving them insight into the market in real time, allowing them to price their loans without waiting for someone in their office to collect and transcribe rate sheets from their prospective buyers. We use our analytics to calculate the lender’s base price each day, given the market.I
With MCM, lenders can enter our online system at any time and price their loans with a high degree of confidence that they will actually be able to sell them and achieve their desired profit margin. The results can be exported by loan program or rate for each required lock period.
Both the lock period and the hedge cost per period can be customized. In addition, the system can calculate profitability by period, product, and coupon. Once the system is set to the lender’s requirements, all they must do is push a button. They can generate new pricing as often as they like.
This service is often purchased as a stand-alone offering, but MCM also provides this service to clients working with us through either type of standard relationship:
Partnership Account
MCM advises clients, who then execute trades, best execution based pooling and delivery. MCM is always available for conference calls to discuss trading strategies and to provide consulting and market analysis.
Guardian Account
MCM does it all, executing MBS trades, providing best execution based pooling and delivery, monitoring pricing and leading a daily client conference call to coordinate secondary marketing activities.
Under either type of business relationship, MCM’s systems, reporting and analysis tools are all available online providing instant accessibility to comprehensive analysis and reports, eliminating the need for the client to load, maintain and manage the software.
Ease of access, ease of use, quick report generation and real‑time “what‑if” scenarios all provide the client with the necessary tools to succeed in the world of risk management. Combined with MCM’s experienced advisors, Hedge Commander allows clients to grow and prosper in any market environment.
Since 1994, Mortgage Capital Management has helped mortgage bankers of every size become more profitable through the use of best-in-class pipeline risk management tools and strategies. Our pipeline risk management services, secondary marketing consulting, and hedging/trading services enable clients to prosper in any market environment.
For nearly 30 years, the U.S. mortgage industry has called upon Mortgage Capital Management for expert advice and proven technologies all designed to deliver best execution in service to a more profitable enterprise. Our customer list includes some of the most successful firms in the business.
Viewing the online demo costs you nothing and will shed light on a unique approach to secondary marketing success that you won’t find anywhere else. Don’t settle for mediocre when excellence is achievable.
Get the MCM Competitive Advantage! Call us to today to learn more or schedule an online demo: 858.483.4404 x220
Call us to today to learn more or schedule an online demo
Project & Services
May 8th Market Commentary
MBS prices are down about 3/32 this morning while the DOW is up about 85 points as investors tried to read the rate-cut runes and weighed a fresh batch of earnings reports for insight into the chance of a corporate America-spurred revival. Mortgage applications in the US rose
May 7th Market Commentary
MBS prices are down about 4/32 this morning while the DOW is up about 65 points as investors soured on Disney's earnings and hoped that interest-rate cuts are in the cards as soon as later this summer. Richmond Fed President Tom Barkin sees the economy slowing in the coming
May 6th Market Commentary
MBS prices are down about 3/32 this morning while the DOW is up about 60 points as Wall Street looked set to build on an end-of-week surge precipitated by a softer-than-expected jobs report that helped spur bets toward an earlier rate cut from the Federal Reserve. More than two-thirds
May 3rd Market Commentary
MBS prices are up about 12/32 this morning while the DOW is up about 325 points as upbeat earnings from Apple lifted spirits and a weaker-than-expected jobs report revived bets that the Federal Reserve could cut interest rates sooner than thought. Nonfarm payrolls increased a smaller-than-expected 175,000 (Briefing.com consensus
May 2nd Market Commentary
BS prices are up about 9/32 this morning while the DOW is up about 240 points after the Fed day storm, as investors set aside rate worries for now to focus on Apple earnings and the coming monthly jobs report. Jerome Powell played down the likelihood of an interest-rate hike,
May 1st Market Commentary
MBS prices are up about 5/32 this morning while the DOW is up about 130 points as disappointing earnings dented AI hopes while investors waited for the Federal Reserve's policy decision and clues to the chances of rate cuts. The Fed is widely expected to keep rates at a
April 30th Market Commentary
MBS prices are down about 8/32 this morning while the DOW is down about 330 points as new labor data came in hotter than expected while investors await the Federal Reserve's upcoming interest rate decision, along with earnings from Amazon. Investors are bracing for policymakers to hold interest
April 29th Market Commentary
MBS prices are up about 4/32 this morning while the DOW is up about 110 points to start a big week filled with a Federal Reserve rate decision, the monthly jobs report, and earnings from more "Magnificent Seven" tech heavyweights. In focus is whether Fed policymakers will backtrack
April 26th Market Commentary
MBS prices are up about 7/32 this morning while the DOW is up about 170 points as Alphabet and Microsoft earnings revived hopes for a Big Tech-led rally, even as a reading on the Federal Reserve's preferred inflation gauge showed price pressures remain sticky. Treasury yields declined by
April 24th Market Commentary
MBS prices are down about 7/32 this morning while the DOW is down about 130 points as the ten year treasury yield rose 1.17% to 4.65. Mortgage applications in the US fell by 2.7% from the previous week in the period ending April 19th, trimming the 3.3% increase