Enterprise Risk Management
Hedging against risk can be a complex undertaking for the mortgage lender or servicer. When performed well, it protects the institution against various forms of risk. When performed poorly, it costs too much and provides substandard protection from market shifts. MCM’s Enterprise Risk Management offering provides effective risk management for both the lender’s origination pipeline and servicing portfolio.
Many diversified financial institutions face complex calculations when attempting to maximize the return on their various assets. MCM offers the analytical tools and the experience to make this process manageable. This is particularly important for originators who also maintain servicing portfolios.
Our Enterprise Risk Management offering provides the support these institutions need to maximize their balance sheet and protect the institution as a whole from the various risks inherent in the market.
Many servicers find that it is much more efficient to hedge both their servicing portfolios and their origination pipelines together. Separating these assets increases risk and makes it very difficult to formulate a strategy that is cost efficient. By considering them together, these lenders can create a servicing hedge from the pipeline and use that piece as a synthetic option to hedge their servicing position.
Naturally, this is not the kind of calculation that can be done on a spreadsheet. It takes the kind of sophisticated analytical software MCM has developed and perfected over the past 20 years.
While this offering seems completely logical to executives, this capability to hedge servicing portfolio risk in conjunction with the mortgage pipeline interest rate risk really didn’t exist before MCM developed it. It’s a more efficient way of hedging the servicing portfolio.
This approach will actually allow a lender to hedge 100% of their servicing portfolio. Traditionally, servicers have only hedged a portion of their portfolios. But with MCM, the servicer can have a custom hedge level and change it when they need to, for instance, when a market rally increases the risk of portfolio runoff.
Hedging both sides of the lender’s business together is better than simply using pipeline growth as a servicing hedge, especially when rates are rising and growth becomes much harder to achieve.
More lending institutions are taking this enterprise-wide approach to hedging against risk because it makes it easier to respond to changes in the market and can reduce the time and work it takes to alter the strategy in the face of market changes.
Executives working in this industry know that market shifts often occur abruptly. Markets can rally in hours on the basis of an announcement by the Fed or a major investor. On the other hand, rising rates can stifle pipeline growth, leading to fallout and issues with secondary market investors. By keeping tabs on both sides of the house, lenders are better protected from market shocks.
MCM uses its advanced software and years of experience hedging origination pipeline risk combined with its servicing asset valuation expertise to provide enterprise-wide protection for its clients. We know the appropriate shock values to apply and what to expect when the market rallies or sells off. Our experience allows us to counteract any unexpected valuation change the institution may experience.
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:
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.
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 strategiesy. 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
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