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

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