How to Internalize Your Best Execution Loan Sales

In this post, we’ll explain how mortgage lenders can leverage secondary market technology and expertise to internalize their Best Execution loan sale process.

Automating a Best Execution loan sale process is a complex and advanced profitability strategy for autonomous mortgage lenders. That’s why the majority of lenders may still prefer utilizing a trusted hedge advisory firm to manage and maximize profits on their behalf.

In our recent article on this same topic, we compared and contrasted a managed versus internalized Best Ex process in order to help mortgage lenders gauge whether they want to make the transition.

If after some consideration you are interested to know the procedural, technological, and staffing requirements to make the transition to an internalized Best Ex, then you have come to the right article!


Six Steps for Automating Your Best Execution

The ever-increasing automation of the Best Ex process is pivotal to the success and satisfaction of growing mortgage lenders. In this first section, we will provide a general overview of the beginning to end process of an automated Best Execution.


1. Select Products: Automation begins at the first step in a loan sale, identifying a population of loans to bring to market. An autonomous secondary market manager will often do this by leveraging secondary market intelligence, such as is found within MCT’s Business Intelligence Platform to keep their finger on the pulse of market outlets.


2. Prepare a Bid Tape: Using a mortgage loan pipeline management software and a bid tape management software, the Secondary Director is then empowered to aggregate, normalize, and distribute a bid tape.


3. Run a Best Execution Analysis: After investors price your tape and return bids, the software runs an analysis to identify the highest price per loan. Further, rate sheet pricing (Best Efforts and Mandatory) is also analyzed as MCTlive’s web crawlers download and parse grids hosted on investor websites. Additionally, MCT Marketplace automatically rules out ineligible pricing on loans that do not adhere to investor criteria.


4. Critically Assess the Nuances of a Best Execution: While often done by an experienced mortgage hedge advisory firm, in an in-house Best Execution process, the Secondary Director employs an assessment of factors unrelated to pricing to determine if there are instances where the Best Ex should be traded away. Once the loans are successfully stratified by the manager to desired investors, automation takes over and requests hit from those investors.


5. Complete Assignment of Trades (AOTs): After the bids are hit, the Secondary Director has the option to complete Bid Tape AOTs. The Bid Tape AOT process is also, you might suspect by now, entirely automated. The Secondary Director is only required to select desired TBA trades to pair up with their committed volume. The signed Tri-Party Agreements are then generated and distributed as the hedge position in MCTLive is adjusted for both the committed loan volume and assigned TBA trades.


What is Bid Tape Assignment of Trade (AOT)?

Bid Tape AOTs are hugely popular among lenders for both the efficiency benefits and cost savings on pair-offs.

By AOT-ing a TBA trade to an investor, the investor agrees to pay the (lower) bid price on the TBA to the client. Normally, pairing-off a trade requires the client to pay the (higher) ask price. Through this clever technology, clients save the cost of the bid-ask spread on every trade they AOT.

Additionally, there is normally a mark-up on a pair-off, referred to as the dealer-margin, that mark-up is also saved through AOTs.

To learn more about this and other functionalities of MCT Marketplace and MCTlive!, schedule a demonstration today. 


6. Write Back Commitment Data: Finally, also through additional automation, MCTLive provides a write-back of the commitment data from the sale into the LOS.


As you can see by the above procedural overview, leveraging industry-leading technology is a non-negotiable component of taking the Best Execution process in-house. Learn more about technology and staffing requirements below.



Secondary Market Staffing Qualifications for In-House Best Ex

Taking the Best Execution process in-house means entrusting a savvy Secondary Markets Director to steer the ship. An ideal candidate will have experience in:

  • Trade Management
  • Commitment Management
  • Pipeline Management
  • Investor Relationships and Communication
  • Investor/Product Stack
  • Product Eligibility and Investor Guidelines

Rest assured, MCT provides the education and tools to improve management in the areas listed above.

An individual capable of taking over the Best Ex process will come with some secondary marketing experience and the critical thinking skills to leverage MCT’s model.

These skills, of course, are learned and improved through coaching by MCT staff. In fact, MCT recommends lenders new to hedging and Best Execution loan sales allow an MCT Trader to manage their Best Ex for the first year or two before fully internalizing the process.


Technology Needs for In-House Best Execution

For a lender intent on moving their Best Execution in-house, it’s impossible to remain competitive in the secondary mortgage market during the digital age without employing industry-leading software.


Schedule a Technology Demo to Learn More

Achieving greater loan sale autonomy has never been easier with MCT’s suite of software and services.

Combining the power of MCTlive!, the award-winning Best Execution and loan pipeline management software with the powerful insights of our web-based BI analytics platform is a recipe for staying ahead of the competition and making critical business decisions while maximizing a Best Execution.

If you’d like to truly understand the breadth and power of these two platforms for this or other purposes, schedule a techology demonstration today! 


Mortgage Loan Pipeline Management Software

It’s imperative to have a comprehensive mortgage loan pipeline management software on hand if you are to take Best Execution in-house. For more information about this topic, we recommend reading 7 Benefits of Best Execution with a Loan Trading Platform to learn why they are now the standard for secondary marketing staff to achieve their goals while reducing risk for the company.

MCTlive! is the most powerful platform available for day-to-day loan pipeline management, trade positions management, and loan sale Best Execution.

The platform was engineered to put the capital markets functions in the hands of mortgage lenders, allowing them to build their capital markets competency inside their own shop.

One differentiator of MCTlive! from the competition is the MCT Marketplace within the platform which integrates with existing lender and investor processes to encrypt bid tapes so that they can be securely and efficiently priced by investors. Investors then load tapes back into MCTlive! where they reside in a centralized bid tape repository that can be easily reviewed to achieve Best Execution. Below are just a few differentiators that set MCTlive! and MCT Marketplace apart from the competition.

Only MCT Marketplace Offers:

  • New executions quickly and conveniently (including bid tape AOT’s)
  • Automated tri-party agreements for AOT transactions
  • All agency API’s as soon as they are available
  • Accurate MTM’s through bid tape indicative pricing through AutoMark program
  • AutoShadow automated investor pricing exploration tool
  • Investor set optimization via iMarket Monthly Reviews
  • Peer benchmarking through the iMarket report set
  • Geocoding of borrower addresses in bid tapes for increased security
  • No external/email NPI data transfer


For lenders seeking to internalize their Best Execution, choosing the most robust loan trading platform is paramount to the success of the whole company. By utilizing MCTlive! and MCT Marketplace, accuracy and reliability are increased with less time spent, pricing and execution are more timely, and the staff can dedicate their resources to strategy and analysis.


Secondary Market Analytics

As you internalize your Best Execution loan sales, secondary market analytics will be invaluable to help your staff make critical Best Execution decisions. When you are independent in your Best Execution decision-making, it is wise to analyze the quality of those decisions and check the pulse of the secondary market to remain competitive.

MCT’s Business Intelligence Tool provides significant assistance in the analysis of market dynamics for the purpose of internalizing a Best Ex.

This platform also provides MCT clients with the opportunity to compare aspects of their secondary market data to their peers and to the MCT average.There is wide variety in the data tables and charts housed within the tool, but it caters to a variety of sellers because our production metrics allow you to compare the execution of your own pipeline to that of like-sized peers.

Unlike other secondary market intelligence tools, the Business Intelligence Platform is a secondary market intelligence software that aggregates proprietary mortgage pipeline and loan sale data from MCTlive! to provide strategic insights to MCT clients in the form of customizable reports and illustrative charts.  This platform aggregates the data from over 315 mortgage banks, credit unions and depositories that do business with over 80 correspondent lenders, all agencies and all major mortgage technology platforms.

So what is one way that you can utilize Business Intelligence to grow your company in its autonomy?

Just one example of a project that can help you achieve the Best Execution is the Loan Sale Color Database. This database allows you to look back at money left on the table on loans where the Best Ex was not executed. The Best Ex may have been moved away from to alleviate a potential post-closing nightmare, but this project allows you to quantify the cost of that headache. The Loan Sale Color Database and other projects relentlessly developed by the BI team afford clients the greatest opportunity for identification of strengths and weaknesses in their performance on the Secondary Market.


Ready to Move Your Best-Ex In-House?

Whether you’re already a Mortgage Secondary and Capital Markets expert or freshly minted, MCT’s disruptive suite of technological advances will help you realize your pipeline’s full potential to increase your company’s bottom line. Whether it’s time to make the move or you’re just taking a peek into the future of your company’s growth, MCT’s software and services will be there to help you achieve your individual goals.

We hope that this and other related articles will help to facilitate the growth and understanding of Secondary Markets for hundreds of Secondary Marketing Directors. The tremendous growth we’ve been so pleased to be a part of is attributable to the flexibility we provide clients in our relationship as their Capital Markets Partner. Think you’re ready for your next stage of growth? Let’s do this!


Leverage Technology for an Autonomous Secondary Department

At MCT we seek to support your growth as a professional and your profitability as a lender. We can customize the level of support you require based on your company’s needs. Taking your Best Execution in-house is just one highly autonomous path to growth.

MCT has the unique ability to meet clients where they are in the development of their secondary marketing department and fast-track them to becoming a Secondary Guru. It’s easier than you might think with the right tools and expert guidance from seasoned secondary market experts.

Contact us today to schedule an MCTlive! or Business Intelligence Platform demonstration so that you can internalize your Best Execution Loan Sales.