How to Choose a Mortgage Hedge Advisor

When you’ve reached the next level of your growth as a mortgage lender, and you’re prepared to take the next steps, you will need to find a trusted partner as your hedge advisor. It’s a very exciting time to think of all the opportunity, but quickly you will find all services are not alike…

Use these tips to find the right advisor, expand your business, and ultimately increase your profitability. You want to ensure that you’re not just partnering with any firm, and to select a mortgage pipeline hedge advisor that will grow with you, by offering the expertise of a one-stop shop, focused on all your capital markets needs.

In this article, we’ll provide the important questions to ask that will help you select a reliable hedge advisor and support your company’s long-term success. We’ll also review key differentiating characteristics and services, only found in a full-service hedge advisory firm, that will put you ahead of the competition.

Table of Contents – What to Look for in a Mortgage Hedge Advisor

• • 1. Flexibility and Customization
  • 2. Great Testimonials
  • 3. Comprehensive Services and Software
    • Hedge Advisor Services Checklist
    • Hedge Advisor Software Checklist
    • Why Pick a Hedge Advisor with a Lock Desk?
  • 4. Technological Innovation & API Integrations
    • Why Secondary Market APIs Are Differentiators
    • Hedge Advisor Innovation Checklist
  • 5. Vendor Connections and Network
•  

1. Flexibility and Customization

Is the hedge advisor willing to understand my business needs to provide me with a customized service experience?

You know your business better than anyone and every lender has different needs. When searching for the right hedge advisor, you want to find a firm that is willing to meet you where you are.

Consider your short and long term goals so you can determine if the hedge advisor of your choice is able to grow with your business over the years. Whether you want some hand-holding or if you want to be educated enough to one day be completely autonomous, a good hedge advisory firm should be able to support you in whatever goals you have for your particular business.

A successful partnership that is formed with a hedge advisor is one that is sustainable, becoming stronger and more useful with time as the advisor gets to know your business and is able to guide you through every stage of growth. In order to grow with your business, find a hedge advisor that offers both best in class services and software.

Lastly, look for a commitment to service in month-to-month contracts. One of the hallmarks of a hedge advisor willing to work with you with flexibility and dedication is month-to-month contracts. Month-to-month contracts show that a company is willing to win your business every month and ensures that you don’t get stuck in a long-term commitment with a company that you no longer want to work with.

2. Great Testimonials and References

Does the hedge advisor offer any testimonials, case studies, or references?

When you are considering a hedge advisory firm, finding someone who’s already a client with the firm is a great start. You will be able to get a first-hand account of the services and software. Reading case studies and testimonials can also make the decision easier.

A superior hedge advisor firm will be first and foremost concerned with the experience of their clients. If this is true, you will find the hedge advisor will have systems in place and specific departments dedicated to the success of their customers.

The purpose of partnering with a hedge advisor is to be supported in your business. When you onboard with a hedge advisor, there is much for the hedge advisor to learn about your business, and there may be some education that you want to receive from your hedge advisor.

As you do your research, determine how focused the hedge advisor is on educating their clients. Are they fully transparent? Do they encourage their client’s autonomy? Or are they trying to keep the knowledge for themselves so that clients will be dependent on them?

Transparency is an important quality to research in a hedge advisor. Does their reporting provide loan-level detail? Do their reports give lenders color on their loan sales? Will they show you the characteristics they use to value your MSR portfolio?

Ask current clients what their onboarding and post ramp-up experience was. How was the support they received? Was it an easy process? How much extra attention is paid to clients in the form of intimate support?

Also, ask about software support. How does the hedge advisor handle their technical support? Have current clients had any experiences with lapses in the functionality of the software? How was it handled?

3. Comprehensive Services and Software

Can your hedge advisor provide additional services or added value, in addition to hedge advisory services?

A good hedge advisor will help you with mandatory executions, but a great hedge advisor will help with every aspect of your business, auditing, and improving your company’s systems all across the board.

When you search for a hedge advisor, you want to make sure they are a one-stop-shop. After all, you don’t want to have to partner with several companies and create more work for you, when you can easily partner to meet all of your needs.

An excellent hedge advisor will provide additional services to lenders including MSR services, rate sheets, lock desk, and much more. You can use the helpful checklists below to ensure you have all that you need to grow into a full-service capital markets department.

Hedge Advisor Services Checklist 

Hedge Advisor Software Offerings Checklist

4. Technological Innovation & API Integrations

Is your hedge advisor continuously being innovative and keeping up with available API integrations?

Partnering with a hedge advisory that is a pioneer of technology and integrations is the key to having the edge over your competition in the secondary market. Look for a hedge advisor that is innovative and consistently breaking new ground.

The digitization of the secondary market is developing at rapid speeds. That’s why it’s important to partner with a hedge advisor that has the dexterity to keep up with and, at times, exceed the pace of growth. Having this edge in a partner will help you exceed as a lender not just during ordinary times, but especially during periods of market volatility when innovative solutions can make or break your business’s success.

Hedge Advisor Innovation Checklist

So, how can you tell if a hedge advisor is innovative?

Here’s a checklist to help you in your questioning.

If you answered yes to any of these questions when researching your potential hedge advisor, it’s highly likely that this hedge advisor will be able to provide you additional savings, profitability, or efficiency gains not typical of average hedge advisors.

Technological advances in the secondary market save lenders in many ways. For example, lenders save BPS by assigning trades to investors and avoiding pair-off fees with assignment of trade technologies. Other gains are in efficiency, where time is saved and manual processes are automated, creating hours per week in administrative tasks.

6. Vendor Connections and Network

Does your hedge advisor recommend other vendors beyond their own services to find solutions for your business?

Lastly, when you’re looking for an excellent hedge advisor, you want to know what their relationship is with other vendors in the secondary market. When you develop a relationship with a hedge advisor, they ought to be extremely connected within the secondary market. If they don’t have the answer to a question themselves, they can easily connect you to an expert who will.

A great hedge advisor will pride themselves on referring their clients to appropriate third party vendors in order to help lenders advance their business and reduce costs.

When asked by a client for support, a great hedge advisor will go above and beyond their own scope of business to find you a solution.