Rasori’s Relentless Releases Episode 4:

Pull-Through Functionality for Refi Fees Reintroduction

Published 09/24/2020

In MCT’s fourth episode of Rasori’s Relentless Releases, Phil Rasori reviews new MCTlive! pull-through functionality which accounts for the market experience adjustment caused by the reintroduction of the 50 basis point Agency Refi Adverse Market Fee. This update comes as we approach the pipeline lock window for the implementation date of December 1st. 

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MCT® is continually optimizing our capital markets software to keep up with the current market space. In an effort to inform you of these real time enhancements this video will review the latest MCTlive! innovations and functionality updates for your benefit. View the episode then join our newsletter to be updated on new releases.

About the Video:

In Episode 4 of Rasori’s Relentless Releases, Phil Rasori discusses the new update to MCTlive!’s pull-through model which accounts for the reintroduction of the 50 basis point Agency Refi Adverse Market Fee. 

Topics Include:

  • A review of the update in Episode 1 of Rasori’s Relentless Releases related to the pull-through model.
  • How today’s enhancement is accounting for the August reintroduction into pipeline pricing.
  • An explanation of the ‘Mrkt Diff Reduction’ field and how it’s being used to apply the 50 basis point Refi Adverse Market Fee.

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Rasori’s Relentless Releases focuses on technology updates to MCTlive!, MCT’s award-winning loan pipeline management software. 

Features include:

  • 100% Cloud-Hosted, Web-Based, Real-Time Functionality
  • Multidimensional Pull-Through Analytics
  • Bid Auction Manager (BAM) Loan Trading Platform
  • Electronic TBA Trading
  • Rapid Commit for Agency Delivery

Learn About MCTlive! 

Video Transcript

Hello and welcome to the MCT Live Release Notes summary for the week of September 21st.  In this episode we will review new pull through functionality that was released just this morning.  This update allows the MCT Live pull through model to account for the market experience adjustment caused by the reintroduction of the 50 basis point Agency Refinance Adverse Market Fee as we approach the pipeline lock window for the implementation date of December 1st.   

To put context around this new functionality, we’ll first review the update that was deployed and covered in our release notes segment on August 26th. 

If we think back to August, on the 12th of the month FHFA surprised the industry with a 50 basis point Refi Adverse Market Fee.  Because there was no lead time between notification and implementation, this announcement caused an immediate price deterioration for all Agency refinance loans.  However, as all know, on August 25th FHFA reconsidered and decided to delay the implementation of the fee for 90 days.  While this was a good decision, it caused the agency refinances that were locked between August 13th and the 25th to experience an artificial rally of 50 basis points. 

To account for this, we added functionality in the Pull Through Assumptions screen such that a user could artificially adjust the market experience of loans that were locked in a given date range.  In this case, that range is August 13th to August 25th and the actual market adjustment we were making was positive, so we added a negative reduction value to get a positive adjustment of 50 basis points. I know this is a little bit confusing but because it was a market reduction field, we had to add a negative value to get a positive market improvement. 

Now, fast forward to today’s release. Because the adjustment is now getting reintroduced into pipeline pricing, we now have the opposite effect on market experience where this LLPA will artificially deteriorate the market for locks made prior to the date of implementation in pipeline pricing.  Thus, we will place 50 basis points in this ‘Mrkt Diff Reduction’ field and then for the date value in the ‘Lock Date Threshold’ field we will input the date that we are implementing the adjustment.  We will then populate the ‘Expiration Date Threshold’ field with the date that loan must be funded by to not get the adjustment. Because we have received notification from some large aggregators that 45-day locks will be getting hit as of September 24th, we will use September 24th for our ‘Lock Date Threshold’ value and November 8th for our ‘Expiration Date Threshold’ value. 

So, to summarize what is happening here, for loans that are locked prior to September 24th and where their corresponding lock expiration date is after November 8th, this Mrkt Diff Reduction value of 50 basis points will be applied. 

As with all these updates, please feel free to contact your MCT Trader or Client Success Group Representative with any additional questions. 

This concludes this week’s release notes segment, thank you for your time and we will be talking next week. 

“This update allows the MCT Live pull through model to account for the market experience adjustment caused by the reintroduction of the 50 basis point Agency Refinance Adverse Market Fee as we approach the pipeline lock window for the implementation date of December 1st.”

Phil Rasori, COO, MCT

About the Host:

Phil Rasori, Chief Operating Officer, MCT

Mr. Rasori is a recognized thought-leader in capital markets operations within the mortgage banking community. His areas of expertise include complex financial modeling, computational dynamics, and linear programming for operational optimization. He developed the ground-breaking mortgage pipeline hedging algorithms that form the foundation of MCT’s HALO Program today. He has also pioneered several metrics that have become standard industry parlance, including “beta pull-through” factors. In addition to banking clients, Mr. Rasori has consulted with GSE agencies and the US Government on hedging best practices for community banks. Mr. Rasori has functionally led MCT operations since 2005 and ascended to his current role as COO in 2007.

Mr. Rasori is a graduate of University of California, San Diego, and holds a B.S. in Management Science.