Why You Need a Whole Loan Trading Platform
Our experiences over the last two decades in the housing market has taught us that seamless trade execution through a whole loan trading platform saves time, minimizes errors, and leads to higher profitability. From integrations with GSEs to Tri-party agreements and bid tape AOT, the right platform selection is crucial to maximizing profitability in the secondary market. Automation is the key to scaling operations and when all data remains in one platform, you can feel more confident about your workflow.
On this page we will be defining what to look for when selecting a loan trading platform, your best options, and the overall benefits of using specialized functionality in your loan trading.
Mortgage Trading Platform
This whole loan trading platform image shows the Bid Auction Manager tab within MCTlive!. Read on to see top features, software, and more!
“My loan trading platform saves me time and kept me from making potential mistakes with a small team.” – First Bank Case Study
What Features to Look for in a Whole Loan Trading Platform
In this section, we’ll discuss some special functionality that you want to look for in a whole loan trading platform.
Whole loan trading platform automation and integrations continue to improve. The integrations to seamlessly acquire Fannie Mae’s Pricing and Execution (Whole Loan Application / Freddie Mac’s Loan Selling Advisor) pricing data to compare against alternative executions, such as bulk bids, is continuing. Some loan trading platforms offer automated commitment of loans by returning trade confirmations to the platform, so clients don’t have to use multiple systems to conduct a single transaction.
More About Integrations
The cash pricing and commitment process is also integrated to include cash pay-ups for fixed-rate mortgages across all specified loan attributes. Prior to this integration, sellers would have to download and print a PDF from Freddie Mac and calculate these loan details. Now, that data pull takes seconds. Once buyers and sellers see the ability to interact at such a fast rate, the platform quickly becomes indispensable to their business model.
Lenders should realize that APIs (Application Program Interface) are proliferating beyond the Agencies and investors (such as Fannie Mae, Freddie Mac, Wells Fargo, PennyMac, and so on). MCT believes that this trend is likely to continue with support from MCT’s InvestorMatic Software.
2. Assignment of Trade (AOT)
With the new bid tape AOT programs, you can assign multiple TBA positions against the total volume to get a weighted-average price. Clients used to be told to hold off making a trade, in order to make a larger trade, and assign it down the road to make the tolerances; but this is no longer necessary. The original AOT process was to manually enter the trade information into the Schedule A of the tri-party agreement, then enter the trade blotter info to the corresponding dealer before sending it.
More About AOT
This bid tape AOT process is beginning to truly dominate the market. MCT expects somewhere between 40 percent and 60 percent of our client’s production to be assigned in the coming six months.
Clients don’t have to pair off the corresponding security, providing savings on the bid-ask spread. The security is assigned to the investor and loans are delivered against that trade. When there is a pair off on a trade and the trade is assigned, remember, that pair off is actually wrapped into the purchase price.
Legacy AOT programs normally required trade tolerances of 1% to 2%, which was virtually impossible for smaller lenders. With the new bid tape AOT programs, there’s an automatic blending that allows us to assign a trade against a population of loans with the price based off a weighted-average AOT strike differential. At the point commitments are requested and subsequently confirms loans are committed, the tri-party is now transmitted.
3. Tri-party Agreements and Bid Tape AOT
Lenders will want to find a whole loan trading platform that automates Tri-party agreements and bid tape AOT executions. Tri-party agreements are executed between the lender (assigner), investor (assignee), and broker/dealer. The loans are then delivered with the corresponding coupon or product into that trade and then the original price of the initially executed trade (the TBA) that were assigning becomes the basis of the trade price for the loan.
More About Tri-Party AOT
Offering a bid tape assignment-of-trade (AOT) loan sale delivery option has become a priority for leading correspondent investors. This execution combines the granularity of price available via bid tape with the cash benefits of assigning the trade, which have historically been mutually exclusive. Watch our webinar to learn more about the benefits of this program.
4. E-signature Capability
E-signatures now automate the process, providing a big efficiency boost. While efficiency is important, the removal of human error is even more impactful. There’s no question that putting the wrong price, volume, or coupon into a tri-party agreement is extremely problematic. New loan trading platforms feature an automatic transfer of data for most of the processes you used to do manually.
More About E-signature
The AOT/tri-party process and the transmission of the trade are resource-intensive in addition to error-prone when done manually, but each of the following steps in the process now causes an automatic transfer of data:
- When a bid tape is posted to the platform
- When an investor uploads their bid levels on that bid tape and best execution analysis is performed
- When the request for commitments on loans the corresponding investor won comes through
- Upon confirmation of commitments coming back from the investor
Overview and Comparison of Top Loan Trading Platforms
Learn about your options for selecting a mortgage loan trading platform and some of the benefits of each company.
noteXchange from Altisource
noteXchange from Altisource can help streamline your workflow, reduce risk and trade more effectively. The platform was designed to buyers and sellers together in a centralized exchange, enabling better communication and shorter sales cycles. noteXchange enables sellers to expedite trading by mapping loans to uniform templates and easily managing the distribution to multiple buyers in one place. This provides loan investors access to greater loan volume and variety.
About noteXchange Platform
- Physical, administrative and technical safeguards that make it easy to sell or source more loans
- Quickly map your loans to uniform templates and easily manage distribution to multiple buyers in one place
- Expedite communication, minimize time-consuming manual processes and rapidly adjust bids to account for market volatility
- Rank top bids by consolidating data from multiple sources and quickly decide where to allocate production
mTrade’s mT360 Platform
The mT360 platform ties buyers, sellers, documents, data, analytics and vendors together. Decision makers can optimize the experience of one centralized platform for loan acquisition, surveillance, and disposition by ingesting seller tapes in different formats and parses loan level data into a standardized format. Processing time is reduced, resulting in deals getting completed more quickly. The platform automates the sorting and grouping of loans into specific pools.
About mTrade Platform
- Improve the efficiency for trading residential whole loans
- End to end Loan Acquisition System (LAS) that ties buyers, sellers, documents, data, analytics and vendors together
- Optimize the experience of one centralized HUB.
- Speed, transparency, risk aversion, communication
- Connect market participants seamlessly and securely
- Enable dynamic document stacking
- Quickly extract data from paper documents
- Reduce settlement time for all market participants
- “Trust and Verify” document data for accuracy
Resitrader by Optimal Blue
Resitrader eliminates the need to email separate bids to investors and manually attach bid tapes, while increasing data security along the way, managing your pipeline, mitigating risk, improving profitability, and ensuring the highest gain on every sale. Receive live bids in real time and turn trades in minutes. Buyers and sellers can leverage expansive trade monitoring automation that ensures critical details are not only collected, but stored and updated in one place.
About Resitrader Platform
- Cloud-based environment
- Single integrated platform
- True auction environment
- Immediate investor notifications of offers
- All completed trades tracked in one place
- Trade confirmations and LOS upload statuses
- Live agency pricing for both servicing retained and released options from Freddie Mac and Fannie Mae
- Directly integrates with Fannie Mae’s Servicing Marketplace Co-Issue Program
Stackfolio is a platform meant for all types of asset classes and product types rather than mortgages specifically. It is a machine learning based prospecting engine and a modern transaction wizard that cracks loan tapes in seconds, sourced from ANY core servicer.
About Stackfolio Platform
- Over $2 billion in loan listing opportunities to buy or sell
- Engine automatically prospects loan listings across thousands of institutions in positions to either buy, sell, or participate
- Execute trades quicker than ever before: automatic tape upload, bid and yield analysis, full communication and deal timeline, and secure data warehouse tools
- View a complete breakdown of any bank’s financials on a powerful and modern data research platform
The MAXEX platform helps solve the risk and complexity associated with the U.S. secondary mortgage market by being the only digital mortgage exchange that enables mortgage buyers and sellers to trade through a single clearinghouse.
About MAXEX Platform
- The first digital mortgage exchange to enable buyers and sellers to sign one contract and trade with multiple buyers and sellers through a single, trusted entity
- Unique approach saves time, reduces costs and increases liquidity
- For sellers: Execute one contract to access multiple leading institutional buyers. Shave days off your liquidity cycles while reducing costs and increasing price executions
- For buyers: Get access to more than 100 qualified sellers from a single, trusted counterparty. Reduce your acquisition costs and optimize pricing
- Already one of the leading sellers of jumbo mortgages on the secondary market. But they also offer additional loan types such as conforming, non-QM and ESG products
MCTlive! Bid Auction Manager
Built specifically for Secondary Marketing by secondary marketing professionals, MCTlive! is the most powerful platform available for day-to-day loan pipeline management, trade positions management, and loan sale best execution. Simply put, it is the most comprehensive solution.
About MCTlive! Platform
- 100% Cloud-Hosted, Web-Based, Real-Time Functionality
- Multidimensional Pull-Through Analytics
- LO Performance Reports & Metrics
- Hedging Scenario “What If?” Tool
- Integrations with Leading LOS Platforms
- Sandbox Capability for Training & Parallel Testing
- Best Execution Engine Incorporating ALL Investor Outlets Including Co-Issue and Bulk Bid Tapes
- Mobile application enables loan pipeline management on-the-go
Why MCTlive! & Bid Auction Manager?
MCTlive! is the most powerful platform available for day-to-day loan pipeline management, trade positions management, and loan sale best execution. Built specifically for Secondary Marketing by secondary marketing professionals. Learn more about this tool by watching the video below, schedule a demo, or read throughout website.
Choose Bid Auction Manager® (BAM) within MCTlive! as Whole Loan Trading Platform
Bid Auction Manager (BAM)® is a platform within MCTlive! loan trading platform that integrates with existing lender and investor processes to encrypt bid tapes so that they can be securely and efficiently priced by investors.
BAM was a first of its kind technology, adding significant value to lenders and investors and establishing newfound efficiencies for bid tape AOT executions to allow lenders to fully capitalize on mandatory to best efforts spread.
BAM has achieved 100% investor adoption with investors citing BAM as the most robust, easy-to-use, scalable, and secure bid tape management technology on the market.
Save time, improve margins, and securely transfer bid tapes with a BAM!
Watch our brief demo for a taste of the power behind the whole loan trading platform from creator Phil Rasori.
Supercharge Your Loan Sale Process with a “BAM!”
No more hours spent sending, receiving, organizing, normalizing, and reviewing bid tapes from a myriad of investors via unsecure emails every time you do a loan sale. BAM saves time and improves margins, whether you use it to streamline your bid tape management or take advantage of robust Best Execution analysis.
More Details About Bid Auction Manager
MCT was the first to release technology to automate the Tri-Party Agreement required between lenders, investors, and broker-dealers during AOT transactions in the secondary market. BAM continues to set the tone for the future of loan sales, continuing with innovations that will better serve the entire secondary market.
“BAM is truly industry-altering fintech that has changed the way loans are exchanged between lenders and investors,” said Phil Rasori, COO at MCT and Chief Architect of BAM. “As we continue to add functionality and make the solution more robust, ultimately, what BAM is achieving is helping move the mortgage industry toward completely digital loan trading on the secondary market.”
For those not harnessing the technology of a trading platform, whole loan trading has become exponentially harder, or less profitable. Lenders not taking advantage of all the delivery methods available are likely leaving some profit on the table. For example, lenders with Fannie and/or Freddie approvals that take out an open position and fill it along the way aren’t going to realize value in the mandatory spread, nor is the process scalable with more volume as it is time-consuming.
Bid Auction Manager (BAM) Features for Lenders
Our real-time mortgage hedging pipeline software, MCTlive! has benefits throughout your company.
Learn more about our comprehensive capital markets platform, Award-Winning MCTlive! Software.
BID TAPE MANAGEMENT
One-click secure distribution, collection, and analysis of bid tapes with your approved bid tape investors.
Anonymized shadow bidding functionality helps you explore potential pickup with unapproved investors, and determine whether to start a conversation.
BEST EXECUTION ENGINE
Review or export a prioritized list of possible executions, commit to investors, and receive confirmations at no additional charge.
RAPID MARKET-ADJUSTED PRICING
Increase speed and organization of the entire pricing process for bulk bid tapes.
LOAN SOFTWARE INTEGRATIONS
Data transmitted through BAM for pricing is retrieved through two-way LOS integrations, making it accurate and easy to set up.
COMMITMENT DATA WRITEBACK
Save time and avoid data entry errors through automation of commitment information back into your LOS.
What is the Future of Whole Loan Trading Platforms?
After the huge shift to bid tape execution which brought granularity of pricing, and the digitizing of the secondary markets taking place in the present that MCT was instrumental in rolling out, where do secondary markets evolve from here?
The trend in the industry, whether on the origination, servicing or secondary side is toward a more seamless, more efficient, and less expensive experience. The future of whole loan trading platforms are no exception to that sentiment.
Thoughts around the industry vary, here are some common themes on the future:
- The vertical structure will become much more consolidated and there will be process coverage from beginning to end of the pipeline.
- Another possibility is moving toward a stock exchange level of shared adoption in the format and process for trading, possibly through blockchain. Or an eBay-style application that provides a format with search criteria for buyers and tools for sellers.
- Others believe the bulk bid process will evolve to so lenders won’t wait to stack up a bulk set of loans before bidding them but will instead be listed for bid as soon as they enter the pipeline, allowing buyers to sort and filter for criteria they are looking for and engender transparent nonconforming markets.
- Many believe the digitization of the loan process will move the pricing and knowledge about spec payups to the point of origination, reducing the need for a traditional rate sheet.
- Finally, pricing granularity is constantly advancing, and one example we could see in the future would be pricing by MSA rather than by state.
Loan Trading Platform Blog Articles
MCT is pleased to announce it is the first secondary marketing platform to integrate with Freddie Mac’s Income Limits application programming interface (API) created for the first-time home buyer area median income (AMI) limits. Income Limits allows for the accurate pricing of Credit Fee in Price (Exhibit 19, or “Credit Fees”) waivers. This is the latest in a series of successful API integrations between MCT and Freddie Mac, and helps promote both pricing transparency and housing affordability.
This whitepaper will review information on moving to mandatory, the strategy of hedging, and how to identify if it is the best option for an originator to use when selling on the secondary market.
In this whitepaper, we’ll review the basics of co-issue transactions, how to get started and how to easily incorporate this strategy in your plan to achieve your business objectives.