Mortgage Capital Trading, Inc. (MCT®), the de facto leader in innovative mortgage capital markets technology, announced today an improvement to functionality through customizable duration analysis for specified loan products. Mortgage lenders using the comprehensive capital markets platform MCTlive! now have the ability to increase, review, and refine the granularity of their spec durations, leading to more precise hedging and reduced basis risk.
SAN DIEGO, Calif. /Mortgage and Finance News/ — Mortgage Capital Trading, Inc. (MCT®), the de facto leader in innovative mortgage capital markets technology, announced today an improvement to functionality through customizable duration analysis for specified loan products. Mortgage lenders using the comprehensive capital markets platform MCTlive! now have the ability to increase, review, and refine the granularity of their spec durations, leading to more precise hedging and reduced basis risk. The new specified loan durations functionality, customized to the given lender’s execution, puts the formerly back-end modeling directly in the hands of mortgage capital markets professionals.
“Pricing granularity in the secondary mortgage market has steadily increased for nearly a decade. We feel it is essential to give clients transparency and customized control around spec durations,” said Phil Rasori, COO of MCT. “As evidenced by the Mission Score programs and the latest low loan balance specified pool tranches, a rising share of production can be expected to be spec eligible in the future. With this release, our clients are prepared to reap the benefits of that trend while maintaining the strongest possible hedge performance.”
Specified loan products available to be sold to the agency cash windows or Ginnie Mae securitizations yield better pricing for mortgage lenders, but their durations vary compared to non-spec production, which, if not properly accounted for, exposes hedged mortgage pipelines to basis risk and underperformance. Many lenders choose to adjust for the spec duration variance by estimating off an average of their pipeline expected to be spec eligible, but this approach leaves them vulnerable to changes in the makeup of their pipeline.
MCT’s superior approach runs an analysis of each execution of each spec program to calculate and set spec durations. These executions include product-level cash window, dealer pay-up survey and, most importantly, MCTlive! platform specified pool executions. Spec durations are now available for review and customization by clients. This new functionality is designed for seasoned capital markets professionals to get involved in the process themselves rather than having it managed by MCT experts. Lenders interested in a refresher are encouraged to read Duration & Convexity in Mortgage Pipeline Hedging.
“Giving our clients and traders the ability to match their loan durations to their spec executions provides them a critical edge in the industry-wide progression towards higher pricing granularity,” said Andrew Rhodes, Senior Director, Head of Trading at MCT. “For lenders delivering significant specified loan production, increasing duration granularity can bring about a meaningful improvement in their hedge performance.”
Mortgage lenders interested in learning more about how granular spec durations may increase their hedge performance are encouraged to schedule a consultation with MCT for the upcoming MBA Annual Convention and Expo.
About MCT:
For over two decades, MCT has been a leading source of innovation for the mortgage secondary market. Melding deep subject matter expertise with a passion for emerging technologies and clients, MCT is the de facto leader in innovative mortgage capital markets technology. From architecting modern best execution loan sales to launching the most successful and advanced marketplace for mortgage-related assets, lenders, investors, and network partners all benefit from MCT’s stewardship. MCT’s technology and know-how continues to revolutionize how mortgage assets are priced, locked, protected, valued, and exchanged – offering clients the tools to perform under any market condition.
For more information, visit https://mct-trading.com/ or call (619) 543-5111.
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