There are some significant drawbacks to current processes – but there may be a solution
There is evidence standard loan processes are leaving profits on the table for lenders, affected by such variables as liquidity, turn times, and ultimately - best execution.
With standard loan sales, lenders are limited by a lack of information on who can provide them with the best price and by the number of investors who have approved them.
Equally, loans underwritten to certain investors are unsalable if they back out, which in itself is an expensive and complex task when lenders are also obliged to monitor all regulatory changes.
The problem is compounded by the fact that with a standard loan sales process, small and mid-size lenders do not have the time or the luxury to employ enough people to keep abreast of every development.
And despite the use of pricing engines, the risk of slowed turn times remains a problem in standard loan sales.
But now one firm is hoping to tackle these issues with the invention of the BAM Marketplace, which you can read about in this whitepaper.
BAM Marketplace, according to MCT, is the first, truly open loan exchange, since it allows non-approved counterparties to buy and sell loans, all thanks to MCT’s patent-pending Security Spread Commitment.
With BAM Marketplace you’ll receive more timely information on who is winning certain bids, while making your best execution pricing decisions and optimizing your investor set.
In contrast to the standard loan system, all pricing is live with open loan exchange, so that both you and your staff are kept up to date on pricing changes.
There’s no fixed price, as buyers bid in the form of a spread to the underlying security associated with the loan, giving the seller certainty and allowing market movement to continue.
With an open loan exchange, lenders can price and trade loans more efficiently. That way, the risk of slowed turn times for pricing is mostly avoided.
When the CARES Act was introduced in March 2020, it sparked zero servicing on GNMA and a liquidity crisis on non-QM, causing financial hardship for both lenders and warehouse lines.
However, those companies that utilized MCT’s BAM Marketplace were able to ride out the storm.
The BAM Marketplace is already working for a number of firms, giving them the competitive edge they crave. Genesis Collins, the vice president of capital markets at Alpha Mortgage, said: “Had I not had BAM Marketplace, we would have been holding onto a few million dollars in loans and I might not have this job to be telling the story to you now.”
Vice President of Margin Management at OnQ Financial, Angela Woodbridge, noted that MCT’s security spread commitment “really helps” when sitting on a commitment a seller wants to get off their warehouse lines.