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Forward Builder Commitments, Long Term Float Down Locks, Lock and Shop, Rate Protection Plan, One-time Close Float Downs....
The use of options as a tool to hedge a mortgage pipeline is nothing new and have been used since they began trading back in 1983. However, the technology and techniques have changed in how to apply them. Options can be an effective tool to reduce risks associated with residential mortgage loan fallout or renegotiations due to market movements. They can also be effective for extended term float down locks and forward builder commitments.
In competitive purchase markets and during times of rising interest rates sellers of homes whether a builder or individual homeowner have elected in the past to advertise and/or offer purchasers/borrowers a break on their interest rates during a period - usually the first two years.
We all knew that a rise in interest rates would hit at some point in time. That time now appears to be upon us as we have seen the 10 Year Yield rise to levels not seen since 2013.
Call us @ (858) 483-4404 x220 to find out how to price and hedge this product
Market Volatility is coming!
In the Mortgage Business...
Considering the recent natural disasters, the renewed interest from home buyers/borrowers to build their new homes, and the relative low level of housing stock, it’s time for mortgage professionals to renew their One-Time (or Single) close product. However, with a new twist that provides borrowers, builders and lenders with more certainty and confidence that the deal will close at a profitable level.
Not paying attention to when a good day to sell your closed loans can cost you sometimes quite a bit!
Matt Gabbard to lead Systems developement at MCM.
MCM has developed a new best execution platform that optimizes your sales according to what will bring the most value according to all available executions - Total Sale Optimization
Forward Builder Commitments protect sales in rising rate environments.
To protect their current and future inventory, homebuilders are entering into Forward Builder Commitments with mortgage lenders.
1. Bad Hedge Ratios: 2. Static Fallout Estimates: 3. No Option Coverage: 4. Old Pricing Levels: 5. Underestimating Locks:
The basis risk between the daily price changes between the coupon and MBS TBA security used to hedge and the execution or pricing source for their mortgages.