Mortgage Capital Trading, Inc. (MCT), a mortgage hedge advisory and secondary marketing software firm, has automated the process of digital TBA trade assignment during the loan sale process for both mortgage lenders and participating correspondent investors. This automation makes assignment of trade loan sales (AOTs) faster, more convenient, and easier for investors to offer, and is expected to further expand on the $19.5 million in cumulative savings experienced by MCT’s lender clients as a result of AOTs in 2022.
“During a time of extreme pressure on profit margins industry-wide, we’re proud of the impact AOT automation has had for our lender and investor clients,” shared Justin Grant, Senior Director, Head of Investor Services at MCT. “Based on our conversations with investors who offer AOTs, we estimate MCT lenders represent around ninety percent of AOT executions in the market today.”
AOTs are an increasingly popular industry practice that involves three counterparties – mortgage originator, mortgage investor, and broker dealer – transferring loan collateral and hedge positions to a mortgage investor and executing a tri-party agreement. While the AOT process has been automated for MCT mortgage originators for several years, recent improvements to the functionality have automated the process for participating correspondent investors with support from an integration with Agile’s TBA platform.
“As a mortgage investor, Village Capital is always looking for ways to integrate technology to improve the price and efficiency for our approved lenders,” said Brandon Knudson, VP of National Correspondent Sales at Village Capital. “Full automation of the AOT process allows us to pass along improved execution to our customers as well as improve the efficiency of processing the AOTs. Since everyone is using the same database of record, it greatly reduces any potential errors and speeds up the process of acceptance.”
AOTs enable mortgage lenders to save the bid-offer spread on the to-be-announced mortgage-backed securities (TBAs) used to hedge their open mortgage pipeline. Due to market volatility these bid-offer spreads have been historically wide, averaging 11.3 basis points in 2022. Participating MCT lenders saved an average of $97,538 each through AOTs in 2022.
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