Our process is simple. FCM receives a download of loan data extracted from your mortgage origination software. We run that data through our proprietary risk management software, which enables us to recommend a hedge structure that will neutralize your fallout and price risks. Our analysts then work with you to make sure you understand and agree with our recommendation, and move to take the necessary action to establish or adjust your hedge position. All of this is done quickly and timely within the parameters established between you and FCM, to meet your business needs. Depending on market and volume requirements, this process is repeated as many times daily as necessary to keep your risk minimized.
We also provide to you on a daily basis our customized best execution advice utilizing the BEAST pricing tool, which enables you to understand which investor will give you the best pricing for your closed loans on any given day. This pricing is also incorporated in your overall market valuation reports, so you know the best price for your pipeline daily.
How We Get Started
First, we get to know you and we learn your business practices so we can begin tailoring our services to you. Then we work with you to develop the data file we need from your LOS to manage your risk and analyze your pipeline. Next, we determine what reports are necessary to manage your mortgage pipeline. If you need something we don’t already have, we can create a custom report for you! We then finish tailoring our customized software and services to your needs to make sure we can assist you to our fullest capacity.
The Hedging Principle
Through our experience working in the mortgage industry we have found that there are two distinct components of mortgage banking. The first being the Origination Process, which is the successful origination of a mortgage loan. The second component is the Secondary Market Process, or maximizing revenue through a complete understanding of capital markets. Many mortgage bankers rely on single loan, best efforts commitments when entering the capital markets. Best efforts provide basic revenue to meet profit expectations in a perceived “risk free” way, but it is neither the most efficient nor profitable means to meet revenue goals.
We at Flatirons have found that the most efficient and most profitable technique to reach and often exceed your revenue goals is not through best efforts, but rather through the Hedging Process. The hedging process is taking an offsetting position in similar market to reduce your risk of loss.
Therefore we have designed our system, with accounting principles at its core, to continually measure all components of the hedging process. We bring the whole process down to a single profitability number. This ensures the maximization of your revenue, and therefore your profitability. We take a “one day at a time” approach: If you can live with your position today, you can live with it tomorrow no matter what the market does.
The heart of Flatirons’ services is customized pipeline risk management. We will use our proprietary software to analyze your mortgage pipeline and provide you with the detailed information necessary to make intelligent and calculated decisions regarding your hedge position.
As part of our risk management services, we will:
- Analyze your mortgage pipeline.
- Generate a daily Mark-to-Market for you.
- Provide you with a daily “Shock Analysis” showing Mark-to-Market position in a range of future potential market pricing scenarios.
- Recommend the proper hedge position to neutralize the fallout and interest rate risks presented by your mortgage pipeline.
- Determine the best sale execution for your loans.
- Execute loan sales on your behalf and with your discretion.
- Execute transactions with authorized mortgage backed security dealers to mitigate risk on your behalf, and at your discretion.
- Generate daily reports detailing your pipeline and hedge positions.
You will have access to a wide-variety of reports which are designed to help you understand the dynamics of your pipeline. With Flatirons’ broad range of more than 100 reports, you can explore your pipeline dynamics and more at a glance.