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“When a loan is funded by a lender, its funded normally on a warehouse line and then, after a period of time, the end buyer – provided the loan as sold either to the agencies, securitized or sold to an aggregator – is purchased off the warehouse line by that buyer,” Rasori said in the way of context. “In the context of the Freddie Mac purchase advice API, Freddie Mac, on their cash window when they purchase a loan, will communicate a purchase advice – basically showing contract information on the commitment and the corresponding loan that they’re purchasing. That’s critical information for a few reasons: First and foremost, on the hedge accounting side that a lender performs, and that we as a hedge advisory help the lender perform these hedge accounting reports and hedge accounting functions. The amount of loans that are funded by the end of the month that are in the warehousing line goes into an entry called ‘Held for Sale.’”
Read more: Understanding the use of technology to improve loan efficiency
There’s the rub: “Historically – I should say invariably – the ‘Held for Sale’ safe number at the end of the month is incorrect because the purchase advice data hasn’t been updated fast enough into the loan originations system,” he said. “And so, this enables us to automatically update that purchase data and get a correct ‘Held for Sale’ number on the hedge accounting side. It’s also historically just a very laborious process where someone at the accounting side at the lender is manually typing all this into their loan origination system. This way, it can be automatically updated in the capital markets system – our MCTlive Loan Commitment Tracker – and if the lender has the ability to write data back to their LOS, we can automatically write it back.”
MCT’s integration will yield exactitude: “The accuracy is important because we run what we call secondary variant reports and we want to always match secondary commitment price to the purchase price to make sure there are no data integrity issues or, frankly, issues with the buyer where the buyer didn’t actually perform in some way the price they committed to. So it’s important those purchase numbers are extremely accurate. Anytime you have somebody entering thousands of data points manually, you’re going to get mistakes.”
It’s faster too: “It’s faster, and there’s no labor involved because it’s all automatically flowing, whereas these purchase advice reports per loan are literally hand-entered into the loan origination system. So there’s large labor cost savings as well there.”
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