Loan Pricing Executive Perspectives from NYLX

A Word from the CTO August 2010

back to executive perspectives

Recent mortgage industry trends and events have changed the way companies should think about loan pricing. Loan fallout and re-purchase risk have highlighted the need to assess pricing and eligibility from a broader perspective. RESPA regulation and the accuracy of the database of record have elevated the importance of integration for all systems and applications. Finally, as mortgage lenders take advantage of new strategies for profitability, the mix of Best Effort, Mandatory and Assignment of Trade delivery channels creates new demands for pricing and accuracy on the back end.

As we look at all of these influences we have seen our customers' needs shift from the basics of product eligibility and loan pricing to price decisioning.

Price decisioning is scenario-focused, going beyond product eligibility to borrower and property considerations. Time and effort is wasted on loans that ultimately cannot be closed and can impact loan fallout. Closing on poor quality loans carries re-purchase risk. Price decisioning helps to avoid these situations by embedding additional technology, some of which include validation and controls, into the origination workflow. From your "greenest" to most experienced originator, price decisioning can provide benefits through:

• Loan scenario comparisons that surface liability discussions with borrowers
• Better technology for covering more complex guidelines and rules
• Mortgage insurance eligibility triggers that identify accurate MI payment
• Fully integrated access to AVMs providing an unbiased view of home value
• A searchable database of Investor guidelines for unusual loan scenarios

Price decisioning technology leverages available technologies through direct integrations and a streamlined interface to improve transparency for any loan scenario and drive higher quality for loans locked.

Price decisioning is workflow focused, enhancing productivity by streamlining tasks and caring for the transfer of essential information between systems. Fully bi-directional integrations reduce complexity and improve usability related to multi-technology environments. Information is leveraged and added naturally throughout the workflow, ultimately in support of compliance and data accuracy.

Price decisioning provides insights for additional profit opportunity. It starts with managing Best Effort profitability at the individual loan level, but must also inform the when/where/how of multi-channel delivery options. Price decisioning incorporates access to market information that can drive timing for lock activity, and influence whether loans are locked or hedged. It enhances secondary pricing through side by side comparisons of Best Effort and Mandatory/ AOT for determination of the most profitable Investor and delivery path. It delivers better pricing controls, addressing changing market conditions. In a nutshell, price decisioning puts the right information at the right point in the pricing workflow to make the right lock/float decisions while minimizing the risks and maximizing the benefits associated with market movement.

As the mortgage industry continues to evolve pricing technology must evolve with it. Price decisioning is the next iteration and provides much tighter alignment with the quality, productivity and profitability needs of today's lenders.