Optimal Blue

Optimal Blue

Optimal Blue

Aug 31, 8:37 PM

We're running out of room for the food donations we're raising for the victims of the #Harvey2017 #HarveyRelief effort. Way to go team!

Aug 17, 0:12 PM

The Finastra Perspectives 2017 is coming up, and we can't wait to see you there. Come join us at Booth #27!

Aug 15, 6:45 PM

If you're going to be at the Finastra Perspectives 2017 conference, we look forward to seeing you. Come join us at Booth #27.

Aug 9, 0:44 PM

Here's a little think piece on how competition is driving innovation in our space... ------------------------------------------------- We fight daily for our share of business in what is an increasingly competitive market. While the posture of this competition changes over time, we seem to be in a buyers market right now where there is a plethora of investors clamoring to purchase the supply of originated loans. This has not always been the case. Just a short four years ago, we were in a market dominated by sellers. Post-crisis, the spectrum of active and viable mandatory aggregators dwindled essentially to two Wells Fargo and Chase. Because of this, pricing competition was lax and originators saw aggregator pricing falling below the pricing they could receive if they sold the asset directly to Fannie or Freddie. Put another way, if the originators were prepared operationally and financially to take on the burden of retaining servicing, they could retain the asset essentially at no opportunity cost. As you can expect, there was a rush of originators who sought to obtain their GSE approvals and either sign up with a sub-servicer or create the infrastructure to service loans themselves. Specifically, we observed a significant portion of our clientele putting themselves in a position to retain the servicing asset. We also created a Implied Servicing Value report in our system to provide our customers with a tool for determining if there was value in retaining servicing on any given loan. This market imbalance ended quickly. Over the course of the past several years, we have seen many new investors move into the mandatory space to fill this void. The players range in size, appetite and operational capacity, but they are all there to take advantage of the apparent undervaluation of the servicing asset. The consequence has been dramatic. Pricing is sharper as more entities chase the inventory of newly originated loans. Where an originator once had one or two correspondent relationships, they now have up to 10 or more. Many originators who prepared to retain servicing have found that such a strategy no longer makes sense for their business. The crowded field, along with the advancement in pricing technology, also has forced investors to innovate in their pricing strategies. We have seen investors who granularize their pricing based on purchase and delivery date efficiencies. We have seen others adjust their pricing based on new criteria such as note rate and other loan characteristics. This, in turn, is pushing the technology providers to make their models more efficient in representing pricing that is based on different structures. In my mind, this represents a healthy market where we are seeing changing economic conditions forcing originators, investors and technology providers to continually innovate and adjust. Those companies that can react the best will be the ones that persist. -Don Brown, Managing Director of Secondary Services for Optimal Blue

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