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Trema Seeks Clients among Real Estate Lenders

Trema, a technology company known for providing automation to international clients as big as the European Central Bank and Canada Mortgage and Housing Corp., is now offering its services to users in the U.S. mortgage market.

And Trema's Finance Kit trading system is garnering a growing amount of interest, "especially from some of the mortgage companies," Robert Lopez, director, business development for Trema (Americas) Inc., told this publication in an interview at MSN's offices here.

Finance Kit's strength lies in its ability to give clients the ability to handle a wide range of financial products using a single system, Mr. Lopez said. That may prove attractive to mortgage market participants, he said.

Such a system is likely to be attractive to such clients because many companies are "no longer just looking at their mortgage portfolio," Mr. Lopez said. This has been especially true given "the increase in mortgage rates recently," he said.

"You can't just go out nowadays and say, 'We run a big mortgage book and we're just going to manage the mortgages,'" Mr. Lopez said. "What we're seeing is people starting to cross assets now in order to more effectively manage the risk of that portfolio and different banks have different exposures."

He said that many companies, for example, "have foreign clients, whether they be (corporations) or banks, that they are getting money from and issuing mortgages. (So) they have foreign exchange exposure."

Companies are "really looking to manage their portfolios on a (generally accepted accounting principles) basis," Mr. Lopez said. "So, taking a certain percentage of the portfolio, managing short-term products and ... managing long-term bonds (in another and) things like that ... the only way you can do that is (by using) one integrated system."

Few U.S. mortgage market participants of this ilk actually have such a system, Mr. Lopez said.

"A lot of them we're speaking to have been just really using spreadsheets, or a system just for derivatives, or a system just for foreign exchange, (etc.)," he said.

Such companies would get a better handle on their risk if they used a single system like Finance Kit, according to Mr. Lopez.

"The big issue ... from a regulatory perspective (for these companies) is that they've not been able to consolidate all those positions into one place and say what really is the risk of the bank to foreign exchange rates, to interest rates (etc.)," he said. "They have a rough idea, but ... even in the foreign exchange market (for example) you still have some inherent interest rate risk, right? Because there's some parity between foreign exchange and interest rates and that's something they've never been able to monitor."

Some companies have been questioning the need to invest in technology that would allow them to monitor such things at a time when higher interest rates have been reducing their origination side products. But Mr. Lopez argues that it's better to spend the money on automation that allows a company to better manage its interest rate risk than to get caught by an unexpected rate swing without the proper resources to mitigate its risk.

"The recent increase in interest rates has kind of shaken people up a little bit in terms of, 'Well, where's the business going to go? What do we have to do?'" he said. "Now some people originally said, 'Well, if we're not making as much money on these refinancings should we go out and buy a system and spend money on a system?'

"But ... you have to be able to model the movement in interest rates going forward in order to effectively fund yourself and hedge you exposure in the marketplace," Mr. Lopez said. "A lot of banks have been burnt in the last three months (by interest rate risk)."

Started in Stockholm in 1992, Trema today has 90 clients and 115 locations globally, including a U.S. office in Boston.

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