FNC Inc.’s new mortgage trading technology platform—which is aimed at allowing originators, banks and mortgage investors to more efficiently trade mortgages in conjunction with its other collateral- and analytic-focused offerings—has processed a few billion dollars of loans from customers and plans to process significantly more as it gets off the ground.
Clark Love, managing director of MortgageTrade, the division of FNC responsible for the platform, told this publication some clients have begun using the platform for trades such as bulk acquisitions of performing and nonperforming loans, acquisitions of loans from correspondent banks, and selling jumbo loans to capital markets investors.
The platform, FNC Clean Room, aims to provide this efficiency by “turning the loan file into structured data that can be easily analyzed,” according to a company press release issued late Tuesday.
The company said extraction from the “signed” loan file, including scanned documents, is done using industry standard formatting with automated identification of missing required loan file documents.
“Investors can use the FNC Clean Room to efficiently extract the data needed from scanned loan files and process defects,” the company said. “Capital markets entities can use the FNC Clean Room to acquire mortgages, sell mortgages, and securely share mortgage data and documents with their approved due diligence vendors.”
The system also is designed to reduce funding times and mitigate the risk of error for originators, according to FNC.
The company said extraction from the “signed” loan file is done using industry standard formatting, there also is automated identification of missing required loan file documents as well as application of validation rules aimed at automatically identifying loan defects, security applied to the transfer of loan files between buyers and sellers, and online access to the loan file for the life of the loan can be authorized. While these functions were designed to help with and improve the loan underwriting/review process, they were not designed to replace it, according to FNC.
“Up to this point, FNC has developed great software and analytical tools for evaluating loan collateral, and the FNC Clean Room will apply those same skills and experiences to the entire loan,” said FNC CEO Bill Rayburn in a press release.
Another company, SecondaryWire, also recently
SecondaryWire does not use transactional pricing and cited concerns with it, but FNC’s Love said, “I don’t think that will be the case for us.”
Love said paying customers are currently using FNC’s system, many of which are from the company’s broader client base, and the pricing varies depending on which of the company’s technology products they use and how many.
He said FNC’s competitive advantage is the extraction and analysis of data it can provide, and the fact that the system is “not just a place to auction off assets” as it can be used for other purposes such as tracking productivity in line with the company’s other offerings.
“Our particular solution is very different,” he said. “Our solution is much more about efficiencies and cost containment than price discovery or marketing.”
Love also noted that trading platforms “have been attempted in the past and not always successfully” but thinks his company’s approach will fare well in the current market.
When why he thinks there have been more efforts to launch trading platforms recently, he said, “One big driver is there is a need for more transparency” related to post-downturn reform.
