How Technology Will Transform Secondary Market Trading for Local Lenders
Sadie Gurley
Small and midsize lenders have lacked dedicated secondary market solutions for years—but that trend is beginning to change. Today, technology-led offerings exist specifically to give local lenders the kind of scale, access, and execution that the industry’s largest players have enjoyed for years.
Maxwell Capital, for example, acts as a dedicated investor that leverages technology to provide competitive rates, faster speed, and better execution for lenders of all sizes. This powerful solution is available exclusively to Maxwell Point of Sale users.
Solutions like Maxwell Capital benefit local lenders’ secondary market trading experience in a few key areas:
Execution
When it comes to the secondary market, predictable and consistent loan files are vital—and automation and technology are the best way to achieve that kind of consistency in execution.
Since technology helps to eliminate or reduce errors in the loan file, it’s a game-changing value-add for small and midsize lenders. By leveraging technology-powered solutions to streamline their process, they can reliably create a consistent loan file and set of data that people can trust. This gives them a strong chance at competing with the largest players in the secondary market.
With Maxwell Capital technology, smaller lenders benefit from a standardized experience. In turn, this reduces the risk that their loan files are inconsistent or inaccurate, creating trust in their data and allowing them to sell their loans for higher rates.
Analysis
Beyond accuracy and execution, technology also helps lenders pursue the most profitable secondary market strategy. By performing a comprehensive best execution analysis, Maxwell Capital helps to ensure loans aren’t left on the table. For example, some lenders may benefit dramatically by switching from best efforts to a mandatory basis.
In-depth analysis can be transformative in determining the outlet and method of delivery that will yield the highest net economic benefit for each lender. In most cases, though, this analysis is prohibitive to perform manually. That’s where innovative solutions come in—through technology-led analysis, lenders can better understand their most successful secondary market strategy. This insight will likely have a larger effect on profitability than any other single action.
Pipeline management
Pipeline management is a vital aspect of the secondary market process that calls for skilled oversight to keep risk under control and ensure profitability. Hedging is often used to offset risk and increase efficiency, but it can be daunting since it calls for complex computations and the use of models to manage risk and determine pricing.
Still, hedging strategies are important, as they offer lenders more selling flexibility, greater efficiencies, and the ability to hold loans on the balance sheet longer, leading to higher returns. This process is most successful when lenders leverage a trusted partner like Maxwell Capital, with leadership that has proven hedging experience.
Scale
A major reason smaller lenders lack access to secondary markets is simply because of their size in the eyes of loan buyers. With relatively little capital on their balance sheets, they lack interest and trust from buyers and investors.
By partnering with a dedicated investor like Maxwell Capital, local lenders can access economic scale by tapping into the collective power of Maxwell’s network. In turn, these economies of scale allow lenders to pass more competitive rates on to their borrowers, enabling them to increase market share.
Maxwell Capital’s goal is to give small and midsize lenders the ability to originate and sell loans in the secondary market that can compete with the largest players. By meeting lenders where they are, then turning around and reliably selling loans to end buyers, Maxwell Capital generates trust and access to better pricing—benefits that lenders can then pass along to their customers.
Driving profitability in the secondary market
Want to learn more about how local lenders can drive profitability in the secondary market?
Our new eBook “The Future of Secondary Market Trading for Local Lenders” dives into how partnering with a technology provider in the secondary market can prepare your lending business to compete in today’s quickly evolving mortgage landscape.
This eBook offers:
- An overview of challenges to secondary market access in today’s mortgage market
- How new technology is changing secondary market potential for local lenders
- 4 vital areas small and midsize lenders can enhance in their secondary market process with technology-led solutions
- Advice from industry experts on leveraging the secondary market for better margins, increased profitability, and enhanced ability to compete against the industry’s largest players
Get your free copy of Maxwell’s 2024 Lender Playbook: 4 Tips to Drive Profitability in a Recovering Market
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