Ellie Mae®, the leading cloud-based loan origination platform for the mortgage industry, announced today the expansion of the strategic partnership with Optimal Blue®, the leading secondary marketing automation platform in the mortgage industry. The expansion includes the collaboration on multiple next-generation, API-based integrations between the Ellie Mae Digital Lending Platform and the Optimal Blue’s Marketplace Platform™ – specifically the company’s flagship Product & Pricing, Hedge Analytics, and Loan Trading solutions. Additionally, Optimal Blue’s Hedge Analytics and Loan Trading solutions now join Optimal Blue’s Product & Pricing as recommended solutions in the Ellie Mae Marketplace™.

Focused on creating a seamless, end-to-end workflow between lenders and investors, Ellie Mae and Optimal Blue are underway with new initiatives to rethink how to best leverage Ellie Mae’s Digital Lending Platform and Optimal Blue’s industry-leading pricing, hedging, and loan trading capabilities to benefit both sellers and Investors. Their collective efforts will create new and further enhance existing integrations between Optimal Blue and Encompass Consumer Connect®, Encompass LO Connect®, Encompass TPO Connect®, and Encompass Investor Connect® solutions that will enable a completely automated data and document exchange between their lender and investor clients. The companies plan to collaborate on these new integrations and efficient workflow improvements throughout 2020.

“Ellie Mae is thrilled about the expansion of our partnership with Optimal Blue,” said Parvesh Sahi, senior vice president, business development for Ellie Mae. “Ellie Mae is committed to enabling further innovation on the Ellie Mae Digital Lending Platform with industry-leading partners like Optimal Blue. This investment to deepen our partnership enables both originators and the purchasers of mortgage loans originated on Encompass to benefit from Optimal Blue’s broad secondary marketing capabilities.”

“Optimal Blue is proud of the work we have done over the past several years to strengthen our Ellie Mae partnership,” explained Scott Happ, President & Chief Executive Officer of Optimal Blue. “Increasing the joint value proposition to our mutual clients by building deeper and more meaningful pricing, hedging, and trading integrations between our platforms to create more efficient workflows is very exciting news for Optimal Blue, Ellie Mae, and our clients.”

ABOUT ELLIE MAE
Ellie Mae is the leading cloud-based loan origination platform provider for the mortgage industry. Ellie Mae’s technology solutions enable lenders to originate more loans, reduce origination costs, and shorten the time to close, all while ensuring the highest levels of compliance, quality and efficiency. EllieMae.com or call 877.355.4362 to learn more.

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PRESS CONTACT FOR OPTIMAL BLUE
Robert J. Brandt
Vice President, Marketing & Strategic Alliances
(469) 609-5585
bbrandt@optimalblue.com

PRESS CONTACT FOR ELLIE MAE
Erica Bigley
Ellie Mae, Inc.
(925) 227-5913
Erica.Bigley@elliemae.com

Caitlin Coffee
Allison+Partners
(312) 635-8204
EllieMae@allisonpr.com

© 2020 Ellie Mae, Inc. Ellie Mae®, Encompass®, AllRegs®, Mavent®, Velocify®, the Ellie Mae logo and other trademarks or service marks of Ellie Mae, Inc. appearing herein are the property of Ellie Mae, Inc. or its subsidiaries. All rights reserved. Other company and product names may be trademarks or copyrights of their respective owners.

– Optimal Blue’s Intelligent Trade Blotter Enables Easy Modeling and Trade Execution; Draws High Praise from Clients –

The comprehensive pipeline risk management and hedging capabilities of Optimal Blue’s Enterprise Secondary Marketing Solution just got better. Today the company has unveiled a highly-advanced trade blotter feature that empowers its clients to easily model coverage and execute trades, leverage a streamlined workflow for associating longs/shorts, and benefit from enhanced business intelligence capabilities.

The functionality is garnering rave reviews from Optimal Blue clients. They have noticed a significant increase in efficiencies as related to modeling, adding, lifting and rolling coverage, as well as the planning and executing of trades.

“It is great to be able to see what someone has modeled, rather than relying on screen shots or word of mouth,” said Patrick Ruybal, Risk Management Specialist at All Western Mortgage. Ruybal further explained that his team enjoys being able to set up buy/offers as first-in, first-out, stating “The dealers have gone this route, and we prefer to remain in line with our dealers and lift coverage as needed by order of trade date, based upon the security.”

Another bonus, Ruybal adds, is the ability to lift from multiple dealers at once for the same security. “Optimal Blue’s trade blotter has saved considerable time in this process and reduced the manual task of working within spreadsheets. Our team is free to allocate that much needed time elsewhere.”

Zalman Zwiebel, Secondary Market Director at Ark Mortgage, said that leveraging this feature has dramatically increased efficiency. “What I love most is when I have multiple trades at the same time. I am now able to enter all data at once as opposed to previously entering data separately,” Zwiebel said.

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PRESS CONTACT FOR OPTIMAL BLUE
Robert J. Brandt
Vice President, Marketing & Strategic Alliances
(469) 609-5585
bbrandt@optimalblue.com

As a mortgage originator grows, it becomes apparent that many processes which worked in the past need to be changed to accommodate the larger volume. Most owners or managers are familiar with the origination process and can make good decisions regarding changes to those processes. The secondary market, however, typically is a mystery and not as well understood.

Originators with a best efforts strategy often hear that they can make more money selling mandatory if they have enough volume. However, they have no way of assessing that statement. In addition, there are many other considerations a mortgage company must evaluate before making a decision to sell their loans mandatory.

The improvement in price achieved by selling loans mandatory is often referred to as the best efforts – mandatory spread. This is the difference achieved by pricing to the loan officers based on best efforts rate sheet and the price achieved by selling the loans mandatory. However, this revenue opportunity does not come without a cost. When selling mandatory, the loan originator now has to manage the fall out assumptions and the interest rate risk from lock to commitment of loans at funding – a task that previously was passed on to the best efforts investor. To accomplish this, the originator must implement a hedging strategy.

An originator can implement a hedge strategy in several ways. They can hire the appropriate talent to perform this task or they can outsource this task to a hedge provider to manage it for them. If they decide to manage it in-house, they still must decide what analytical tools to use. This can be a complicated decision and one that will be addressed in a future column. In addition to how to manage the hedge, there are many other internal changes that an originator must address when making the transition to a mandatory commitment strategy. These include:

Loan Delivery: In my experience, this can be more important than the best efforts – mandatory price improvement on an operation. When growing it becomes very onerous to manage each lock individually with the investor. By moving to a mandatory strategy, most originators say the improvement in operations creates about 1 -3 bps improvement to profits. Loans are delivered in bulk instead of individually improving loan delivery efficiencies. Also, loans data is final (no management of loan data during the underwriting process) and loan substitutions in commitments are allowed so there is much more flexibility in delivery.

Lock Desk: For a mandatory strategy, a centralized lock desk is a necessary. Some shops let their loan officers manage the locks. This will not work with a mandatory strategy. I recommend implementing a centralized lock desk first while you still are operating with a best efforts strategy. This will reduce dramatically the work required of a lock desk and will pave the way for the transition to mandatory commitments. When a new lock comes in at a best efforts shop, the lock desk must turn around and lock the loan with the investor. Data changes have to be managed on an individual loan basis. With a mandatory strategy, this does not have to be done. In addition, the lock desk would have to administer any lock changes with the investor based on the investors lock policies. With a mandatory strategy, lock policies are determined by the originator. This includes extensions, relocks, renegotiations and other changes. This means there can be consistent policy that can be published for all loans locked by the originator. In addition, the economics of the lock policy are managed by the originator and not passed along to the investor.

Underwriting: I suggest, although it is not required, that you create a common underwriting guideline per product when selling loans mandatory. Best efforts shops lock loans with the investor as soon as they lock a rate with the customer. It makes sense to underwrite to the investors guidelines. When selling mandatory, the investor is not selected until funding of the loan. Therefore, underwriting to a single guideline gives the secondary markets group the most flexibility to sell the loan to the investor with the highest price. Issues arise when investors have soft overlays that are different from other investors. In that situation, there should be a mechanism to include or exclude investors available for the sale of the loan.

Pricing: Many originators begin a mandatory strategy for selling loans but continue to use best efforts pricing for origination. I highly recommended that the originator transition to one pricing strategy per program to match the common underwriting guidelines. Many loan officers are used to picking the investor with the best price so this might require a cultural change within the organization. And this could take time. If the originator decides to continue to offer pricing based on investor best efforts rate sheets, extra care should be taken to make sure that best efforts pricing offered can be sold mandatory at a profit. Sometimes, investors offer a very aggressive best efforts price for a short period of time. In such cases, it could be more aggressive than mandatory pricing. This typically is a short-term phenomenon and will adjust back to a price that is lower than mandatory. But any origination occurring during that time could experience a loss. I would recommend either (1) adjusting origination spreads to compensate for the difference or (2) locking loans best efforts at the time the lock is taken from the customer.

Investor Management: When going from a best-efforts to a mandatory strategy, it is important to make sure that (1) your current investors are aware of the new delivery strategy and (2) they are evaluated to ensure that they are the best outlets for the new strategy. Many investors offer incentives on the delivery method used by the originator. By notifying investors of the change in strategy, it will ensure that the originator will make the most profit from the change.

There are a lot of opportunities to improve profitability and efficiency with a mandatory strategy. I have seen many customers successfully go from best efforts to mandatory but the work on the above items needs to be done first. For originators who have volume over $10 million per month and a net worth over $3 million that want to get to the next level, this is a worthwhile endeavor. But as you could see from the items described above, many operational changes have to take place to be successful.

This article was featured in the May issue of Mortgage WOMEN Magazine. View the entire article here.

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PRESS CONTACT FOR OPTIMAL BLUE
Robert J. Brandt
Vice President, Marketing & Strategic Alliances
(469) 609-5585
bbrandt@optimalblue.com