Bear with me – let’s compare secondary automation to the popular new electric bikes. People want the freedom to control their path and activity level, but they want a boost for the tougher parts of the ride. Also, most of us would prefer to skip repeating the same old routine every day. With that in mind here are four predictions:
As with the bikes, secondary marketing automation is increasingly enabling users to do the heavy lifting faster, while taking the drudgery out so that teams get better at quickly responding to the market. To do this, Fintech companies will continue work to apply workflow automation to secondary tasks ranging from loan sales and bulk bidding to ratesheet production.
Next, also in keeping with the electric bike metaphor, is that assistance technology will get more people back on bikes… in our case, using outsourcing less as secondary personnel become more capable of handling loan sales and hedging themselves. It has been interesting to see the reaction to new technology among lenders in the industry. Everyone is of course looking for ways to increase efficiency and the perennial question is how to do it. In recent years, and in particular in the last six months, we’ve seen a shift in the mindset of lenders as they have realized how much easier some of the secondary tasks have become with new technology. As confidence builds, more and more lenders will take over tasks they have previously outsourced.
The exchange of data between sellers and investors is at the heart of the secondary market. Any look at the future would be incomplete without addressing this fact. In addition to the many data exchange technologies offered by the agencies, private investor APIs will become more prevalent, both in pricing and committing loans – a-la PennyMac’s pricing/committing API. This technology will remove a terrible pain point for lenders.
And finally, servicing value pricing will follow what we are doing with RoundPoint and Mountainview… increasingly transitioning to loan-level API pricing as opposed to SRP grid- based pricing. In addition to improved precision, this technology coupled with dynamic margin management allows lenders to be more competitive at the point of sale. Each of these technology opportunities allows lenders to be in firm command of their secondary marketing activity. As in the latest in battery-assisted bikes and hybrid cars, it’s nice to have the efficiency, capability, and profitability reserves these technology advances can provide when the market gives us a steeper hill to climb.