Mortgage Servicing Rights Hedge Advisory

MountainView offers risk measurement and hedge advisory solutions to help mitigate the risks that your MSR portfolio may have on your profitability. As a leading provider of MSR valuations and Transaction Advisory services, our clients leverage our experience and market insight to accurately measure the value and sensitivity of their MSR portfolio. We will work with you to assess your needs, determine the appropriate solutions, and support your institution through complete program development, deployment and ongoing advisory services.

Interest Rate Risk Hedge Advice

In connection with our mortgage asset risk management consulting services, we offer through our affiliate, MountainView Risk Advisors, LLC, interest rate risk hedging services on a consultative or advisory basis. These services will include MSR, whole loan, and mortgage securities portfolio analysis, hedge instrument position review and securities purchase and sale recommendations based on your firm’s individualized risk tolerance and strategy. Our consulting services and recommendations will be tailored to the strategy and policies of your firm.

MountainView Risk Advisors can provide you with hedge advice with respect to the following types of securities:

  • Receiver Swaptions
  • Payor Swaptions
  • Interest Rate Swaps
  • Interest Rate Caps and Floors
  • Swap Futures
  • U.S. Treasury Futures
  • Eurodollar Futures
  • Call Options on U.S. Treasury and Eurodollar Futures
  • Mortgage Forward Rate Agreement
  • Forward Sales of Mortgage-backed Securities (MBS)
  • Forward Purchases of MBS
  • Collateralized Mortgage Obligations (CMOs)
  • Principal Only Mortgage Strip Securities
  • Interest Only Mortgage Strip Securities (Trust IO and IOS)
  • Constant Maturity Mortgage Forward Rate Agreements
  • Put Options on U.S. Treasury and Eurodollar Futures

We can also monitor your mortgage portfolio on a periodic basis and provide you with advice and recommendations with respect to the securities and instruments that we believe will assist you in managing the interest rate risk associated with your mortgage portfolio.

Our Philosophy on Hedging within a Balanced Risk Management Approach

  • A hedge strategy must be simple, understandable and avoid over-management
  • The hedging framework must be designed for maximum transparency
  • Management decisions must be explainable and verifiable, and success will depend on establishing the right communication rapport

Hedge Advisory Solutions

Risk and Profitability Scope™

We perform an in-depth enterprise risk and profitability analysis to assess your needs related to MSR risk profiling and to estimate the net value at risk in different rate environments. As a result, we enable you to improve the management of cash flow needs, maximizing the return on the MSR asset, and provide critical info for senior management and investors, showing that you're prepared for any market environment.

Portfolio Management

MountainView offers sophisticated Transaction Advisory and market back-testing analysis and assists with MSR model and subcomponent implementation, calibration and validation. We deliver robust risk reporting by key rate risk drivers, provide an integrated stochastic and static modeling framework, and assist with P&L attribution and financial forecasting.

Program Design, Governance and Implementation

We partner with you in authoring or reviewing risk policies in conjunction with internal framework and in accordance with regulatory requirements, including setting risk limits. In conjunction, we assist you with control processes and policies that may include valuation assumption control and change policy and oversight control of overall MSR risk management process.

Hedge Optix™ Tool

MountainView's Hedge Optix™ tool integrates model output from all major MSR models to create a best-in-class detailed MSR attribution analysis with hedge profiling, rebalancing scenario analysis, and asset/hedge attribution and performance tracking. Our results are fully transparent, allowing you to quickly view your current position with horizon analysis to quarter end and determine if existing hedges are within your risk limits. We provide streamlined daily reporting of MSR value, the risk profile, attribution and P&L analysis and trade recommendations.

Mortgage Profitability Analysis

MountainView can perform a mortgage profitability analysis for you that forecasts your net economics associated with your origination and servicing platforms and hedging strategy.

Our comprehensive mortgage profitability analysis is designed to:

  • Give you the ability to know your net value at risk in different interest rate environments
  • Inform your MSR risk profiling needs
  • Help you determine the amount of your MSR portfolio to hedge
  • Maximize your return on the asset and simultaneously manage your cash flow needs
  • Provide your senior management and investors with the critical information needed to manage your business in multiple rate environments