Novaprime, a technology firm that provides a data intelligence platform for mortgage lenders, has partnered with Tradeweb to enhance the Novaprime hedging solution. Tradeweb is a major player in the fixed income sector, with one of its biggest areas being the TBA mortgage backed securities (MBS) market, where it saw average daily volumes of $248 billion last year. Both use the Canton blockchain network, which enables automated workflows for hedging for mutual clients of the two platforms. Hence, this partnership helps to automate mortgage risk management.
To understand what’s involved takes a little bit of explaining.
As background, Agency MBS are mortgage backed securities issued or guaranteed by Freddie Mac, Fannie Mae or Ginnie Mae. Their issuances have scheduled release dates, and the TBA (To be advised) market involves the trading of issuances before anyone knows precisely which mortgages will be included. Despite the apparent lack of information, it works because the MBS issuances are very standardized. Hence, the TBA market is a kind of forward market for mortgages that’s used for hedging.
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