Trading Services

EDGE Asset Management functions as a comprehensive consultancy firm, catering to the needs of financial establishments engaged in the acquisition, sale, and financing of mortgage and consumer receivable portfolios. Count on EDGE to act as your proficient collaborator, guiding you through the complete auction procedure, and ultimately facilitating a fruitful transaction that aligns with your diverse objectives.

Basking in the vibrant atmosphere of Miami Beach, EDGE Asset Management emerges as a beacon of financial expertise. Our headquarters, strategically planted in this sun-kissed locale, offers a nexus for trading finesse and advisory acumen. Imagine a brigade of adept professionals poised to harmonize with your institution's transactional cadence – whether it involves the finesse of valuation, the intricate brushwork of accounting, the strategic choreography of trading, or the nuanced curation of mortgage servicing rights, whole loans, and REO assets. As a comprehensive guide within the advisory domain, EDGE remains unwaveringly committed to the mortgage industry's orchestral melody. Our accomplished experts craft a tapestry of advisory excellence, their skillful strokes spanning diverse service landscapes, crafting a narrative of achievement and finesse.

Loan Sale Consulting

Our services encompass various aspects, including meticulous data analysis, precise price estimation, efficient transaction oversight, and accurate trade settlement. We implement a robust marketing strategy that targets optimal trade partners, demonstrating our commitment to facilitating your trade.

Our team of experts acts as collaborative partners, guiding sellers throughout the entire auction process with the aim of achieving a smooth and prosperous transaction.

Asset Types

Our substantial proficiency in valuation and transaction extends across a wide range of loan categories, encompassing:

  • Residential and Commercial Loans
  • Performing and Non-Performing Mortgages
  • Secured and Unsecured Consumer Loans and Leases
  • Conventional, ARM, HELOC, FHA
  • S&D, Fannie/Freddie, CMBS

Due Diligence Portfolio Review


Drawing from over three decades of experience in completing MSR transactions, EDGE is poised to offer indispensable guidance during this pivotal phase of the sale process. Following a comprehensive assessment of the seller's financials and loan portfolios, the buyer will present a Purchase and Sale (P&S) Agreement for the seller's endorsement. While the Letter of Intent (LOI) is anticipated to encompass all financially relevant information, mutual concurrence between the buyer and seller on all other sale-associated matters and timelines is imperative.
In the course of this stage, EDGE will oversee the buyer's due diligence procedures and provide support in the evaluation and negotiation of the P&S Agreement. Alongside a meticulous review of the seller's financial soundness, the buyer is likely to conduct an off-site due diligence evaluation of a pre-established subset of the sale portfolio.

Valuations


EDGE's valuation team offers valuation services and benchmarking to numerous clients annually. Leveraging our involvement in MSR trading, we possess an intimate understanding of prevailing fair market values at any given point. Our dynamic trading desk actively engages with mortgage servicers nationwide on a daily basis, harnessing insights from this interaction, along with inputs from various market analytics providers, to comprehensively grasp the value determinants in the mortgage servicing domain. Our clientele spans the entire industry spectrum, ranging from those managing portfolios with a few million in Unpaid Principal Balance (UPB) to those handling close to a trillion in UPB.
We have meticulously scrutinized and enhanced every facet of our MSR Valuation Model. This includes the current coupon model, primary rate model, delinquency model, and the models outlined below. These refinements collectively culminate in an analytically driven and substantiated MSR Valuation Framework, meticulously aligned with the dynamic traded MSR Market.

  • Cash Flow Model

    EDGE's team of consultants develops a comprehensive MSR cash flow model from the ground up, incorporating insights from customer input and market data. Our valuation methodology commonly encompasses a standardized set of mark-to-market cash flow assumptions, which mirror those employed by market participants to derive a mid-market bid for a portfolio. When substantiated by evidence and rationale, Incenter possesses the capacity to integrate a client's internal economic parameters for MSR valuations. This capability becomes particularly relevant in scenarios such as mark-to-model valuation approaches.
  • Option Adjusted Spread (OAS)

    EDGE employs Option-Adjusted Spread (OAS) to formulate discount factors for the cash flow projections within the model. These OAS values are deduced from real, executed MSR transactions (both bulk and flow) to establish an OAS assignment rooted in market dynamics, intricately aligned with distinct portfolio attributes. While these OAS assignments can be fine-tuned to accommodate specific investors' internal hurdle rates or Return on Equity (ROE), they predominantly mirror discount factors at the market level.
  • Prepayment Model

    EDGE may initially employs a prepayment model calibrated to industry-standard prepayment speeds for the purpose of the initial valuation. These speeds may incorporate adjustments for prepayment based on factors like state variations or origination channels. Recognizing the distinctive servicing tactics and portfolio performance metrics of each servicer, Incenter customizes the prepayment model for each individual client as time progresses, considering their real-world prepayment rates. On a monthly cadence, Incenter revises its prepayment model to account for evolving primary rate trends and other assumptions furnished by our prepayment model vendor.

MSR Hedging


EDGE's tailored solutions offer each client a precise and focused asset valuation for their servicing needs, accompanied by a hedge strategy meticulously crafted to uphold that valuation across diverse interest rate scenarios. The determined asset value can encompass servicer economics (real costs of servicing, late fees, floats) or align with fair value principles and widely accepted assumptions for the asset. This empowers clients to devise a program aligned with their objectives, be it to sustain Generally Accepted Accounting Principles (GAAP) earnings while minimizing earnings fluctuations, or to attain specific return targets while safeguarding projected asset cash flow.

  • Ginnie Mae

    EDGE actively engages in Ginnie Mae MSR trading and possesses the capability to integrate highly specific economic components into the hedge construction process. This ensures accurate modeling of the authentic MSR exposure for our clients.
  • Basic Approach

    The optimal strategies for hedging the MSR asset involve addressing curve risk and mortgage basis. Incenter's approach to MSR asset valuation is founded on a libor/swap-based curve. By leveraging swap-based instruments, our valuation framework closely replicates the fundamental curve underlying the asset, which aligns with the predominant exposure areas. This approach enhances the effectiveness and efficiency of our hedging strategies.
  • Risk Measurement

    Quantifying the risk associated with an MSR portfolio necessitates an intricate examination of all Key Rate Durations, which stem from our Option-Adjusted Spread (OAS) modeling of the asset. Our OAS model intricately integrates 256 trajectories through the polypaths model, supplemented by prepayment speeds extracted from the Espiel (AFT) prepay model that's fine-tuned to both client portfolios and broader market transactions.

Analytics


Across the industry, standard analytics tools are commonly employed to establish MSR valuations and generate reports. However, the efficacy of these analyses hinges on the proficiency of the user. What sets IMA apart is our highly seasoned analytics teams, which rank among the most adept in the field. Collaboratively, we collaborate with every client to shape a tailored analytics roadmap that precisely aligns with their unique MSR prerequisites and strategic goals.

  • Analytics Modeling

    We employ an extensive array of industry-standard MSR valuation tools, encompassing static, stochastic (Option-Adjusted Spread or OAS), and hybrid modeling methodologies.
  • Customized Solutions

    As an illustration, we have the capacity to conduct in-depth asset analyses concerning key rate exposure. Additionally, we can perform essential assumption stress tests that encompass a range of factors such as servicing costs, prepayment speeds, yields, spread, and discount rates.
  • Trade Reporting & Compliance

    Our analytics team provides comprehensive support to our clients by producing a diverse range of reports tailored for various stakeholders. These reports are utilized by MSR managers, counterparties, internal and external auditors, as well as regulatory bodies.