Black Knight launching mortgage trading and hedging platform

Data and technology vendor Black Knight on Wednesday announced it's launching a secondary market platform into a volatile market where loan sales analysis and risk management capabilities are increasingly sought after.

The loan platform combines automation from Compass Analytics that Black Knight bought in 2019 with Resitrader, a trading platform that Optimal Blue had owned prior to its acquisition by Black Knight. An updated version of Optimal Blue's Secondary Services technology also is part of the new platform, which Black Knight has branded CompassEdge.

"We are definitely taking the best of all three of those products but we did do some enhancements along the way as well," said Mike Vough, a managing director at Black Knight, in an interview. The technology has been in trial mode and undergoing beta testing.

The launch out of Black Knight's Optimal Blue division comes as the parent company, which is known best for its core servicing automation, prepares for possible acquisition by ICE Mortgage, another major mortgage technology vendor that's more focused on originations. Optimal Blue's product and pricing engine, which feeds into the new secondary market platform, has a 40% market share and also has partnered with ICE's core origination system.

Regardless of whether the acquisition of Black Knight — which faces potential antitrust objections — goes through, the new platform could strengthen the company's position as a technology provider in the secondary market at a time when trading and hedging are a greater focus for lenders. 

The volatile, higher rate environment has strained lender profitability and renewed attention to sales execution and risk management. The platform is designed to help users gear up quickly, potentially using a smaller staff, Vough said. 

"I think a lot of folks are feeling the pinch. They've seen the layoffs in the news, and the way that we've thought about this system is that we take away the hurdle to mastery," Vough said. "In a lot of these hedging systems, there's a pretty big ramp up in terms of becoming an expert in it, or even just comfortable with it."

A loan sale can be done in as few as six clicks on the platform, and a dashboard displays a color-coded pie chart to show users the percentage share of mortgage sales per investor. It also displays a rolling 30-day analysis of the share of mortgages sold in bulk on a servicing retained or released to the government-sponsored enterprises for a particular company, and how those percentages compare to the numbers for its peer group. The technology also helps support mortgage servicing rights valuations done in conjunction with those types of loan sales.

The new platform is cloud-based, Vough added, noting that this will help users avoid bottlenecks in processing when swift market moves occur.

"With us moving to the cloud, we'll be able to basically just spin up more servers whenever there is a moment when we think there'll be a lot of trading and hedging," he said.

Black Knight also continued to build out its servicing platform on Wednesday, releasing new self serve chatbot technology to answer borrower questions. ServisBOT integrated its artificial intelligence-based technology into Black Knight's system to provide the functionality in the latter company's digital servicing platform. Among the users of both companies' technology is Cenlar, a major subservicer.