Frequently Asked Questions

Does UCM perform MSR valuations?

No, UCM believes that valuing the asset hedged and hedging the same asset sets up a potential conflict of interest.

Can my company license UCM’s HedgeCalc™ program?

No, UCM uses HedgeCalc™ in its hedge consultancy and it’s only available to UCM’s active clients as part of their service.

How does UCM charge for its services?

After an initial retainer and setup fee, UCM charges a number of annual basis points on the notional amount hedged. The rate declines as the notional amount increases.

Is UCM affiliated with any company that may compete with my bank or mortgage banking company?

No, UCM is privately held and has no affiliation (direct or indirect) with any mortgage servicing enterprise.

As a third-party service provider, is UCM compliant with SAS 70?

UCM has formal policies and procedures for hedging on its clients’ behalf and has a national auditing firm perform a “Type II” review annually. Additionally, UCM provides detailed instructions for daily reconciliation procedures that reduce its clients’ reliance upon UCM’s controls.

My bank only has $250 million in MSR notional balance, can UCM help me?

$250 million is around the minimum that UCM can efficiently hedge. UCM would be happy to review your portfolio in detail to determine the feasibility to hedge.

My portfolio is very large and I’ve got a trading group that hedges most of the risk, how can UCM help me?

With large companies UCM would typically only be part of a larger, more complicated solution. For instance, we might help where FAS 133 treatment is essential or to cover the “gap” between AFS securities and production offsets that some institutions use.

I’m worried about “basis risk” between the treasury-based hedges that UCM uses and the actual changes in MSR values.

UCM believes that it is most efficient to address basis risk through frequent re-valuation (typically monthly) of the hedged MSR asset’s value and rate sensitivity rather than trying to create a hedge that addresses basis or spread risk. UCM’s observes that most hedges that attempt to cover basis risk tend to add volatility. UCM’s hedges reduce volatility.

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