January 29, 2018
Overview: MAXEX, LLC is a financial services technology company that has developed and launched the first exchange for trading residential mortgages loans through a centralized clearinghouse. Developed by long-time mortgage industry veterans, MAXEX’s technology and unique program structure combine to address the issues that have stymied the modernization of this large market and enable buyers and sellers of residential mortgage loans to operate more efficiently, transact with more confidence, and scale like never before. MAXEX began processing live transactions through its LoanExchange program in June 2016 and, to date, has facilitated over $1 billion in loan trades, of which over $350 million have been securitized through a series of eight transactions with JP Morgan and Redwood Trust. MAXEX is now actively growing its client base and transaction volume through its two exchange programs:
- LoanExchange: Program for bank and non-bank sellers that launched in June 2016.
- MAX Exchange: Pilot program for Federal Home Loan Bank (“FHLBank”) Member sellerslaunched in December 2017 through a strategic alliance with the Federal Home Loan Bank of New York, which received finalapproval for MAX Exchange from the FHFA. Upon the successful conclusion of the pilot program, MAXEX will seek to roll out
the MAX Exchange program to additional FHLBanks and their 7,000+ Member banks and credit unions nationwide.
How It Works: Both programs utilize MAXEX’s proprietary technology, standardized documentation, and centralized clearinghouse structure. The centralized clearinghouse structure creates a more efficient market by allowing sellers to sell loans to, and buyers to buy loans from, multiple participants while transacting with only one counterparty: MAXEX Clearing, a wholly owned subsidiary of MAXEX. Additionally, MAXEX administers a pre-settlement, independent due diligence review on 100% of the loans traded through its Exchange programs to identify potential errors and minimize the risk of subsequent repurchases/put-backs. Should a seller be unwilling or unable to repurchase a loan due to a validated representation and warranty violation, MAXEX provides a backstop mechanism that guarantees the seller’s repurchase obligations. By standardizing and streamlining the seller’s underwriting guidelines, legal documentation and loan sale process as well as mitigating many of the risks and operational inefficiencies that currently exist in the secondary mortgage market, MAXEX: (i) reduces operational costs, (ii) expands market access, and (iii) disintermediates the middlemen for the benefit of both buyers and sellers.
- Reduced Operational Costs: As MAXEX is a single destination for sourcing, pricing,purchasing, selling, reviewing, and settling loans, buyers and sellers no longer need to juggle many expensive andcumbersome relationships in order to transact confidently and efficiently with numerous qualified counterparties.
- Enhanced Value & Liquidity: We believe MAXEX’s centralized participant approvaland monitoring, standardized contracts, independent loan audits, and backstop mechanism together should enhance the valueand liquidity of mortgage loans that pass through the Exchanges.
- Best Execution Pricing: Single, centralized counterparty allows for anonymous two-waytrading on MAXEX, which enables sellers to connect to multiple buyers and receive best execution pricing.
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