Hedging Strategy Assessment

Mortgage Banking Solutions conducts evaluations of hedge models and hedging strategy using the following methods:

Hedge Model Validation:
In the Hedge Model Validation method, month-end pipeline and warehouse data are obtained and run through an independent, previously verified hedge model to calculate a new hedge position assessment. The independent results are then compared with the existing hedge position to determine validation. This Validation complies with the requirement of the OCC 2011-12 Model Risk Management bulletin (previously Bulletin OCC 2000-16 Risk Model Validation).

Hedge Model Review:
The Hedge Model Review procedure reviews the model reports to determine if the results are reasonable given market conditions and consistent with typical mortgage banking hedge strategy. This method provides a general observation of the hedge model results.

Pre-Hedge Assessment:
In the Pre-Hedge Assessment the existing product mix, pipeline reports, secondary marketing procedures, accounting reports, technology platform and staff experience is assessed to determine if the existing process is consistent with the best practices in mortgage banking to effectively engage in hedge transactions.

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