Freddie Installing Software From Treasury Services Corp.
The Federal Home Loan Mortgage Corp. is installing newly designed asset-liability management software to handle its $385 billion mortgage portfolio.
The software, called TSER/Treasury Manager, is from Treasury Services Corp., Santa Monica, Calif. It will enable the agency to calculate the effects of alternative interest rate scenarios and balance sheet tactics.
The software, which runs on personal computers, is also being marketed to banks and thrifts.
Freddie Mac expects to have it up and running by November. TSER/Treasury Manager replaces software that the agency had developed in-house.
Behind the Upgrade
Analysts have recently speculated that Freddie Mac was considering building up a large retained-mortgage portfolio. But an official of the agency said the software switch signifies no such intention.
"We're installing the software to do our earnings forecasting and income sensitivity," said Cheryl Regan, a spokeswoman.
Eric Hemel, an analyst with First Boston Corp. in New York, said the agency "just might want to know more" about the impact of rate shifts. However, he said, Freddie Mac may "want to have that [software] to examine the retained option."
The new software could also be used simply to transmit better information to underwriters.
Several vendors offer software designed to manage interest rate risk, one of the major areas of risk faced by banks. These systems monitor how interest rate movement affects cash flow and market value. The effects are then forecast over various periods of time.
Treasury Services is a relatively small competitor in the market. Sendero Corp., a subsidiary of FiServ, has the largest installed base of asset-liability management software among banks and thrifts.
Treasury Management said its software uses data-base technology to give financial institutions a clearer picture of prepayment patterns based on changes in interest rates.
A Search for Control
"As profits [in the banking industry] get tighter and tighter, it's less acceptable to have random fluctuations," said David Crandon, a principal with Treasury Services.
"We find institutions spending a huge amount of time finding out what drives their operating costs," with too little emphasis on improving margins, he said.
Mr. Crandon said that many institutions manage interest rate risk by examining data in aggregate. The Treasury Management software allows bankers to forecast performance down to the level of individual accounts. With the software, Freddie Mac will be able to simulate cash flows for individual loans.
The agency also will be able to forecast the behavior of customers who purchased 30-year fixed rate loans at either 12%, 10%, or at 9%, Mr. Crandon said.