Is there a new wave of MSR sales?
With the possible flurry of MSR sales, are we looking at servicing portfolio prices flatten further ?
"The MSR market has shifted to be more of a buyer's market," - Nick Smith, managing partner and CEO of Rice Park Capital.
Indeed, a powerful observation that has the market experts split in halves.
Over the last two months, servicing portfolio prices have flattened significantly. However, there are divergent views as to what’s driving this trend.
Reasons are varied, ranging from - 2023 recession scare to buyers asking for concessions related to risks from agency backed mortgage repurchases.
Whatever be the cause, the reality is - large tranches of MSR assets are up for sale.
The question is - should we expect a deluge of MSR portfolio flooding the capital markets in upcoming months ?
Flurry of MSR sales hit January’23
For the major part of 2022, non-bank independent mortgage companies were mostly MSR buyers or at least retained large parts of their MSR portfolio. Of the top 50 holders of agency mortgage-servicing rights, roughly $3 billion are nonbanks and $2.5 billion are depositories.
Towards the last quarter of 2022 calendar year, these non-banks & depositories turned net sellers - mostly as rates went up, putting liquidity pressure on non-banks. However, a possible recession & rising default scare is putting added selling pressure on non-banks & banks alike.
Very recently a depositories owned MSR portfolio wend up for bids, that included a $4.85 billion bulk offering of Jumbos.
In addition to these, there are smaller agency & Ginnie Mae backed offerings up for bids. These include a $2.1 billion Fannie Mae and Freddie Mac bulk offering dominated by third-party originations and a $1.86 billion Ginnie Mae deal from an unnamed bank affiliate.
MSR mega sales brewing up at Wells Fargo
These are offers are dwarfed by what’s about to hit the capital markets.
Recently, Incenter put out a $10 billion agency servicing portfolio, up for bid. This is just a smaller tranche of a much larger sell-off that’s on the cards - the Wells Fargo MSR sell off.
Well Fargo recently announced that it will progressively reduce it’s servicing portfolio.
Rumor mills are abuzz with two $100 billion plus MSR packages that Wells is planning to shave off in phases - one consisting of conventional mortgage servicing rights and the other with Ginnie Mae MSRs, as reported in HousingWire.
In addition to these packages, Mortgage Industry Advisory Corp floated an offer of mixed $1.29 billion MSR package comprising of Ginnie Mae (39.84%), Fannie Mae (36.98%) and Freddie Mac (23.18%).
With such mega packages on the anvil, it is expected that MSR portfolio prices will become even more favorable, helping new players to enter the market. Do these transactions signal a new wave of MSR sales in the first quarter of 2023 ?
What remains to be seen is - will buyers latch onto these offers and if so, who will these buyer groups be?
Spotlight: What’s new at Vaultedge
Servicing Solutions Conference & Expo 2023
MBA’s Servicing Solutions Expo 2023 couldn’t have come at a better time.
With MSR markets still hot, the conference provides a platform for buyers & sellers to explore strategies for a seamless servicing transfer operation.
Innovation & Technology tracks such as ‘The Road to Success - A Quality Servicing Transfer’ and ‘Innovative Uses of Artificial Intelligence in the Servicing Realm’ - are designed to help servicers deploy automation for a cleaner loan boarding, fast-tracking portfolio QC and automating manual due diligence.
At Vaultedge, we see it as an opportunity to build a better understanding of the industry's challenges and opportunities, so that we design solutions that help servicers improve their operations and remain competitive.
With that goal in mind - we are headed to Servicing Solution Expo at Orlando (Feb 21-24). If you’re coming to MBA’s Servicing Solutions Expo, then let’s meet & see if we can make the most of this once in a decade opportunity in the coming days.
IMB 23 Wrap up
We wrapped up our visit to IMB 23 conference.
Unlike before, we did not set up a booth at the event. Nevertheless, it was great to have in-person meetings with customers, partners and industry experts at the event.
Some of the sessions that particularly left an impact were:
Opening Session: Intentional Leadership
Breakout Session: Strategies for Servicing for 2023
General Session: Fintech Showcase “Needs vs Wants”
While we put together a summary of notes from these sessions, here’s a quick peek-a-boo of what went down at the event.
Until next week,
Stay healthy, keep reading.