Nearly $7 billion in mortgage servicing rights go up for bid

A $6.9 billion portfolio of mortgage servicing rights concentrated in California and Colorado has gone up for bid through Incenter.

Weighted averages for the MSRs from government-sponsored enterprise-backed loans from 2020 and 2021, are as follows: interest rate, nearly 3.2%; servicing fee, 0.25%, and age, 20 months. 

The relatively lower coupon provides a little more prepayment protection than servicing from more recently originated loans, noted Tom Piercy, president of national enterprise business development at Incenter LLC. 

"The WAC is less than 3.20%, which has not been the case of late," Piercy said in an email. "We're seeing deals offered that are north of 3.50% as the interest rate bank is widened by sellers with rates moving up. "While these higher rates are still insulated against refinance in this market, they do create slightly greater risk when rates begin to move down."

The seller has purchased MSRs in bulk and through a co-issue channel and is now selling a portion of its portfolio. Three-fourths of the MSRs up for sale came through the bulk channel.

A little over 1.1% of the loans in the portfolio Incenter is offering are delinquent based on the unit count. The largest share (0.74%) are late on their payments by 30 days, followed by 0.20% in the 90-plus bucket. The remainder, or 0.16%, are in the 60 day category. Foreclosures or bankruptcies affect another 0.10% of the loans.

Nearly 29% of the portfolio's unpaid principal balance is in the Golden State. Another 23% is located in the Centennial State. The remainder of the top 5 states are as follows: Texas, 7.4%; Washington, 6%; and Indiana, 4.8%. 

Fannie Mae backs the majority of the loans, which deliver payments from borrowers to investors in mortgage securitizations on an actual/actual basis. The balance are Freddie Mac-backed mortgages on an accelerated remittance cycle. Information about all the loans is available through the Mortgage Electronic Registration System platform.

The seller, an unnamed mortgage bank, would prefer a Dec. 31 sale date. Written bids are due at 2 p.m. Mountain time on Nov. 17.

Publicly-traded companies, such as Mr. Cooper, have noted in recent investor calls that they expect a wave of MSR sales from mortgage bankers, which have been contending with lower funding volumes and profitability due to rising rates, and may need to raise cash.

"For the MSR market generally, we continue to see robust activity on both sides, with many deals being offered and many bids on the buy side," said Piercy, who also is a managing director at Incenter Mortgage Advisors.