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"The banking scare created a lot of volatility and I think buyers and sellers alike were a little nervous about jumping into the market until things stabilized. Now they seem to have," said Mike Carnes, managing director, Mortgage Industry Advisory Corp.'s MSR Valuation Group.
Companies brokering mortgage servicing rights like MIAC and Incenter reported that they had multibillion-dollar packages either trading or about to go up for bid at deadline Monday. Also, Prestwick Mortgage Group has marketed a $165 million deal.
The average MSR portfolio has been drawing multiple investors, with both banks and non-depositories participating in the market.
"Your typical auction is going to get six to eight bids, maybe, depending on the size of the portfolio. That's less than where we were in
Carnes did not immediately have specific information available on what he said were multiple pending billion-dollar deals MIAC was preparing to market at deadline. At least one is sizable, he said.
Meanwhile, Incenter has $2.02 billion in mortgage servicing rights associated with loans backed by government-sponsored enterprises Fannie Mae and Freddie Mac up for bid until 2 p.m. Mountain time on April 19.
That national portfolio, which has no delinquencies or foreclosures, has the following weighted averages: coupon, 3.26%; loan-to-value ratio, 66.5%; and credit score, 753.9. The mortgages also have a $214,823 average loan size and 33.3 months of seasoning.
Prestwick's offering has a bid deadline of 5 p.m. Eastern time on April 26. The bulk of the loans are Fannie Mae-backed mortgages. The portfolio's geographic distribution is: New York, 38.81%; Texas, 11.44%; New Jersey, 8.29%; and Pennsylvania, 8.13%. This retail, fixed rate portfolio's weighted averages are: note rate, 4.49%; seasoning, approximately 14 months, and credit score, 729.98. The average loan size is $273,809. The delinquency ratio is around 1.49%, with no loan more than 30 days late and none in foreclosure.
There also are other deals in the market that haven't been publicly offered, said Tom Piercy, president of national enterprise business development at Incenter LLC.
"We do have a pretty sizable pipeline of what I would call direct deals that are not being put out to auction or being done on a very limited basis without presentation to the full market," said Piercy, who also is managing director of the company's Incenter Mortgage Advisors division.
Pricing for Fannie Mae and Freddie Mac portfolios generally remains stronger than for servicing associated with government-backed Ginnie Mae securitizations, Piercy said.
"The increase in the number of delinquencies as well as the financing costs is starting to be applied," the Incenter executive said of pricing in the last category.
Ginnie servicers may finance advances they make to securitization investors when borrowers don't pay, so as arrears rise, so too do financing costs.
Investors are typically paying more for older deals with less prepayment risk because the loans involved have lower rates. However, rights to servicing on loans with relatively higher rates are also trading; they remain attractive to companies good at recapturing borrowers who refinance.
"We're still seeing quite a bit of that 2021 vintage in the market and that certainly is getting top dollar," Piercy said. "We also are seeing a fair number of transactions with at-the-money rates."
So far, all of these factors combined suggest the servicing market could remain strong in 2023, as long as investor allocations remain available.
"I'm a little bit concerned about another year, like '22, where buyers fill up at some point and bidding that we're seeing in the market kind of fades a little bit; but so far, so good," Carnes said.
