Lenders are facing a tough market for originations, helping to prompt sales of servicing. The supply of MSR is coming both from older vintages with interest rates well below current rates and new production in which a lender might not want to hedge the MSR.

Some MSR buyers are offering exceptionally strong bids for servicing, counting on being able to recapture borrowers when interest rates drop. The high bids are creating some complications for sellers and MSR valuations.

MSR bids are currently largely rational, though a few packages sold in recent weeks at unexpected prices, according to Brian Simon, a managing director at Bungalow Funding.

Although nonbank advocates have long argued for FHLBank membership, new proposals from the Urban Institute address key challenges.

Refis are poised to increase and MSR values will decline as interest rates decline. United Wholesale Mortgage is prepared for the moment, having sold off a significant amount of MSRs earlier this year.

The servicing acquisition from Flagstar puts Mr. Cooper’s pro forma portfolio at the end of June at about 31% higher.

There’s more demand for mortgage servicing rights than there is supply at the moment, helping to keep prices for the assets elevated. Even if MSR sales increase this year, prices are expected to remain firm.

Lenders continue to make bulk purchases to offset runoff in their portfolios and make up for anemic originations. However, demand for MSRs could be near a peak, according to industry analysts.

With the supply of MSRs expected to grow, there are concerns that prices won’t hold up. Meanwhile, the CFPB is considering incentives for lenders to retain servicing.

The tide is starting to turn in favor of servicing sales where higher note rates are involved. Don’t expect premium prices or a tsunami of deals, but at least it’s an outlet.