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.
MISMO is helping to facilitate collaboration between servicers and federal regulators to improve the servicing transfer process. The CFPB is also keeping a close eye on complaints tied to servicing transfers.
MSR sales hit a record in 2022 and even more sales are expected both this year and in 2024. The jump in supply is presenting investors with attractive opportunities.
Bids for MSRs are declining, prompting worries among some sellers. Those holding servicing also face the possibility of an increase in delinquencies and advancing responsibilities.
The halcyon days of sizeable MSR markups are in the rearview mirror, causing servicing owners to ponder their options. Some nonbanks continue to actively sell servicing rights while others are being told by their advisors to hold their cards.
The REIT’s investments in MSRs increased by 20.2% in the second quarter, based on unpaid principal balance, to $109.0 billion as of the end of June. Annaly sees the assets as a nice hedge to its traditional investments in agency MBS.
The market for MSRs is now divided between portfolios with loans originated prior to 2022 and portfolios with loans that have prevailing interest rates, prompting some shifts in practices among servicers and investors.
Beginning in April, credit unions will be able to buy and sell MSRs among themselves. The sector currently holds servicing tied to more than $460 billion of unpaid principal balance.
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