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.
The NCUA board in December voted 2-1 to allow federal credit unions to acquire MSRs from other FCUs. The lone dissenting vote came from Todd Harper, who was just appointed NCUA chairman.
The flow market for MSR sales is returning to normal after COVID-related volatility in March and April caused demand for MSRs to wane. Traditional sellers of MSRs retained servicing this summer, helped by profits from the refi business.
Subservicing firms continued to grow in the first quarter, albeit at a slower pace. The reason: Coronavirus and a lack of flow deals. (Includes data chart.)
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