MSRs remain an attractive asset for yield
Demand and low origination volumes feed market appetite
MountainView Servicing Group is managing the sale of $1.4 billion in mortgage servicing rights tied to enterprise loans.
The offering, up for bid on August 29, includes both Fannie Mae and Freddie Mac MSRs.
"We continue to see upward price pressure on conventional and Ginnie Mae servicing," said Matt Maurer, managing director at MountainView Servicing Group.
He added, "And this $1.4 billion conventional offering should be no different, given the portfolio’s low weighted average interest rate and stellar loan performance."
While MountainView did not reveal the names of the sellers and buyers in the deals, the company is seeing more parties demand traditional MSR deals.
The increase in MSR market activity is driven by a couple of items, including strong demand for the asset from private equity firms and real estate investment trusts looking for high single-digit returns in the current low-rate environment, the managing director explained.
"Lower origination volumes and margins are causing more mortgage banks to monetize the asset to manage cash flows, and in most cases, sellers are able to book gains on their sold MSRs given the increase in market pricing," Maurer said.
On a similar note, Interactive Mortgage Advisors managing director Tom Piercy explained that MSRs have been an undervalued asset class for many years and finally hit its peaks in 2012 when "the dance hall is starting to get decorated."
"MSRs are a yield play for investors who have not been able to achieve these types of yields in the past," Piercy said.
He continued, "It’s attractive massive outside capital that’s now being deployed to capitalize on the yield in the market."
At this point, there are very few buyers that have not completed an MSR transaction through MountainView Servicing Group, Maurer said.
The company attributes its veteran experience in the mortgage industry to being able to identify what each buyer will and will not pay for.
"We discuss the pluses and minuses of each buyer’s due diligence process and agreements," Maurer pointed out.
As a result, the validation advisor has completed more than a handful of government-sponsored enterprise MSR selloffs.
Recently, MountainView managed the sale of $1.2 billion in MSRs tied to Freddie Mac and Ginnie Mae loans.
The first offering included $730 million Freddie Mac MSRs, while the second was made up of $485 million in Ginnie Mae MSRs.