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Servicing

Inaugural IMN mortgage servicing rights conference starts off with a bang

"MSRs are like fracking"

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Regulators have been throwing up obstacles left and right, state and federal, for those engaged in the growing and lucrative MSR market, but if the opening panel at Information Management Network’s first-ever Residential Mortgage Servicing Rights conference is any indication, at least some folks in the industry are taking it in stride.

(Note: IMN asks for the conference to be off the record. Panelists are quoted but not named.)

The session started with a great comparison by the moderators.

“MSRs are like fracking – there’s great cash flow, a lot of smart money figured out how to get in there early, and there are new rules,” he said.

The slate of regulations and the increased scrutiny is just something the industry – especially nonbank servicers – are going to have to deal with, he added.

“I think it’s about making headlines rather than anything else,” one of the panelists at the opening session said, when asked about the increased government scrutiny of bank and nonbank servicers. “You definitely have to factor in oversight and regulatory costs with the FHFA looking at everything and slowing the speed of transactions.

“They are looking at our business but it’s not long term concern,” one said. “Working with regulators properly will be part of what we do.”

Not everyone was so nonplussed.

“He just doesn’t want to paint a target on himself,” whispered an audience member, laughing.

Other panelists were also a little more riled by the regulatory environment, some expressed shock at the fact the cost of servicing is 10 times more expensive because of regulatory burden.

"As HPA rises and aggregate MSR cost of service becomes easier it will help but performance servicing costs have risen a great deal with national servicing standards that went into effect, what, just a month ago,” another panelist said.

One attendee after the session seemed to take a middle ground reaction.

“The rules are not done changing. The industry is still in state of reform. There will be more changes on the performing and non-performing side you will be required to meet. You need to model volatility around those costs,” he said. “It’s not reflected in MSR valuations but costs are going up as a result of regulatory environment. My biggest concern it’s not just a slow down, but a bigger obstacle that will take liquidity out of the market.”

With no relief from or endpoint to regulatory scrutiny, the industry just has to suck it up and get back on the field.

“We have willing sellers and willing buyers and unfortunately we’re in an environment where we can’t transact,” a panelist said. ‘There are growing pains at the moment.”

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