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MSR market picks up in Q3 where Q2 left off: Hot

Incenter, Prestwick unveil new bid packages for mortgage-servicing rights portfolios

Four new mortgage-servicing rights (MSR) offerings for agency loan portfolios valued at some $3.7 billion hit the market as the third quarter of the year kicked off.

Alexandria, Virginia-based advisory and brokerage firm Prestwick Mortgage Group, along with its strategic partner, San Diego-based Mortgage Capital Trading (MCT), recently released bid documents for two separate MSR offerings involving loan portfolios valued at $1.85 billion in total.

In addition to the MSR offerings being marketed by Prestwick and MCT, Denver-based Incenter Mortgage Advisors in July alone has come out with two large MSR offerings, which are tied to loan packages worth $1.84 billion.

MSRs gain value as interest rates rise, in part because upward-bound rates cause mortgage refinancing to slow. That reduces mortgage-prepayment speeds — increasing the effective long-term yield of the servicing rights tied to those loans. 

Since the start of the year, rates have trended upward, quickly, with the 30-year conforming fixed rate rising nearly 2.3 percentage points since early January — from 3.22% as of the first week of 2022 to 5.51% as of mid-July, according to Freddie Mac’s Primary Mortgage Market Survey (PMMS).

One of Prestwick’s packages on the auction block, offered by a party identified in bid documents as “an independent mortgage banker,” involves MSRs for a pool of 2,826 Freddie Mac loans valued at $749 million. The other offering is for a package of MSRs on a combined portfolio of 4,853 Fannie Mae and Freddie Mac loans valued at $1.1 billion — also being offered by a party identified only as an “independent mortgage banker.”

The weighted average servicing fee for both packages is 0.25%. Bids on the $749 million Freddie Mac portfolio are due July 21. For the $1.1 billion Fannie/Freddie package, bids are due July 20.

Incenter’s offerings include MSRs for a pool of 3,212 Fannie Mae and Freddie Mac loans valued at $1.03 billion. The other MSR sale being marketed by Incenter involves a portfolio of 5,274 Ginnie Mae loans valued at $807.8 million.

Bids for both of Incenter’s MSR packages are due July 21. The servicing fee for the $1.03 billion package is 0.25%, bid documents show, while the servicing fee for the $807.8 million MSR package is a tad higher, at 0.284%.

During the final week of June, Prestwick also put out for bid an offering for a $1.6 billion package of Fannie Mae, Freddie Mac and Ginnie Mae MSRs, with bids due July 12.  

Prestwick’s offering came on the heels of a separate bulk offering announced by Incenter last month, which involved a $915.8 billion package of Fannie Mae and Freddie Mac MSRs. Bids on that package were due June 23. 

At the time the $915.8 billion offering was being marketed, Tom Piercy, managing director of Incenter Mortgage Advisors, said his firm was working on multiple MSR deals totaling more than $60 billion, which “are not out for public auction.” 

A recent report from mortgage-analytics firm Recursion, current as of the end of June, ranks Wells Fargo as the leading all-agency mortgage servicer, with a 7.6% market share and some $620.5 billion in loans serviced. 

Pennymac ranks second, with $507.1 million in agency loans serviced; followed by Rocket Mortgage, $490.7 billion; J.P. Morgan, $480.4 billion and Lakeview Loan Servicing, $389.3 billion.

Following are the top five mortgage servicers broken down by agency and respective market shares, based on the volume of loans serviced as of the end of June, according to the Recursion report:

Fannie Mae — total outstanding $3.31 trillion

  1. Wells Fargo, 8.3%
  2. Rocket Mortgage, 7.4%
  3. J.P. Morgan, 5.7%
  4. Pennymac, 4.3%
  5. United Wholesale Mortgage, 3.8%

Freddie Mac — total outstanding $2.84 trillion

  1. J.P. Morgan, 9.9%
  2. Wells Fargo, 8%
  3. Rocket Mortgage, 5.1%
  4. Pennymac, 4.6%
  5. NewRez LLC, 4.3%

Ginnie Mae — total outstanding $2.05 trillion

  1. Freedom Mortgage, 12.5%
  2. Pennymac, 11.4%
  3. Lakeview Loan Servicing, 10.5%
  4. Wells Fargo, 5.85
  5. Rocket Mortgage, 4.9%

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