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Will Bank of America Lop Off $100B in MSRs?

OCT 26, 2012 4:58pm ET
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Now that Residential Capital Corp. has agreed to sell its massive MSR holdings to Ocwen and Walter Management, it’s Bank of America’s turn to unload some hefty product – or so were told. Just how hefty might its offerings be? One source said don’t be surprised to see a $100 billion package pealed off. But time will tell. It was a little over a year ago that B of A stealthily sold $74 billion in MSRs to Fannie Mae in a deal that the GSE initially denied actually happened. So, it’s not unusual to think that the bank will off-load $100 billion. But there’s a wrinkle to all this. Phoenix Capital in Denver has been handling the bank’s sales – a contract (we’re told) that has a lot to do with the hard work of Phoenix executive Michael Lau. The thing is, Lau recently departed the servicing advisory firm for Sterling Partners, a Chicago-area equity fund. And as it turns out Sterling plans to invest in – drum roll please – MSRs…   

Sterling, we’re told, also owns a piece of at least one mortgage banking firm…

While we’re on the topic of hedge funds, I was recently approached by a recruiter who’s looking for a board member for a firm looking to buy into the mortgage banking space…

Meanwhile, in Monday’s print edition of National Mortgage News we report on the state of hedge funds and PE firms eyeing the mortgage sector. We also have a strong story from Brian Collins on mortgages and risk-based capital rules, and Bonnie Sinnock’s ‘Street Smarts’ column. To subscribe, call: (800)221-1809

Rumor: a certain former subprime executive of a certain high profile failure is supposedly out there looking to raise money to start a nonprime lender. Go figure…

With Hurricane Sandy beginning to pound the East Coast what better time to bring up another bad news subject: borrowing short and lending long. What’s that you ask? I’m dating myself but such a thing happens when a depository funds mortgages with short-term deposits holding ‘long term’ assets (mortgages) on their books. As long as your cost of funds is lower than the mortgage yield everything is hunky dory. It’s when your cost of funds exceeds the yield that you get into trouble. (Remember the S&L crisis>) Anyway, here’s my point: I keep hearing plenty of stories about community banks and credit unions (Ed Roberts phone home) holding in portfolio “almost” conventional loans. Apparently, many regional banks are pitching mortgages to their commercial business customers, while relaxing the underwriting standards. They can ease their standards because (a)they know the client and (b)they’re keeping the mortgage in portfolio. But what if rates rise dramatically? Of course, a spike in rates is in no one’s forecast. And even though the U.S. has a huge debt burden we’re still better off than those Socialist commies over in Europe. Right?..

Who Will Mitt Romney Pick for HUD secretary? Deutsche Bank reports that the job market continues to improve at a slow and uneven pace. In a new report it predicts that next week's employment report (for October) “should show more of the same middling job gains we have become accustomed to over the past year.” It adds that only a portion of last month's unexpected decline in the unemployment rate is likely to be reversed “because the data are likely to remain distorted by election year hiring. In all, the labor market data are likely to reinforce our expectation of an economy that continues to grow at a subpar pace.”  

WASHINGTON NEWS: The ‘Qualified Mortgage’ rule could be released right before Thanksgiving. That rumor was making the rounds this week but we’re told that there’s not much to it. The CFPB is expected to have the rule out by January.

MORTGAGE PEOPLE: Mark Korell is moving on again. He lasted four months at Alonhill but before that was at JPMorgan Chase for a handful of years – in the bank’s correspondent division. Wholesale lender ICON Residential – which recently changed hands – hired Jeffrey Lisinicchia as its chief financial officer.   

TWITTER (MORTGAGE) NEWS: Watch my personal Twitter feed where I provide updates on breaking stories. Just visit Twitter and plug in my name.

MORTGAGE DATA: NMN recently published the 2Q edition of its exclusive Quarterly Data Report product. It includes the nation’s top 100 lenders and servicers and much more including subprime servicers. To order email: Deatra.Todd@SourceMedia.com.  

COMPLAINTS? NEWS LEADS? Send them to: Paul.Muolo@SourceMedia.com.

FINAL WORD: Stay safe hurricane watchers.

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