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A Major Shift in MSR Owners Is Underway

NOV 5, 2012 9:47am ET

Nearly $700 billion of mortgage servicing rights—or 7.6% of the housing receivables market—are in some stage of auction or sale, according to figures compiled by National Mortgage News.

And as almost any player in the market know, it’s a buyer’s market.  

In a new research report, Michael Carnes, senior vice president of the capital markets group at MIAC Analytics, New York, notes, “For those contemplating the purchase of servicing, consider the following: Beyond doubt, mortgage servicing rights values remain at historically low levels, potentially creating one of the best buyer’s markets in history. Prices for servicing have dropped to very attractive yields relative to the risk profile of the asset class.”

As far as pending deals are concerned, two sales represent a majority of the soon-to-transfer market: $374 billion of MSRs that belong to Residential Capital Corp., which are slated for sale to Ocwen Financial and Walter Management, and $122 billion of product being offered by Ally Financial, the parent of ResCap. (See the upcoming print edition of Mortgage Servicing News for more details.)

Ocwen also is scheduled to purchase $74 billion of product when it closes on Homeward Residential, a shop being sold by bottom fisher WL Ross & Co. Up until early November, the largest "un-attached" portfolio involved $70 billion of MSRs belonging to MetLife Home Loans, the mortgage unit of the insurance conglomerate of the same name. As reported by NMN last Friday, JPMorgan Chase agreed to buy the MetLife package for an undisclosed sum.

Earlier this year MetLife exited the residential lending, reverse and warehouse finance businesses but kept the servicing portfolio—until the JPM deal.