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Balances Still Sliding, Servicers Are Worried

Between foreclosures and paying down their loans through “cash-in” refinancings, the nation’s mortgagors are continuing to whittle down their housing debt—and that’s bad news for the nation’s servicers.

According to exclusive survey figures compiled by MSN and the Quarterly Data Report, outstanding residential loan balances fell to $9.2 trillion at Sept. 30, a 6% decline over the past 12 months.

The nation’s top four servicers—Bank of America, Wells Fargo, JPMorgan Chase and CitiMortgage—saw their MSRs decline or stay flat during the third quarter.

B of A, not unexpectedly, is on the verge of losing its No. 1 ranking, ending the period with $1.93 trillion of MSRs, compared to $1.81 trillion for Wells.

B of A plans on being a net seller of servicing contracts in the years ahead and is reducing its exposure to the nation’s housing crisis. About two months ago it sold $74 billion of MSRs to Fannie Mae.

The bank is currently offering a $50 billion package of MSRs tied to Freddie Mac loans. Investment advisors say Fortress Investments was awarded the package, but there has been no official confirmation on a deal. Bayview Financial also bid on the MSRs, sources said. To date, B of A, Fortress and Bayview have all declined to comment.

Other top-ranked servicers besides B of A are reducing their MSR holdings.

CitiMortgage saw its contracts fall 14% in 3Q to $562 billion, the largest decline among the top 10. Nationstar Mortgage had the largest increase, ramping up its MSR balance by 163% to $92 billion.

The nonbank, a unit of the publicly traded Fortress Investments, now ranks 10th nationwide, according to MSN/QDR