Bulk Market for Servicing Slow
Washington-There seems to be plenty of talk these days about pending sales of bulk mortgage servicing rights but not much news on deals actually getting done.
Of the three largest bulk deals currently in the market, none have closed and the investment bankers brokering the sales aren't giving much out in the way of details.
The largest of the three is a $12 billion portfolio of jumbo servicing rights belonging to the now-defunct Thornburg Mortgage, Santa Fe. Interactive Mortgage Advisors, Denver, is believed to be brokering the transaction but company officials declined to talk about it.
One investment banker close to the situation described the portfolio as "really good quality - and impressive given the vintage." He added, "The good news is that there is no agency counterparty risk on it," a reference to Fannie Mae and Freddie Mac.
Even though Thornburg filed for bankruptcy protection earlier this year, the default rate on its portfolio was extremely low. "It's very low given the vintage and the universe we are talking about," said an executive that has looked at the portfolio's "tape." Sources say the holdup to selling the servicing stems from the bankruptcy process. "You never know what a judge will do," said a source. Thornburg's attorneys have declined to discuss the matter.
Meanwhile, there is still no news on a recent auction of $1.04 billion of GNMA servicing rights by Mortgage Industry Advisors Corp., New York.
The receivables are being sold by MIAC on the behalf a Northeast-based mortgage banking firm that the company declined to identify. The weighted average coupon on the servicing is 5.73%. The loans come from three states: Connecticut, New Jersey and New York.
The seller was hoping to complete the transaction by the end of November.
One other large pending sale is the auction of roughly $1 billion in servicing rights from Franklin Bank of Texas, a depository that was closed a year ago. IMA is brokering that sale as well and is close to finalizing the transfer.
Meanwhile, there are a handful of smaller servicing portfolios trading hands, including a few by The Prestwick Mortgage Group, Alexandria, Va. It recently sold a $9 million portfolio of receivables from a Michigan lender. "We got the results we were looking for," said company EVP George Christo. "Maybe that's the key to selling servicing now - keep it small."