GNMA Servicing Is Hot
Washington-With FHA-backed mortgages among the hottest loan products in the nation, it's no surprise that "flow" servicing rights tied to GNMA securities are now in huge demand.
One New York-based servicing advisor told this publication that some sellers of GNMA servicing rights are asking as much as seven times the servicing fee on newly minted loans. "They're not getting that price - but they're asking that much."
He added, "Let's face it. FHA is the only game in town." The servicing fee on GNMAs is about 44 basis points depending on how the deal is structured.
Instead, it appears that for flow servicing packages (rights that will be delivered forward as new loans are originated) the final bid price is settling in between four- and five-times the servicing fee.
"If you're buying at six-times (the servicing fee) you can't make money on that," said one advisor.
Tom Piercy, managing partner of Interactive Mortgage Advisors of Denver, said he has been hearing about prices of four- to five-times the servicing fee on GNMAs but cautioned that "certain note rate adjustments" can change the final price greatly.
IMA, which has been actively brokering servicing deals throughout the downturn, has a handful of deals in the works, though Mr. Piercy declined to discuss them at this time.
He also warned that although GNMA product is hot right now he anticipates that on FHA loans where the FICO scores are below 620, "50% to 60% of that stuff could go delinquent eventually."
Two to three years ago when FHA lending was in the dumps GNMA servicing rights sold for about 200 basis points at best.