Prices of SRPs Improving After Hitting All-Time Low
For the past two years small- to medium-sized lenders have been complaining about the servicing-released premiums paid by the nation's aggregators, feeling they were being shortchanged on pricing.
The issue is crucial for nonbank lenders that rely on the SRP because, as a business model, they choose not to service the loans they produce. In other words they book their "earnings" upfront as opposed to relying on the servicing "strip."
With the credit crisis-including a dearth of warehouse financing-beginning to ease, there are new signs that the buyers of freshly originated mortgages are becoming less stingy on what they pay on the SRP.
According to Glen Corso, managing director of the Community Mortgage Banking Project, a month ago SRP prices hit an all-time low. But lately, prices have improved.
His nonbank members are reporting an improvement due to rising rates. "One member told me that the improvement came at a time when the increase in mortgage rates from below 5% to above 5% took place," said Corso, who heads up the fledgling trade group.
In other words, the largest correspondent loan buyers-Bank of America, Wells Fargo and JPMorgan Chase-prefer to keep their mortgage pipelines full and are now willing to pay more to firms that upstream product to them.
The improvement in pricing comes at a time when the aggregators are relying more heavily on the correspondent channel. According to figures compiled by National Mortgage News, correspondent lending accounted for 41% of all loans produced in the fourth quarter, the highest reading in a year.