Deals Perking In M&A Market

Rising interest rates were supposed to revive the market for mortgage servicing rights in the new year but, so far, activity has been light.

Topic "A" among servicing professionals currently is Cendant Mortgage Corp., Mt. Laurel, N.J., a top-10, $135 billion servicer, whose parent company, sources say, is pondering the idea of selling it.

"The origination, servicing and relocation businesses are for sale," said one executive familiar with the matter, but he noted that there is not yet a "book" out on the company.

As Mortgage Servicing News went to press this month, Cendant had not commented on the sale rumors and there was still no offering book out on the company. (Its investment banker is Goldman Sachs & Co.)

Sources note that Cendant's parent may have been making discreet inquiries, just to test the waters, without having any firm plans to actually sell.

The biggest impediment to the secondary market for servicing rights taking off is interest rates.

Mortgage rates have risen from their lows of the past summer, but not enough to allow for any significant mark-ups on the value of housing receivables.

Also, as this publication went to press, the yield on the 10-year Treasury (which mortgages are pegged) had begun to fall again. The yield was 4.05% at press time.

"Without that rise in rates the write-up of the servicing valuation can't occur," says one research report penned by Raymond James & Co.

However, some servicing deals are getting done. Irwin Mortgage Corp., Indianapolis, has agreed to sell $5 billion to $7 billion in "flow" servicing to an undisclosed buyer in a deal brokered by Cohane Rafferty Securities Inc., White Plains, N.Y. Also, Phoenix Capital, Denver, is working on a $1 billion bulk servicing sale for a client.

Copyright 2004 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.mortgageservicingnews.com

Next in News ►