Servicing Deals Are Heating Up
The "bulk" market for residential servicing rights is finally showing some signs of life. But will it last?
As Mortgage Servicing News went to press, General Electric had finally unloaded the last chunk of its residential servicing portfolio, selling about $9 billion in receivables to the firm subservicing the loans - Wells Fargo Home Mortgage, San Francisco.
And in one other large deal, Ohio Savings Bank FSB, Cleveland, was negotiating with a buyer on a $5 billion package of bulk rights.
A source familiar with the GE deal said, "After subservicing it, Wells now owns it."
The source, requesting his name not be used, said the portfolio includes "a lot of private-label securities."
In late 2000 GE began liquidating its GE Capital Mortgage affiliate, based in Cherry Hill, N.J. The unit had about $80 billion in servicing rights at one time.
Cohane Rafferty Securities, New York, which is now owned by Lehman Brothers, brokered the original deal where Wells began subservicing GECM's portfolio. A Cohane official declined to comment.
As far as the Ohio Savings sale is concerned, CEO Jess Lederman confirmed to MSN that the thrift has a commitment from a buyer. The deal is being brokered by Phoenix Capital of Denver, which declined to comment.
Ohio Savings, according to Mr. Lederman, "sells most of what we originate" but also retains servicing for its portfolio.
He and his capital markets chief, Phil Laren, believe more bulk portfolios will hit the market in the months ahead.
At press time, Matrix Capital, Denver, was about to come to market with a $350 million package of bulk servicing rights.
The bulk market has been unusually weak the past two years because the refinancing boom has hammered servicing values. Valuing portfolios has been especially troublesome for both buyers and sellers. Moreover, many publicly traded firms have been hurt by servicing impairment charges.
A recent report on receivables issued by Servicing.com, New York, notes, "In general, the market for MSRs is still struggling with a reduced level of demand, while future price gains may come slower than what market participants expect in a rising interest rate environment."
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