Sterling Partners Plans to Make Large Investment in MSRs

Sterling Partners, a Chicago-area equity fund that hired Phoenix Capital’s Michael Lau this week, plans to invest several hundred million dollars in mortgage servicing rights, according to industry advisors familiar with the firm’s plans.

The exact dollar amount of the investment is not known though one source said it entails “a substantial capital commitment towards purchasing MSRs.”

At deadline Sterling could not be reached for comment. Sources confirmed to National Mortgage News that Lau, executive vice president of Phoenix, has accepted a position with Sterling.

Increasingly, more hedge funds are beginning to eye MSRs as an investment as megabanks the likes of Bank of America divest of the asset because of changing capital rules.

Investment banking sources say returns on MSRs can be in the 20% range at least.

Phoenix Capital, a servicing advisory firm, is based in Denver. For the past 18 months it has been handling large MSR bulk sales on behalf of Bank of America.