Is mortgage servicing's bulk market coming back?

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The Mortgage Industry Advisory Corp. is putting $5.27 billion in servicing rights up for bid on behalf of an undisclosed seller in one of the first bulk transactions seen in months.

The average loan balance is $117,064 and the retail-originated Fannie Mae mortgages in the portfolio have on average a 4.08% interest rate, more than four years of seasoning, a 740 FICO credit score and loan-to-value ratios well under 80%.

The loans also have a 3.73% delinquency and foreclosure rate, which breaks down as follows: 30 days, 1.82%; 60 days, 1.11%; 90 days, 0.19%, and 120 days-plus, 0.61%.

The largest geographic concentrations based on loan count are Texas, 10.4%; Florida, 6.13%; Illinois, 4.64%; California, 4.34%; and Pennsylvania, 4.28%. All the mainland loans are registered with Mortgage Electronic Registration Systems.

The metrics on the loans in the MSR portfolio are current as of May 31.

The bulk market for mortgage servicing rights froze up early on in the pandemic, and its lot was further complicated in May when Fannie Mae and Freddie Mac suspended purchases of loans more than six months old, citing uncertainties related to the coronavirus and related economic impacts since older loans were underwritten.

While the government-sponsored enterprises' absence from the bulk loan market decreases the number of outlets available to sell to, banks and other investors may find the reduction in the number of buyers attractive because it limits competition.

Bids must be received by 5 p.m. Eastern time on July 21 and a sale date of Aug. 31 is preferred. The portfolio transfer date is subject to investor approval and subservicer transfer timelines.

Cenlar is currently responsible for servicing operations related to the loans. The associated notes and deeds are available in hard copy formats, and the remainder of the documents are electronic image files.

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