Prestwick puts $1.6B in mortgage servicing rights up for bid

A $1.6 billion portfolio of servicing rights with some unusual geographic concentrations and a nearly 2.63% delinquency rate went up for bid Tuesday, according to Prestwick Mortgage Group.

As of May 31, weighted averages for Ginnie Mae ($737 million), Fannie Mae ($583 million), and Freddie Mac ($322 million) MSRs were as follows: note rate, almost 1.38%; net service fee, more than 29 basis points; seasoning, around 27 months; and a FICO credit score just above 740. 

The delinquency rate, which includes foreclosures, was highest for loans in securitizations Ginnie Mae backs, at nearly 5.08%. In comparison, it was more than 1.19% for the Freddie-backed loans, which pay on an accelerated remittance cycle. The Fannie-backed loans, which pay to securitization investors on an actual basis in line with borrower remittances, have a nearly 0.61% delinquency rate.

The difference between Fannie/Freddie and Ginnie delinquency rates is generally in line with trends in the broader market.

Loans insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, which are the two largest categories of government-backed loans included in Ginnie securitizations, respectively had serious delinquency rates of 5.33% and 3.15% in the first quarter. In comparison, the serious delinquency rate for Fannie and Freddie loans combined was 0.97%, according to a report released by the Federal Housing Finance Agency on Tuesday. 

The delinquency rate for all outstanding home mortgages last month was 2.75%, according to mortgage technology and data provider Black Knight.

Properties in Florida secure a little over half of the loans associated with the servicing rights Prestwick is putting up for bid on behalf of an unnamed seller, followed by Michigan (28.4%), and Indiana (14.2%). The rest of the mortgages associated with the portfolio are spread throughout 21 other states.

Typically bulk MSR packages tend to have a lot of exposure to California, but portfolios with other regional concentrations have been trading recently as well. For example, the Mortgage Industry Advisory Corp. earlier this month accepted bids on a $817 million package with a Midwest concentration. Other MSR packages with geographic concentrations in the Southeast, Texas, the Mid-Atlantic region and New England have gone up for bid recently, according to Prestwick. These portfolios tend to range somewhere between $500 million and $2 billion in size.

Although some debate on the outlook for the overall MSR sales market exists, experts at deadline were reporting that so far it has remained active even though the extent of the rise in interest rates that protects servicing cash-flows from runoff has fluctuated.

“Slightly lower increases still represent a significant opportunity for MSRs,” Scott Stoddard, senior vice president of business development, default and capital markets at industry marketplace and transaction management platform Flueid, said in an email. “When rates rise, loan prepayments typically slow. This extends the MSR payout period and intensifies their overall value in the market.”

The average for the unpaid principal balance of the individual loans in the Prestwick offering was $228,471. A retail lending operation originated almost all the mortgages (98.4%) associated with the servicing rights.

Written bids are due July 12 at 5 p.m. Eastern time. The seller may accept investor-specific bids for different portions of the portfolio.