SPS grew its servicing rights 14% by targeting nonagency market

Register now

Select Portfolio Servicing grew its mortgage servicing rights portfolio by over 14% in the second quarter by targeting opportunities in the nonagency loan market.

The largest nonbank servicer, Nationstar, during the quarter grew its portfolio by 7% by adding agency MSRs. Other servicers, like Ocwen and Bank of America, reduced the size of their portfolios through sales.

SPS, owned by Credit Suisse and primarily a nonagency servicer, grew its total portfolio by 14.4% from the first quarter to approximately 574,000 loans with an unpaid principal balance of $98.5 billion, according to the Fitch Ratings second-quarter residential mortgage-backed securities servicer handbook.

During the second quarter SPS' nonagency (both prime and subprime) RMBS portfolio grew to 499,388 loans (including 433,000 subprime loans) with a UPB of $86.6 billion. At the end of first quarter, SPS had 425,476 loans in the nonagency portfolio, with a UPB of $81.8 billion.

SPS has been acquiring seasoned nonagency MSR portfolios from banks divesting their holdings, the Fitch report noted.

The delinquency rate for SPS' nonagency portfolio is slightly better than for the overall portfolio. The percentage of loans in its entire portfolio 60 days late or more fell to 10.6% as of June 30, compared with 11.7% on March 31 and 14.1% on June 30, 2016. Over the same period nonagency loans 60 days or more late fell to 10.4% from 11.6% one quarter ago and 13.6% one year ago.

The largest nonbank servicer at the end of the quarter was Nationstar, which has rebranded its consumer facing businesses to Mr. Cooper. It grew its portfolio by 7% from the first quarter to 2.8 million loans with a UPB of $459.1 billion. Only $71 billion is nonagency.

Like SPS, Nationstar has been active in acquiring MSRs from banks and nonbanks, including subservicing a $97 billion portfolio that New Residential Investment Corp. acquired from Citigroup. (Both Nationstar and New Residential are affiliates of Fortress Investment Group.)

Because it has a much smaller percentage of nonagency loans, its delinquency rates are much lower than SPS. For the whole portfolio, the 60-day-or-more percentage of late payments was 1.78%, unchanged from the first quarter. The 60-day-plus delinquency rate for the nonagency RMBS portfolio was 3.41%, up 15 basis points from the first quarter.

Ocwen Loan Services had a $189 billion MSR portfolio at the end of the quarter, with $139 billion of nonagency servicing, according to Fitch (a 10-Q filing from Ocwen said it had a $195 billion portfolio as of June 30). It was the largest subprime RMBS servicer with approximately 617,000 loans, according to Fitch.

But Ocwen, because of regulatory prohibitions, has not been allowed to acquire new MSRs. A new round of settlements will bar Ocwen from purchasing MSRs until April 30, 2018.

Ocwen's servicing portfolio grew smaller in July to approximately $85 billion, following the sale of $110 billion in MSRs to New Residential.

Among large financial institutions, Bank of America sold delinquency and underperforming loans to nonbank servicers, reducing its portfolio to $510 billion at the end of the second quarter from $519 billion on March 31.

Wells Fargo remained unable to purchase MSRs by regulators and its portfolio fell to $1.47 trillion to $1.46 trillion.

For reprint and licensing requests for this article, click here.
MSR Mortgage defaults RMBS Fitch Nationstar Ocwen Financial Bank of America Wells Fargo