Surprise (Or Maybe Not): Nonbanks Lead MSR Growth

As commercial banks continue to weigh the effects of the Basel III accords on mortgage servicing rights and capital, nonbank residential servicers are posting the strongest growth rates in the industry.

According to new second quarter figures compiled by National Mortgage News and the Quarterly Data Report, two nonbanks had the fastest growth rates in the industry: Nationstar at 194%, and Provident Funding with 35%.

The gains reflect MSR growth for top ranked processors from the second quarter of 2011 to 2Q 2012. (The complete rankings appear in the new, 2Q edition of the QDR.)

Nationstar’s results are hardly surprising. Majority owned by Fortress Investment Group, the company has been bottom fishing in the MSR market the past two years, snatching up troubled portfolios from companies that have been either exiting the business or cutting back. The Lewisville, Texas-based firm is also a leading contender to buy all or part of Residential Capital Corp., a $370 billion bankrupt servicer ultimately controlled by the U.S. Treasury Department – courtesy of the TARP program.

Among the nation’s top five servicers in 2Q, four firms showed negative growth: Bank of America (-20%), CitiMortgage (-13%), Chase (-9%), and ResCap (-5%). All are banks, or bank owned. (ResCap is owned by Ally Financial.)

The only megaservicer that experienced growth in 2Q was Wells Fargo & Co. which ended June 30 with $1.86 trillion of MSRs on its books, a 3% gain from a year ago.

Wells ranked first in the industry, followed by B of A ($1.59 trillion), and Chase ($1.07 trillion). All five experienced a decline in market share, a sign that deconsolidation of the servicing side of the business is continuing.  (For a larger analysis see the weekly paper edition of NMN.)