One man's junk is another's gold, especially when it comes to mortgage servicing rights. Late this past week Ocwen inked a deal to buy roughly $15 billion of MSRs from JPMorgan Chase, which like many mega-servicers (except for maybe Wells Fargo) is downsizing its presence in the receivables market (for a variety of reasons). According to a new report from Sterne Agee, the MSRs cost Ocwen about 55 basis points. Here's the thinking from Sterne: “In estimating the portion of the purchase price that should be allocated to MSR purchase, we have to estimate the advance rate on the service advance line, which is believed to be modestly above 70% (originally we were assuming 80%). This implies that the MSR associated with theses servicing assets is valued at approximately $82 million or 55 bps of UPB.” The total deal is valued at $950 million, but a large chunk of that represents servicer advances…
A few weeks back one servicing executive told me: “I think the days of MSRs selling at four-times (the servicing fee) are long gone.” Maybe. Maybe not. When rates rise what will the rights on 4% mortgages be worth? Will that stuff ever prepay?...
Meanwhile, Fannie Mae and Bank of America are still refusing to confirm that the GSE bought $70 billion of its MSRs early this fall. By now—thanks to reporting by National Mortgage News—everyone knows the deal has closed with Green Tree being assigned the MSRs by Fannie. But why is everyone so secretive? NMN is already receiving emails from former B of A customers who recently received “Welcome” letters from Green Tree. Come on, Fannie, come clean already. What's the big secret?...
Meanwhile, in Monday's NMN we have a story about GSE servicing compensation and “Fee for Service” and how it might result in more white-collar jobs being sent over to India. Don't subscribe? Call 800-221-1809…
It looks as though Quicken Loans had a decent third quarter, funding $8.4 billion of residential loans. For a complete ranking of the nation's top 100 lenders see the Quarterly Data Report. For a sample copy drop a line to
Fannie and Freddie lost a ton of money in the third quarter. Credit losses continued to harm the GSEs, but their biggest problem was losses tied to derivatives, which they use to hedge. Of course from what we know about derivatives—what is marked down, can one day be marked up. It's sort of like MSRs and herding cats…
Some readers were not happy with comments I made about the bonus/salary situation at Fannie/Freddie. I basically defended GSE management and the contracts they received from the government. (It's called “rule of law” folks.) But OK, I'm open to suggestions. What is a fair salary for someone running a $1 trillion GSE, especially when the person now in charge did not cause the damage/is trying to fix the damage, and has a constant bull's eye on their backs? Send your comments to
And as I've noted before: thousands of GSE workers lost their entire retirement savings when the two crashed. Does anyone care about those people and their families?
TECH NEWS: DocMagic, a market leader in compliant mortgage loan document preparation, has been recognized by Mortgage Technology magazine as one of the 2011 Top 50 Service Providers. This marks the tenth consecutive year that DocMagic has been named in the publication's annual listing of top service providers since the award's inception in 2002.
WASHINGTON NEWS: The Securities and Exchange Commission could hurt the housing recovery if it imposes tighter restrictions on real estate investment trusts that purchase and securitize mortgages, according to industry comments filed with the agency. In August the SEC issued a “concept” release, seeking public comments on whether mortgage REITs should be regulated under the Investment Company Act like mutual funds. (For the full story see the NMN website. Reporting by NMN's Brian Collins.)
MORTGAGE PEOPLE: Mortgage technology vendor Ellie Mae has promoted Jonathan Corr to chief operating officer.
DATA NOTE No. 1: NMN is in the process of collecting its third-quarter surveys. If you would like to participate in our survey, send an email to
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LAST WORD: Remember the fallen on this Veterans Day.
