Nonbanks increased their share of the mortgage servicing market by nearly 5% in the first quarter, while a one-time reporting change lowered credit union portfolio holdings. (Includes three data charts.)
PE shops have quietly entered the MSR arena as owners, reaping strong gains. How long they might stick around depends on the direction of interest rates.
For years, the number of subservicing contracts has proliferated. But with loan production falling, there is less of a rush to use outsourcing vendors. Some lenders may even move the function inhouse. (Includes data chart.)
After a respite of sorts, the insatiable appetite for mortgage servicing rights revives. Meanwhile, Better.com and its founder find themselves on the wrong end of a civil damages claim.
Servicing bids are off their highs for the year, but the situation could be temporary. As originations wane in the quarters ahead, nonbanks could flood the market with more auctions.
According to new research paper, nonbanks use their MSRs to help fund operations in a rising rate environment, resulting in stronger originations in comparison to banks.
When rates increased substantially in the first quarter, many nonbanks moved aggressively to mark up the asset value of their MSR portfolios. There’s nothing wrong with that, but the volatile nature of servicing makes regulators nervous. (Includes data chart.)
Sale of bulk MSR packages have been white-hot the past 18 months, but a pause could be in the works, some investment bankers suggest. Still, any kind of lull may not last for long.
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