MSR buyers believe that there will be plenty of supply of the asset this year as mortgage originators face difficulties from high interest rates. UWM, the largest lender in the industry, is willing to sell if the price is right.
Lenders are facing a tough market for originations, helping to prompt sales of servicing. The supply of MSR is coming both from older vintages with interest rates well below current rates and new production in which a lender might not want to hedge the MSR.
Some MSR buyers are offering exceptionally strong bids for servicing, counting on being able to recapture borrowers when interest rates drop. The high bids are creating some complications for sellers and MSR valuations.
MSR bids are currently largely rational, though a few packages sold in recent weeks at unexpected prices, according to Brian Simon, a managing director at Bungalow Funding.
Refis are poised to increase and MSR values will decline as interest rates decline. United Wholesale Mortgage is prepared for the moment, having sold off a significant amount of MSRs earlier this year.
There’s more demand for mortgage servicing rights than there is supply at the moment, helping to keep prices for the assets elevated. Even if MSR sales increase this year, prices are expected to remain firm.
Lenders continue to make bulk purchases to offset runoff in their portfolios and make up for anemic originations. However, demand for MSRs could be near a peak, according to industry analysts.
With the supply of MSRs expected to grow, there are concerns that prices won’t hold up. Meanwhile, the CFPB is considering incentives for lenders to retain servicing.
Some SWFs in other countries have extensive ownership interests in major corporations and sweep much of their profits into state coffers.
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