…from the desk of Phil Laren
As the economy continues to heal from the pandemic, more investors are coming back into the game of MSR buying and selling. We saw unprecedented pull back from investors last year where MSR sales went to zero due to the uncertainty of COVID-19. With the first quarter over in 2021, the market for MSR sales is beginning to shift. Take a look below and review our Top 5 Takeaways for Bulk MSR Market.
MSR prices stabilizing – multiples either back or almost back to pre-COVID levels
Early deals out this year have been surprisingly well-received, especially conventional business. GNs are making a slower comeback but are starting to regain ground. Buyers have become more comfortable with the forbearance risk, and as a result, more buyers are in the market driving bid levels higher.
Lower production/revenue expected to drive MSR asset sales in 2021
With production easing, some mortgage companies are taking an opportunistic look at selling a portion of their swollen portfolios.
Strategically postponing MSR Sale activity until after 12 months seasoning to take advantage of long term capital gains tax treatment
Pandemic-related retention activity began for most lenders in March last year, making now a good time for lenders to review their books. We find many exploring the composition of their portfolio to optimize the best value for a portion of their book.
Liquidity boost from private equity capital infusion and mega-mergers contribute to MSR value optimism
We are seeing new capital enter the mortgage market in a number of ways; public offerings, purchases, mergers, and acquisitions. This only enhances MSR transaction prices as the number of participants grows.
Preparing for a potential transition from A/A servicing to S/S servicing
FHFA limits on the ability to sell through the cash window next year may encourage many lenders to explore securitizing more of their originations. Lenders who retain servicing have to be prepared for the responsibility to remit P&I advances when a borrower is delinquent, as well as the benefit of holding those payments when the borrower is not.
Do you Need Help Managing your MSR Portfolio?
MCT’s MSR Services team wants to help you manage this asset both financially and operationally. We have the experience and the software to aide in your MSR decisions, starting from optimizing your retained/released decision to valuing your portfolio to analyzing the risks of MSR ownership, including interest rate and credit market exposure, to finally buying or selling your MSRs.
We’re here to help and we look forward to continuing to serve your MSR management and valuation needs.
Questions or comments should be directed to the MSR Services Group, David Burruss, dburrus@mctrade.net, Phil Laren plaren@mctrade.net, Susi Schlenk, schlenk@mctrade.net, or Natalie Martinez, nmartinez@mctrade.net.
About the Author:
Phil Laren, Director of MSR Services, MCT
MCT’s mortgage servicing software, MSRlive!, was created by industry veteran Phil Laren.
Mr. Laren has more than 30 years experience in Capital Markets, predominantly in servicing. He is experienced in all aspects of servicing, modeling, pricing, trading, negotiating, hedging, risk analysis, accounting analysis and operations. He is also very experienced building teams and managing traders & analysts.
Mr. Laren holds Advanced degrees in statistics and econometrics.
