The economy continues to heal from the pandemic and MSR pricing has seen improvement as a result. Many servicers are still sitting on large portfolios as a result of MSR multiples/prices going to zero in early 2020, and the market is becoming ripe for MSR bulk sales and there is ample capital/liquidity from buyers ready to purchase. Continue reading below for our Top 5 Takeaways for the Bulk MSR Market.
MSR prices are improving – multiples in late summer to present are actually better than pre-COVID levels
The next increase in MSR values will be driven by long term interest rates increasing, making servicing on existing loans more valuable, in addition to improved short term rates making escrow float more valuable.
Lower production/revenue is expected to drive MSR asset sales in Q4 2021 – 2022
Q1 2021 secondary gains were significant, continuing the market trend from the second half of 2020. But Q2 and Q3 2021 experienced lower revenue, driving some sellers to take advantage of strong bulk MSR multiples to offset their decline in production revenue. With declining overall conforming production along with pressure on margins, we expect this trend to continue in 2022.
Strategically postponing MSR sale activity until after 12 months seasoning to take advantage of long term capital gains tax treatment is prudent
There is a high probability of income tax increases that will affect subchapter-S corporations. The confluence of good pricing in the current MSR market and the prospect of higher taxes next year, will certainly impact motivation and activity.
Liquidity boosts from private equity capital infusions and mega-mergers contribute to MSR value optimism
There is plenty of investor/buyer capacity driving attractive MSR levels in the market. A lot of liquidity is present in the market looking for something to buy. Specifically, MSRs.
The recent FHFA PSPA announcement has put the brakes on the potential transition from A/A servicing to S/S servicing
Following the announcement, Servicers should be less concerned about the potential future impact of cash advance responsibilities related to transitioning to S/S servicing.
Continue Reading – Case Study: MSR Services Improves Profitability of Doorway Home Loans
In this case study, Mr. Danilowicz explains how MCT’s MSR team helped Doorway Home Loans successfully facilitated a $1 billion MSR Sale. He also describes how MCT was instrumental in providing critical guidance through the 2020 market uncertainty and volatility.
Featured Quote: “The MSR team was absolutely crucial to the success of our MSR sale. I’m confident that with MCT’s guidance, we added 15bps of additional profitability on our $1 billion portfolio sale or approximately $1.5 million. Every time there was an issue or challenge during the transaction, Phil Laren and others from the senior management team at MCT stepped in to ensure the deal went through as agreed and on schedule.”
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, Bill Shirreffs, firstname.lastname@example.org, David Burruss, email@example.com, Susi Schlenk, firstname.lastname@example.org, or Natalie Martinez, email@example.com.
About the Authors:
Bill Shirreffs, Head of MSR Services & Sales Operations, MCT
Mr. Shirreffs brings extensive industry experience in capital markets, structured transactions, credit risk, mortgage insurance, strategic planning and sales leadership to MCT. Prior to MCT, Shirreffs gained broad secondary experience with both Fannie/Freddie (17 years), where he ultimately became Vice President, responsible for oversight of the West Region for both organizations. Due to his deep experience on Fannie’s Cash Window, Bill was tasked with becoming one of the principal architects of Fannie Mae’s “Live Pricing”, the Industry’s first electronic whole loan committing platform.
Shirreffs also spent 13 years in the mortgage insurance industry, where as Head of National Accounts he helped PMI MIC grow into one of the Industry’s leading providers in the 2000s.
Mr. Shirreffs is MCT’s Head of MSR Services & Sales Operations, responsible for overseeing all operational aspects of the sales organization and other related functions, including contract management, sales leadership, strategic planning, process improvement, and sales reporting.
George Christo, Executive Vice President at The Prestwick Mortgage Group
Mr. Christo began his mortgage career in 1992 at one of the country’s largest specialty investment banking providers to the mortgage banking industry. During his tenure at this firm, he personally managed over one hundred servicing sales transactions ranging in size from $10 million to $1.5 Billion. He was also active in providing evaluation and consulting services to numerous clients.
Since joining The Prestwick Mortgage Group in 1995, Mr. Christo has played an active role in positioning the Company as a nationally respected provider of mortgage loan asset brokerage, evaluation and consulting services. At Prestwick, he has successfully marketed over three hundred fifty servicing portfolios, ranging in size from $3 million to $4.0 billion, and twelve mortgage companies. He has managed over eight hundred evaluation and consulting assignments.