HousingWireHousingWire
Some mortgage lenders are seizing the moment to sell billions of dollars in mortgage servicing rights (MSRs), capitalizing on strong demand and high valuations. Among them are Movement Mortgage and Sierra Pacific Mortgage, sources told HousingWire.
On the buy side, investors are eager to acquire MSRs either to build a portfolio that enables borrower recapture once mortgage rates fall and refinancing activity picks up—or to gain exposure to a high-yielding, stable asset.
In early May, South Carolina-based Movement Mortgage, a top-25 U.S. lender, sold approximately $5 billion in MSRs, when California-based Sierra Pacific Mortgage also offered a $5.2 billion package, according to sources.
Sierra Pacific’s portfolio includes loans backed by Fannie Mae, Freddie Mac and Ginnie Mae, with full representations and warranties. Key metrics for the offering include a weighted average interest rate of 5.3%, an average loan age of 50 months, an average FICO score of 742 and a delinquency rate of 4.12%.
Representatives at the companies declined to comment.
One executive at a mortgage lender said a $4 billion MSR sale could generate $40 million in cash for a company–potentially providing a financial boost amid a challenging market or helping offset a one-time expense.
Meanwhile, a senior executive at a leading mortgage servicing rights brokerage firm described the timing as ideal: “Demand is enormous and multiples are at 25-year highs.” According to the executive, selling now is a “smart” move.
Another executive at a competing firm, which currently has more than $20 billion in MSRs listed for sale, echoed that sentiment: “The demand for MSRs remains high and that’s reflected in pricing, which is exceeding anticipated model values. This type of demand has drawn out more sellers than there would be ordinarily and that’s good for those who are looking to deploy capital and invest in this attractive yielding asset.”
According to MCT’s May report, servicing release premiums (SRPs) – a fee paid by a lender when they purchase MSRs – remain highly attractive, roughly 10 to 15 basis points above fair value. MCT estimates lenders need to retain only 25–35% of servicing to keep income steady, making the case for more MSR sales.
In the bulk MSR market, trades remained strong, with recent deals ranging from 130 to 139 basis points, or 5.2–5.56x multiple of servicing fees. In April, JPMorgan Chase acquired a book from United Wholesale Mortgage (UWM) at a 6.5x multiple—an outlier, but a sign of continued appetite for quality MSR assets amid low mortgage volume.
