Tuesday, December 8, 2015

Servicing Transfer Trends


(Warning: don't read if you are politically sensitive.)

During the 3-1/2 years of World War 2 that started with the Japanese bombing of Pearl Harbor in December 1941 and ended with the Surrender of Germany and Japan in 1945, the U.S. produced the following:

22 aircraft carriers, 8 battleships, 48 cruisers, 349 destroyers, 420 destroyer escorts, 203 submarines, 34 million tons of merchant ships, 100,000 fighter aircraft, 98,000 bombers, 24,000 transport aircraft,

58,000 training aircraft, 93,000 tanks, 257,000 artillery pieces, 105,000 mortars, 3,000,000 machine guns, and 2,500,000 military trucks.

We put 16.1 million men in uniform in the various armed services, invaded Africa, invaded Sicily and Italy, won the battle for the Atlantic, planned and executed D-Day, marched across the Pacific and Europe, developed the atomic bomb and ultimately conquered Japan and Germany.

Could today's Congress put that in motion? It's worth noting, that during the almost exact amount of time, that the CFPB reformed RESPA-TILA, and (remember back) the Obama administration couldn't build a web site.

As I mentioned last week servicing continues to change hands although at a slightly slower pace than earlier this year. And the top servicers continue to add servicing through their own retail branch networks: Wells Fargo (with about $1.7 trillion it has about a 17% market share), Chase (with less than $1 trillion), followed by Bank of America. Per Inside Mortgage Finance at the #4 spot we see our first non-bank with Nationstar ($400 billion), followed by Citi, US Bank, and then Ocwen with about $300 billion. After that you'll notice the banks almost disappear: Walter Investment, PHH, Quicken Loans, PennyMac, then SunTrust, PNC, and BB&T (with about $120 billion). And then more non-banks: LoanCare, Caliber, Provident Funding, banks Fifth Third, Flagstar, and at #20 Bayview ($63 billion). Those who follow such trends are quick to point out that, aside from Nationstar, the top five all lost market share during the last year.
Occasionally I am asked who the larger servicing brokers are, and what the pools look like. Below is a collection of recent deals over the last several months, along with the pertinent information. As a quick aside according to Dr. Sheldon Cooper, when it comes to the most common street names, there are generally more "2nd Streets", than there are "1st Streets", in the United States. The general consensus for this phenomenon says the majority of cities and small towns have renamed 1st Street to Main Street....leaving 2nd Street as the most common. Who am I to argue with someone who has a Master's degree and two doctorates?
Speaking of fun facts, Prestwick Mortgage Group is offering of mortgage loan servicing package for $150 Million of New England FNMA A/A first liens. The package, which is 100% FRMs, is $199k average unpaid principal balance, with a 3.587% WAC, 754 WaFICO, retail originations, with a state dispersion of: Massachusetts (643 loans) and New Hampshire (110
loans). Bids for this package were due Sep 29th....Phoenix Capital offered Project Piston:  a $1B FNMA + $617M FHLMC + $1.04B GNMA + $578M GNMA Bulk MSR package. The seller was an experienced independent mortgage bank, and the collateral is in line with what we've seen with agency product. MountainView Capital recently sold a $430M FNMA/FHLMC Servicing package which was 100% fixed rate, 1st lien product, with a 762 WaFICO, 64% WaLTV, 3.94 WAC, low delinquencies, average loan balance of $263k, located entirely in Hawaii.
Tis the season to shed some balance sheet weight. MIAC is the exclusive representative rep for a Seller of a $604 Million GNMA mortgage servicing portfolio. The portfolio is being offered by a mortgage company that originates loans with a national geographic concentration. The Seller will be providing full representations and warranties for the loans included in this offering. The package is: $111,233 Average Loan Size, attractive 0.578% Service Fee, low Actual CPR's in the single digits, 100% Fixed Rate, 6.44% GNMA I and 93.56% GNMA II, 5.642% WAC, weighted average loan Age of 18 months, 98% Retail and 100% Owner Occupied. MIAC's second offering is for a $122.8 million GNMA Multifamily MSR portfolio. The portfolio is being offered by a National Commercial Real Estate lender. The portfolio is: 100% GNMA Multifamily, $15.36 Million Average Loan Size, 3.604% WAC, 100% retail origination, weighted average loan age of 13 months, with a weighted average net service fee of 0.147%. Interactive Mortgage Advisors is the exclusive broker for the seller of a $70 - $120 million monthly South East MSR flow deal. The seller is a well-capitalized, state-chartered bank with experienced senior management well-versed in servicing transfers. The Seller's objective is to begin delivery in January with full ramp-up in February. The Seller will be offering a subsequent bulk offering of approximately $1.5 Billion with a Q1 2016 Sale Date requirement. Therefore, this potential relationship could total up to $3 Billion in 2016. The FNMA/FHLMC flow portion out for bid is for $40-70M per month, 85% 30yr FRM, with an average loan balance of $196k. The GNMA portion of the deal is for $30-50M per month, 97% 30yr FRM, with an average loan balance of $176k. MountainView Servicing Group is offering a $121 million FHLMC/GNMA/FNMA servicing portfolio that is being made available to the national market. Quality features of this portfolio include: 98% fixed rate and 100% 1st lien product, WaFICO of 733, WaLTV of 78%, 3.76% WAC, low delinquencies, with top states: Utah (54%) and California (32.8%), and an average loan size of $252k.
Looking at the bond market, remember that Friday we saw the unemployment data. Basically it came out as expected, and does nothing to change most analysts' opinions that the Federal Open Market Committee will raise short term rates next week. In fact the new president of the Philadelphia Fed, Patrick Harker, said that the Fed is likely to raise rates "sooner rather than later". Treasuries got battered on Thursday but they did find a relief rally Friday.
We do have a fair amount of news this week. There is nothing noteworthy here on Pearl Harbor Day, nor tomorrow although there is a $24 billion 3-year T-note auction, or Wednesday aside from the non-market moving MBA application figures, some forgettable inventory numbers, and a $21 billion 10-year T-note auction. Thursday is Initial Jobless Claims & some import and export price data along with a $13 billion 30-year bond auction. Friday is some meat: Retail Sales, the Producer Price Index (PPI), and some University of Michigan figures. If you're trying to guess where rate sheets will be, we closed the 10-year Friday at 2.28% and this morning (in the very early going as I head toward Southern California) it's 2.27% with agency MBS prices slightly better.


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