There are more signs that the flow servicing market is making a comeback.
Mortgage Industry Advisory Corp. (MIAC) reports that it is handling the sale of a portfolio of mortgage servicing rights (MSRs) delivering $150 million or more per month of concurrent flow.
As per a press release, the flow servicing is being offered by a well-capitalized mortgage company that originates nationally. The seller will be providing full representations and warranties for the loans included in this offering.
The portfolio sports an average loan size of $168,417 and comprises 99.6% fixed-rate loans. About 55% of the loans are Ginnie Mae while 31% are Fannie Mae (A/A) and 14% are Freddie Mac (gold). The loans are distributed across the U.S. and carry an average escrow balance of $1,667.Â Â
MIAC reports that the seller is looking to enter into a 12- to 18-month future flow delivery, with a minimum commitment of six months.
Bidders may present their flow bid pricing matrices for the Ginnie Mae or conventional MSRs separately.
The seller would prefer an initial delivery by May 1, but no later than June 1, the release states.
Flow servicing is where one or more lenders upstream new servicing rights on a monthly basis. Although the contracts are complex, it was relatively common (and quite profitable) up until the financial crisis, but after the subprime meltdown hit and Wall Street securitizers started demanding buybacks – and with Fannie Mae and Freddie Mac jumping onboard the repurchase train – the model simply became way too risky.
Now that most of the issues surrounding reps and warrants are largely resolved, and loan quality has vastly improved for loans issued after 2009, there has been renewed interest in the flow servicing model among investors. Helping to stimulate this market is the fact that Fannie and Freddie have, in recent years, granted ‘bifurcation’ status to select servicers that are willing to buy flow MSRs, thus granting them safe harbor from buybacks.
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