The MSR market celebrates like it’s 2006

Bill Shirreffs, Manager of MSR Services and Sales Operations in San Diego Mortgage capital negotiation, agrees with Carnes’ bullish assessment of the MSR market. He said the outlook for MSR assets “remains very strong, [price] multiples at very attractive levels for potential sellers.

“Due to a combination of lower origination volume and margin pressure, we expect many MSR asset holders to benefit from these favorable conditions in the near term,” he added. “Overall, the bulk MSR market is expected to be incredibly robust throughout 2022.”

Based in Denver Incenter Mortgage AdvisorsChief Executive Tom Piercy said he expects market exuberance to continue as well, as long as interest rates rise and Federal Reserve remains committed to adopting a hawkish stance on rates over the coming year as part of an effort to quell soaring inflation.

Incenter closed a dozen MSR bulk-sell deals in January involving MSRs for agency-backed loan pools that together had a total outstanding principal balance of $113.2 billion, which is close to what Incenter has historically sold in an entire year.

Piercy said Incenter earlier in February launched an $11.5 billion bid Fannie Mae/Freddie Mac bulk service offering which is expected to end this week. Additionally, Piercy confirms that Incenter has another $13 billion MSR offering in the pipeline that is expected to be released as soon as this week.

“February looks like another strong month,” Piercy said. “In addition to the aforementioned $24.5 billion [in MSR offerings]we will release an additional 13 billion dollars [MSR offering] next week and another $40 billion in multiple deals before the end of the month.

As for the MSR cushion described by Carnes, the rankings provided by the New York-based mortgage data analytics firm Recursion shows the agency’s top MSR repairers at the end of 2021 were based in San Francisco Wells Fargo; Based in Detroit rocket mortgage (Previously Accelerate lending); Based in Westlake Village, CA Penny Mac; Based in New York JPMorgan Chase; and based in Mount Laurel, New Jersey Liberty Mortgage.

The Wells Fargo agency MSR portfolio – including Fannie Mae, Freddie Mac and ginnie mae servicing loans — was $641.9 billion, or 8.2% of all agency loans serviced, as of Dec. 6 last year, according to the most recent data available from Recursion. MIAC’s Carnes points out, however, that while banks are opportunistic about selling MSR, he also said the assets are valuable to them because they provide cross-selling opportunities that are not available to non-custodial institutions. .

“There are lots of reasons to sell MSRs, including tax benefits,” Carnes explained. “But owning MSRs in areas where they [banks] having branches effectively gives them access to thousands of potential customers to whom they can offer credit cards, savings accounts, checking accounts, and any other offers the bank might have.

At the end of 2021, Wells Fargo in terms of MSR market share was Rocket Mortgage, with an agency MSR portfolio of $481.4 billion and a market share of 6.2%. Next was PennyMac, at $479.3 and 6.2%; JP Morgan Chase, $387.5 billion and 5%; and Freedom Mortgage, $365.4 billion and 4.7%.

Overall, as of December 6, 2021, Recursion data shows that banks controlled 33.2% of the agency MSR market while non-banks controlled 66.8%, based on the $7.8 trillion outstanding principal balance of agency loans managed by lenders.

Among the MSR leaders, only Wells Fargo saw a decrease in the size of its MSR portfolio year-over-year – down $128.8 billion from year-end 2020, when its MSR portfolio stood at $770.7 billion. Freedom Mortgage saw the largest increase in its MSR portfolio over the same period, increasing $108.3 billion from $257.1 billion at the end of 2020.

MSR’s portfolios are affected by loan prepayments, MSR sales and purchases, and MSRs related to the issuance of new agency loans.

In the case of Wells Fargo, for example, agency loan issuance with retained management has grown from $165.6 billion in 2020 to $138.4 billion in 2021 through Nov. 6. The bank has also been a net seller of MSRS in recent years, posting MSR net sales of nearly $2 billion combined for 2020 and 2021 — and $20.9 billion for 2019. Wells Fargo also had the most large volume of prepayments among top MSR lenders — $294.3 billion in 2020 and $208.8 billion last year through Nov. 6, according to Recursion.

In contrast, Freedom Mortgage was the largest net buyer of agency MSRs in 2021 through Dec. 6, at $147.8 billion, compared to $60.9 billion in the prior year period. In terms of MSR’s net sales, Quicken Loans led the pack last year, with nearly $112 billion year-to-date through Dec. 6, 2021. Quicken also posted the largest brand of agency loan issuance in 2021 through Nov. 6 was $316.5 billion, up from nearly $294 billion in 2020.

“Political tensions, Russia-Ukraine conflict, inflation, I can go on and on,” Carnes said when asked about the potential headwinds facing the MSR market. “This makes it nearly impossible to accurately predict where rates will end in 2022.”

Carnes added that some might argue that MSR’s sudden increase in values ​​and sales is “too, too fast.” Either way, he said that hasn’t stopped buyers from paying “five times and more for some agency deals.”

“Rates up, significantly lower [mortgage] prepayments and strong demand pushed MSR values ​​to the highest levels since before the financial crisis [of 2007/2008]”Carnes said.

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