Non-banks gaining share of mortgage servicing business

Private equity groups and hedge funds buying servicing rights

TRD New York /
Sep.September 18, 2013 02:15 PM

From the South Florida site: Private equity firms and hedge funds are buying mortgage-servicing rights or MSRs as banks look to unload long-term assets in order to meet stricter new capital requirements of an international accord known as Basel III.

Wells Fargo’s chief financial officer Tim Sloan said last week the San Francisco-based bank will sell $41 billion in MSRs for home loans guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae in coming quarters as a risk-management practice, according to Bloomberg.

“As part of our strategy to strengthen and grow our servicing business, we continually look at opportunities to buy and sell mortgage servicing rights,” Amy Bonitatibus, a spokeswoman for JPMorgan, the U.S.’ second-largest servicer with $1.06 trillion in collection rights, told Bloomberg News in an email.

Facing new Basel III requirements, banks can improve liquidity by unloading servicing rights, eliminate some risk and even, if they win a subservicing contract, get paid to continue to do the same work, Thomas Siering, a chief executive for Minnestota-based REIT Two Harbors, said at an investors’ conference in New York Sept. 10.

Hedge fund giant Fortress closed its MSR Opportunities Fund II to new investors in July after reaching $1.1 billion, according to a statement last month. The fund is a successor to a $600 million fund that closed in August of last year, said Gordon Runte, a Fortress managing director.

Fortress is already deeply invested in the mortgage market. It owns Nationstar, a loan originator and servicer that has rights to collect on $318 billion in residential loans as of June 30, triple its portfolio at the end of 2011, spokesman John Hoffmann told the news wire. [Bloomberg] — Emily Schmall

Related Articles

Housing and Urban Development Secretary Ben Carson (Credit: Getty Images, iStock)

HUD wants to jumpstart bank lending on low-income homes

Lenders issued the most mortgages in 14 years last quarter (Credit: iStock)

Nonbank lenders could give serious boost to cooling housing market

The Daily Digest - Tuesday

WeWork bonds hit low, new LLC legislation went farther than intended: Daily digest

A rendering of Tower Fifth with Harry Macklowe (Credit: Getty Images)

Harry Macklowe just got $192M closer to building his Midtown skyscraper

The number of closed sales fell by more than 14 percent year over year in the third quarter (Credit: iStock)

Low mortgage rates are killing Manhattan’s all-cash buyer

Clockwise from top left: The Watchtower building at 25 Columbia Heights, Long Island University at 1 University Plaza, The Rheingold at 10 Montieth Street and 871 Bushwick Avenue in Brooklyn (Credit: Wikipedia and Google Maps)

These were the top 10 outer borough loans last month

(Credit: iStock)

Despite housing market slowdown, mortgage lenders just had a great second quarter

The Daily Dirt: The dark cloud hanging over buyers

The Daily Dirt: The dark cloud hanging over buyers