Prestwick adds more fuel to a booming MSR market
Consulting and brokerage firm Prestwick Mortgage Group came out with three new Mortgage Servicing Rights (MSR) offerings for agency loan pools worth a total of $2.6 billion.
One of these MSR offers involves a ginnie mae loan pool of 7,591 mortgages worth $2 billion based on outstanding principal balance. The package is marketed with strategic partner Prestwick, based in San Diego Mortgage capital negotiation (MCT) on behalf of an “independent mortgage banker”.
The average note rate for the loan pool is 3.7%, with an average service fee of 0.3693%, according to MSR tender documents. The pool’s average loan default rate is 14.1%, which includes loans 30 days past due and foreclosures. Bids are for the MSR offering — made up of loans originating in Colorado, Texas and the Southeast — are due Oct. 6.
“Ginnie Mae loans tend to be, or tend to be, more delinquent than conventional products,” Azad Rafat, senior MSR manager at MCT, said in a previous interview. “On average, the delinquency rate is about twice that of the conventional product.”
Ginnie Mae allows lenders to create qualifying mortgages which they can then securitize through the government-sponsored agency. Ginnie, however, only guarantees payment of principal and interest to buyers of its bonds, which are sold around the world.
The underlying loans are backed by guarantees, or proof of mortgage loan insurance, from the real estate agencies approving the loans — which include single-family mortgages secured by the Federal Housing Administrationthe Department of Veterans Affairs and the United States Department of Agriculture.
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Prestwick also markets a separate MSR package on behalf of an anonymous independent mortgage banker, consisting of 1,239 Ginnie Mae loans worth $228 million. The average note rate for pool loans is 3.857%, with an average service fee of 0.3752%, according to MSR tender documents. The average loan delinquency rate in the pool is 14.9%
Bids are for the MSR offering — made up of loans primarily from Texas and the Midwest — due today, September 27.
The third MSR package actively marketed by Prestwick – again on behalf of an Independent Mortgage Banker – involves a combination Fannie Mae, Freddie Mac and a Ginnie Mae loan pool of 1,544 residential mortgages valued at $372 million. The average note rate for the pool is 3.659%, with the management fee strip averaging 0.2548%.
The average delinquency rate for the loan pool is 2.72%. Mortgages from Florida, New Mexico, Ohio and Wisconsin account for more than half of originations. Bids on the MSR package are due Oct. 4, the bidding documents show.
Current MSR offerings are by no means outliers. Prestwick has been very active in the MSR market over the past few months, including some large trades.
In early August, Prestwick and its strategic partner MCT released tender documents for a wholesale service offering involving a Fannie Mae and Freddie Mac loan pool consisting of 5,590 mortgages worth 1.1 billion, with offers due Aug. 17. The vendor has been described in the tender documents. once again as an “Independent Mortgage Banker”.
Later in August, Prestwick unveiled another Mortgage Servicing Rights (MSR) offer for a bundle of 2,544 Fannie Mae and Freddie Mac loans worth $598 million – with offers due September 8. Prestwick was listed as the exclusive broker, with the seller identified as an “independent mortgage banker”.
In July, Prestwick, again with MCT as a partner, released tender documents for two separate MSR offers involving loan portfolios valued at $1.85 billion in total. One of Prestwick’s packages on the auction block, offered by a party again identified in the bidding documents as “an independent mortgage banker”, involved MSRs for a pool of 2,826 Freddie Mac loans. valued at $749 million. The other MSR offering involved a combined package of 4,853 Fannie Mae and Freddie Mac loans worth $1.1 billion – also offered by a party identified only as an “independent mortgage banker”.
During the first half of 2022, mortgage interest rates rose rapidly – with the Federal Reserve adding rate hike accelerators to the mix. As a result, loan prepayment terms have dropped for lower rate loans due to reduced refinancing activity. This, in turn, amplified the value of MSRs, as lower rate loans would have to be repaid over a longer period.
This momentum has sparked a buoyant MSR market so far this year, as Housing Wire has previously reported.