A $1.6 billion portfolio of management rights with unusual geographic concentrations and a default rate of nearly 2.63% went on sale Tuesday, according to Prestwick Mortgage Group.
As of May 31, the MSR weighted averages of Ginnie Mae ($737 million), Fannie Mae ($583 million) and Freddie Mac ($322 million) were as follows: Note rate, nearly 1.38 %; net service charge, more than 29 basis points; seasoning, about 27 months; and a FICO credit score just above 740.
The delinquency rate, which includes foreclosures, was highest for loans in Ginnie Mae-backed securitizations, at nearly 5.08%. By comparison, it was higher at 1.19% for Freddie-backed loans, which repay on an accelerated payment cycle. Fannie-backed loans, which pay securitization investors on an actual basis based on borrower payments, have a default rate of nearly 0.61%.
The difference between Fannie/Freddie and Ginnie’s Delinquency Rate is generally consistent with broader market trends.
Federal Housing Administration-insured or Department of Veterans Affairs-guaranteed loans, which are the two largest categories of government-guaranteed loans included in Ginnie securitizations, had severe default rates of 5.33% and 3.15% in the first quarter. By comparison, the serious delinquency rate for Fannie and Freddie loans combined was 0.97%, according to a report released Tuesday by the Federal Housing Finance Agency.
The delinquency rate for all outstanding home loans in the last month was 2.75%, according to mortgage technology and data provider Black Knight.
Florida properties get just over half of the management rights loans Prestwick offers on behalf of an anonymous seller, followed by Michigan (28.4%) and Indiana (14.2%) . The rest of the mortgages associated with the portfolio are spread across 21 other states.
Typically, bulk MSR packages tend to have heavy exposure to California, but portfolios with other regional concentrations are also trading recently. For example, the Mortgage Industry Advisory Corp. earlier this month accepted offers on an $817 million package with a concentration from the Midwest. Other MSR packages with geographic concentrations in the Southeast, Texas, Mid-Atlantic region and New England have recently been offered, according to Prestwick. These portfolios tend to range between $500 million and $2 billion.
Although a debate on the overall market prospects for MSR sales exist, experts at Deadline were reporting that so far it has remained active even as the magnitude of the interest rate hike that protects utility cash flow runoff fluctuated.
“Slightly lower increases still represent a significant opportunity for MSRs,” said Scott Stoddard, senior vice president of business development, default and capital markets at industrial market and transaction management platform Flueid, in a statement. E-mail. “When rates rise, loan prepayments typically slow down. This extends the MSR payment period and intensifies their overall market value.
The average outstanding principal balance of the individual loans in the Prestwick offer was $228,471. A retail lending transaction was the origin of almost all mortgages (98.4%) associated with servicing rights.
Written submissions are due July 12 at 5:00 p.m. Eastern Time. The seller may accept investor-specific offers for different parts of the portfolio.