Incenter puts $12.5 billion in ‘pristine’ servicing up for bid

One of the large packages of mortgage servicing rights stockpiled during the pandemic reportedly has a perfect loan performance history and it’s on sale now.

A nearly $12.5 billion portfolio of the rights to payments associated with loans purchased by two government-sponsored enterprises lists no delinquencies or foreclosures, according to Incenter, which is marketing the package on an unnamed seller’s behalf. And the loans aren’t new production. The weighted average loan age is 15.5 months and the interest-rate for the mortgages, 85% of which are 30-year loans, is 3.19%.

While a lot of large packages of MSRs have traded recently, “this may be the most pristine of them all,” Incenter said in an email.

It also contains a broader range of loan ages than other transactions that have traded recently, according to Tom Piercy, president of national enterprise business development at Incenter.

“What’s unique about this portfolio relative to other recent offerings is that while it does contain a majority of these lower rates from the ’20 and ’21 vintages, it also contains seasoned loans that are greater than five years,” he said in an email.

This “provides an extremely profitable opportunity for servicers who have strong recapture capabilities through solicitations, etc., and can convert these older loans into new loans through cash-out refinance,” said Piercy, who also is managing director of his company’s capital markets trading and valuation subsidiary, Incenter Mortgage Advisors.

The package currently up for bid also is somewhat unusual in that it has a Texas rather than the typical California concentration, with 13,906 of the loans (28.5% of the package by count, 26.3% based on the current balance) located in the Lone State state. The Golden State, where the second largest concentration of mortgages is, has just 5,525 loans associated with the MSRs (11.3% by count, 17.9% based on balance). The third largest concentration of loans is in Georgia at 5,213 (10.7% by count and balance.) No other state has a concentration of mortgages greater than 10%.

The servicing rights are almost entirely (99.7%) associated with loans originated through the retail channel. The estimated 12-month average escrow for the loans as a percentage of principal is 0.84%. The weighted average FICO credit score is 750.6. Averages for the size and loan-to-value ratio are $255,937 and 75.1%, respectively.

Roughly three-fourth of the associated loans are Fannie Mae mortgages for which the actual principal and interest payments get remitted to the GSE. The balance are loans Freddie Mac accepts payment from on an accelerated remittance cycle.

The unnamed seller is an independent mortgage company that uses the Finastra Fusion Servicing Director system and advises that it has electronic data transfer capabilities.

While a $12.5 billion servicing portfolio is typically considered large, anonymized records provided by Incenter show that several deals tens of billions of dollars in size have been marketed publicly or privately recently, at least two of which have been almost twice the size of this transaction.

All bids must be received for the $12.5 billion portfolio currently up for bid in writing by 2 p.m. Mountain time on Feb. 24, according to Incenter.