It may be a buyer's market for residential servicing rights but that isn't stopping mortgage banking firms from unloading their legacy housing receivables in an attempt to clean up their balance sheets.
Last week Aurora Loan Services finally unloaded its $66 billion MSR portfolio to Nationstar and at press time rumors were circulating that Ally Financial was talking to several potential investors about taking on $80 billion in receivables housed at Residential Capital Corp. (ResCap)/GMAC.
A spokeswoman for Ally declined to comment. Investment banking sources who play in the MSR space say some type of offering is definitely afoot but details are sketchy.
Industry advisors told ASR sister publication National Mortgage News that the White House is pushing for either an Ally IPO or sale before election day in November.
At last check the U.S. Treasury Department controlled 74% of the bank holding company's stock. Ally's core business entails auto lending and residential finance but while one has recovered (cars), the home market continues to struggle.
Last year Ally planned to go public but investors turned up their collective nose on the deal, citing uncertainty in the housing and mortgage markets. An IPO or sale of the firm is considered impossible unless ResCap/GMAC can be spun-off separately. To ready the firm for that day, Ally CEO Michael Carpenter has directed mortgage chief Tom Marano to begin lopping off certain large chunks of ResCap's MSR portfolio.
At yearend, ResCap/GMAC serviced $382 billion in home mortgages, about flat with yearend 2010.
To date, ResCap has already taken huge writedowns on its lending and servicing business and remains a top five ranked lender nationwide focusing on retail and wholesale production.
Servicing brokers caution that information about a sale is still sketchy and that in the end nothing may happen. “I hear they're trying to get something done,” said one advisor. “Word is that he [Marano] wants to do more than non-agency. He'd like to do the whole thing. I'm told that the non-agency is a tough deal, depending in which book it is. It's all tied up in no traditional docs and servicer's rights issues, complicated and technical.”
Meanwhile, Bank of America is expected to hit the market with several large MSR packages during the next few weeks ranging in size from $10 billion to $50 billion. (This past fall the bank sold $74 billion in MSRs to Fannie Mae.)
Also, the bankruptcy trustee for Taylor Bean & Whitaker has approved the sale of $30 billion in MSRs with an offering book expected to make the rounds by April.
HSBC Bank is still contemplating selling its $41 billion MSR business, but advisors say it doesn't like the bid prices.
The bank has been listening to bids for well over a year and is inclined to keep the MSRs which are tied mostly to conventional loans.
Most of the recent MSR sales involve legacy portfolios – prime and nonprime alike -- with delinquencies well above industry averages.
The buyers tend to be firms such as Nationstar, but also subservicing specialist the likes of Ocwen Financial Corp., and Green Tree Servicing. Besides BofA, large bank sellers include JPMorgan Chase, and CitiMortgage.