The market for mortgage servicing portfolios is beginning to gather steam, with talk of new offerings and the closing of at least two large sales.
It appears that many of the active bidders are midsize companies, with the traditional large-bank buyers staying on the sidelines. Most of the activity centers on the sale of rights from institutions that have failed or are in trouble.
For example, BOK Financial of Tulsa announced last week that it had bought the servicing rights on $4.1 billion of loans from Charter Bank in Albuquerque (the price was not disclosed).
The newly established Charter Bank — a unit of Beal Financial Corp. in Plano, Texas — acquired the former Charter Bank of Santa Fe, N.M., when it failed on Jan. 22.
The servicing acquisition will boost BOK's total portfolio by 46%, to $11.5 billion, when it takes over the 34,400 loans from Charter Bank in April. The loans are largely concentrated in New Mexico, where BOK has a local mortgage team.
Ben Cowan, the president of BOK's mortgage unit, said it had already agreed to buy the portfolio from the Charter Bank in Santa Fe before the Federal Deposit Insurance Corp. seized it.
Eventually, the FDIC, after reviewing the proposed sale, allowed it to proceed.
The portfolio consists mostly of servicing rights for loans owned or guaranteed by Fannie Mae, Freddie Mac or the Government National Mortgage Association. Some of the rights are tied to mortgages purchased by some of the 12 Federal Home Loan banks. "It's very clean stuff," Cowan said. Mountain View Financial of Denver brokered the sale.
BOK is open to buying additional pools of servicing rights, Cowan said.
Matt Olney, an analyst who covers BOK for Stephens Inc., said mortgage servicing provides steady cash flow but is a relatively low-margin business, so it is rare for community banks smaller than BOK to buy portfolios.
"It makes sense for BOK because they have the scale to make this work, they have the balance sheet, plus they already do mortgage servicing," he said.
The deal garnering the most attention was the sale of servicing rights on $11 billion of jumbo loans that belonged to the bankrupt Thornburg Mortgage of Santa Fe. At least five investors bid on the package. Select Portfolio Services, a Salt Lake City unit of Credit Suisse, won the auction by paying roughly $85 million.
The publicly traded PennyMac Mortgage Investment Trust was declared the "backup" bidder. (PennyMac, which was created to buy troubled mortgage assets, is branching out into specialty servicing and conduit lending.) Interactive Mortgage Advisors was the broker on the sale.
Thornburg filed for bankruptcy protection in early 2009. The sale of the servicing rights was the last leg of its dissolution. Select Portfolio Services eventually will take over the nearly 17,000 loans. For now the portfolio is being subserviced by Cenlar, a Ewing, N.J., thrift.
When the portfolio was brought to market in late December it had overall delinquencies of 3.79% and a 2.87% foreclosure rate. The weighted average interest rate was 5.87%.
Interactive, of Denver, is also shopping around a $10 billion portfolio of servicing rights for Flagstar Bancorp of Troy, Mich.