Serving as trending co-investment vehicle launch points


The closing of a $30 million co-investment vehicle for mortgage servicing rights announced Thursday adds to signs of these partnerships expanding.

Details were scarce in the announcement investment bank Cambridge Wilkinson, which involves a client with license approvals to service government-sponsored company-backed mortgages.

However, taken in conjunction with reports, such as Rice Park Capital Managementthe commitment of $300 million in a new MSR fund and the $65.1 million Prophet Capital raised from investors for a recently created investment vehicle, he confirms that the number of partnerships is increasing.

“We have recently seen significant capital commitments to own MSRs by non-originators. The investment community is looking for alternative return, and the MSR asset absolutely delivers that,” said Tom Piercy, president of national business development at Incenter and managing director of his firm’s capital markets trading and valuation subsidiary. .

Piercy declined to comment on specific examples, but said deals are typically in the $250 million range. The investment for the vehicle in which the Cambridge client Wilkinson is involved could potentially reach $200 million or more.

Servicer-investor partnerships have been active in the market for years, and players like owenNew Residential and Bayview participated even before the rate outlook changed, but they have seen a recovery in growth since the The MSR market has warmed up.

“Certainly the trend has accelerated,” Piercy said.

The trend is a subset of a broader exploration of strategic options involving MSRs, said Pat McEnerney, CEO of RoundPoint Mortgage Servicing Corp.

“There has been increased interest in owning MSR and alternative approaches to having a stake in mortgage servicing rights,” McEnerney said. “We have seen proposals for many strategies that allow non-banks to invest, directly and indirectly, in excess management rights and MSRs.”

However, MSR investments have risks this may limit the extent to which these types of partnerships can expand.

“Ownership of MSRs is dependent on meeting operational requirements set by the GSEs,” McEnerney said. “Failure to comply with GSE requirements could have a significant negative impact on MSR owners.”

The interest rate environment is also a risk as well as an opportunity when it comes to these partnerships.

“As soon as you start betting on those rates, they will go the other way. Hedging these MSR assets is therefore important to make these investments,” said Piercy. “But the reality is that interest is rising because of the rate outlook. Expectations around refinancing saturation and rate trends really emphasize the greater value of the MSR asset.

Cambridge client Wilkinson offers both interest rate hedging and direct investment opportunities, according to the company’s press release.


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