The Seattle-based HomeStreet Bank has agreed to sell the portfolio on Aug. 1. It had a principal balance of $794 million as of June 30. The merger with Mechanics is set to close in the current fiscal quarter, which ends Sept. 30.

HomeStreet's filing with the Securities and Exchange Commission does not specify the buyer, price or loan type. It does indicate that the purchaser is an experienced servicer that has worked with Ginnie, making it possible a nonbank is buying the assets, in line with larger trends. 

A sale amid heightened nonbank competition for MSRs

HomeStreet did sell other assets to a bank recently and a relatively small portfolio like the one it's currently selling is more likely to be palatable to a depository than a larger package.

That said, bigger nondepositories like the companies HomeStreet sold to in the past, are generally the most active MSR buyers.

In the Ginnie Mae market in particular, there was only one bank among the top 10 MSR holders, according to the most recent ranking. That bank, Wells Fargo, announced a plan to downsize servicing back in 2023 and has notably slipped in the ranking from No. 4 a year earlier.

Furthermore, consolidation is fueling more competition among nonbanks. Freedom was No. 1 with a 15.4% market share in Ginnie's latest ranking for June, but Lakeview Loan Servicing's agreement to acquire Guild Mortgage could unseat it as the leader by a small margin.

The acquisition could combine Lakeview's almost $377.16 billion in Ginnie MSRs, a 14.9% market share, with Guild's nearly $26.44 billion. Although Guild has only a 1% market share, the total of roughly $403.6 billion is enough to exceed Freedom's nearly $390.79 billion.

Rocket Mortgage's acquisition of Mr. Cooper also could shake-up the rankings a bit. No. 5-ranked Mr. Cooper, which is the larger player of the two when it comes to Ginnie servicing, could unseat Rithm Capital's Newrez as No. 4. Newrez held a 5.6% market share in June.

Mr. Cooper had a 5.4% share with a principal balance of nearly $137.56 billion last month. When combined with Rocket's 4.7% market share (almost $118.45 billion), they surpass Newrez with a share of more than 10%. The third largest player, Pennymac, had a 12% share.

Mechanics Bank being cautious about mortgages in general

While some larger players in the nonbank sector may be eager to invest in MSR, Mechanics Bank President and CEO C.J. Johnson has said he wants to "exercise prudence" around mortgages and commercial real-estate lending more broadly.

Johnson has been playing a more influential role in the company's direction as HomeStreet Executive Chairman, President and CEO Mark Mason transitions to a consulting position in line as part of the merger. Mechanics will own most of the company after the deal closes.

"Our CRE concentration will decline over time, and we will explore strategic options to maximize the value of HomeStreet's multifamily lending business that's delegated underwriting and servicing," he said during a March 31 call about the merger.

Multifamily properties collateralize some loans in Ginnie-backed securitizations.