Mortgage servicing rights are an asset that many organizations — troubled or not — can monetize by selling them to pad out their
Could New York Community Bancorp go down that same path, especially
George notes that
While NYCB has been a long-term player in commercial and multifamily lending, its commitment to residential lending has not been as consistent.
The bank previously exited the space, outsourcing the function until it
Once-troubled Flagstar took steps to diversify its operations and
In 2013, Flagstar
In addition to the $78 billion agency and government MSR portfolio, NYCB currently subservices nearly $295 billion; it also has $9 billion of portfolio loans, according to the fourth quarter earnings release.
The owned portfolio is 55% Fannie Mae, 25% Freddie Mac, along with 19% of Ginnie Mae MSRs, with the remainder for other investors, KBW said.
George thinks the MSRs could fetch the carrying value if NYCB was to go that route.
"The carrying value of $1.1 billion equated to a valuation of 1.42% with a servicing fee of 31 basis points," George wrote. "This equates to a multiple of 4.6 times the servicing fee. These multiples are fairly similar to peers, so we think most MSRs, especially high quality GSE MSRs, should transact around carrying value."
That last part is key, as government-sponsored enterprise portfolios have more potential buyers, George said.
His list of parties that might be interested includes Mr. Cooper, Rithm, Annaly and Two Harbors, as well as funds that buy bulk MSR portfolios.
Some banks, such as JPMorgan Chase, have also been purchasers of conforming portfolios.
"There are fewer buyers for Ginnie Mae MSRs and the two biggest buyers are Freedom Mortgage and Lakeview/Bayview," George said. "While Pennymac is a large Ginnie Mae servicer, that company has historically not acquired bulk MSR."
The most likely purchasers would be what George termed "financial buyers" like Annaly and Two Harbors, "as opposed to operating companies. This is because if NYCB sells, they would most likely want to keep the subservicing in order to maintain the escrow deposits."
Right now, NYCB has between $6 billion and $8 billion of escrow deposits. The U.S. Supreme Court
"As long as the company keeps the subservicing on any MSR sold, they should be able to maintain the deposits, especially since most buyers are non-banks," George said. "However, if they sell the whole servicing operation, it will likely be harder to hold on to the escrow deposits."
