Sponsorship
Winston & Strawn Sponsors, Attorneys Speak at IMN’s Mortgage Servicing Rights Conference 2023
Sponsorship
November 9, 2023 - November 10, 2023
Winston & Strawn was proud to sponsor IMN’s Mortgage Servicing Rights Conference on November 9-10, 2023, in New York. IMN’s Annual Mortgage Servicing Rights (MSR) Forum is the only event that explores the investment, trade, risk management, and service of the MSR asset.
Partner Taylor Speers and of counsel Paul Libretta both spoke on panels at the conference. Taylor spoke on the panel, “A Deep Dive Into the Excess Servicing Rights Market.” Paul spoke on the panel, “Financing & Securitization: The Latest Terms, Structures & Deals.”
Key Takeaways
A Deep Dive Into the Excess Servicing Rights Market
- What is Excess Servicing Spread? There is the actual cost of servicing and then there is what is left. That slice is what a mortgage servicer can sell/monetize.
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- With regard to mortgage servicing, servicing rights can be retained and capitalized or sold to a third party
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- What are the benefits to a purchaser: scale, a deep investible market, and good returns.
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- As an investor you can get the same exposure as an actual mortgage servicer
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- What avenues exist to invest in the servicing market?
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- Contact an established servicer
- Purchase a “shelf” servicer
- Own MSRs
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- Necessary documents
- Fannie/Freddie prohibit sales without agency consent
- Fannie requires a subordination plan for the sale of the strip (the purchaser’s interest is subordinate to Fannie/Freddie’s)
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- There are ways to address this in the documentation/mitigate the risk
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- Freddie requires an acknowledgement agreement
- Ginnie uses an acknowledgement agreement (only one is provided)
- Recapture has become a big part of the whole MSR investment thesis.
Financing & Securitization: The Latest Terms, Structures & Deals
Panelists discussed the following topics:
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- A general overview of mortgage servicing right financings (ie, secured lending market vs. capital markets), and current issues faced in connection with those structures
- Current market pricing benefits for servicers to issue term loans versus term notes in master trust structures
- Freddie Mac views as to the conditional nature of the “servicing contract right,” and implications for excess servicing spread sales
- Market trends in connection with excess spread sales
- The distinction between excess spread sales and an XSIO transaction (where the available servicing spread is reduced)
- Market conditions for servicing advance facilities and the expectations of the Agencies