Moderated by David Wharton, Editor-in-Chief of DS News, webinar participants included Bob Dowell, Managing Director of Analytics at Incenter, and Tom Piercy, President of National Enterprise Business Development and Managing Director for Incenter.
The panel was brought together to discuss the issuance of a Request for Input (RFI) pertaining to tightening financial stability requirements for anyone obtaining and maintaining a Ginnie Mae single-family issuer eligibility and approval.
Opening the webinar, Piercy was asked to provide an overview of the current state of the Mortgage Servicing Right (MSR) industry, and how it is faring as the COVID-19 pandemic begins to wane. Piercy said that he hopes everyone understands the MSR market is in great shape right now.
“The real key component for everyone to understand is that the MSR market is extremely robust in many facets,” Piercy said. “What occurred here with the pandemic was government intervention, the CARES Act that created that impact on the value of servicing, and certainly record-low interest rates that generated record levels of originations that also impacted the value of MSRs.”
The panel discussed the state of the MSR market in a post-pandemic world.
“The MSR market evolved out of the financial crisis, with bank participation being impacted negatively, where many banks had to pull back, and some of the headline risk tied to servicing coming out of the financial crisis and independent mortgage bankers were becoming much more of a significant participant in the MSR industry,” Piercy said. “And it’s not just mortgage originations we’re talking about, but truly building up MSR portfolios, so there was this shift from the federally-insured depositories over to the independently mortgage banker.”
The first question posed to the panel was “Why is Ginnie Mae addressing financial stability in the MSR industry now?”
“We have to recognize that Ginnie Mae is acting prudent and responsibly in issuing this RFI,” Piercy continued. “They really have the responsibility to maintain the credibility to its bondholders. “The bondholders, the purchasers of these Ginnie Mae bonds, are a critical component to affordable housing finance in our nation.”
Piercy continued to state that as we started to come out of the pandemic, forbearance numbers were not as significant as early estimates reported, which allowed the GSE to pump the brakes and take a step back to re-address their financial stability in light of the changing market and the demographics of who is purchasing MSRs.
When asked about who the RFI will have the most impact on and where it will be felt the most, Dowell said that it would be the smaller mortgage companies that would feel it the most.
“The biggest impacts of this will be smaller mortgage companies whose most significant asset is the MSR asset,” Dowell said. “A company that originates $100 million per month, but has a servicing portfolio of a couple of billion that they are able to maintain, that asset is going to be the biggest investment that they have.”
Dowell continued, “It will mainly be small- to mid-sized mortgage companies who mostly are retail originations … they retain the asset to get those cash flows, and this will cause them to get into investments they are not comfortable with.”