Home Loan Servicing Solutions (HLSS)

[56Chevy]

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That’s a great position to be in, considering that banks are expected to sell or transfer the servicing rights on $300 billion to $500 billion worth of loans each year for the next three years, and Fannie Mae and Freddie Mac , which dominate the mortgage business, hold veto power over servicers. They currently favor three: Nationstar, Ocwen and Walter.
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Citigroup Selling Servicing Rights as Banks Shrink Role

By Heather Perlberg & Dakin Campbell - Oct 25, 2013

[....]

Citigroup Inc. (C), the third-biggest U.S. bank, is selling mortgage-servicing rights on $63 billion of loans, or about 21 percent of its total contracts at midyear, according to two people briefed on the matter, who asked not to be identified because the sale is private. Wells Fargo & Co. (WFC), the largest home lender, began marketing rights on $41 billion of government-backed home loans in September.

[....]

Banks are scaling back from the almost $10 trillion market for mortgage servicing rights, or MSRs, amid looming Basel III regulations. That’s attracting private-equity firms and hedge funds to assets that can increase in value when borrowing costs rise and giving them increased control over the rights to collect Americans’ monthly mortgage payments.

[....]

“Three years from now, banks will be making fewer real-estate loans and servicing will be smaller,” said Chris Whalen, managing director at Carrington Investment Services LLC in Greenwich, Connecticut. “You will see the whole industry shift.”

[....]

$1 Trillion

Servicing rights on at least $1 trillion of mortgages will trade in the next two years, Jay Bray, chief executive officer of Nationstar Mortgage Holdings Inc. (NSM), a servicer majority owned by Fortress Investment Group LLC (FIG), said last month. The private-equity firm said in July it raised a $1.1 billion fund to buy the contracts. Nationstar dropped 0.3 percent to $54.35 at 11:11 a.m. in New York trading, trimming its return this year to 75 percent.

In addition to a widening pool of buyers, rising mortgage rates this year boosted the appeal of MSRs since higher costs discourage homeowners from refinancing. This prolongs the length of the contracts.

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http://www.bloomberg.com/news/2013-10-25/citigroup-selling-servicing-rights-as-banks-shrink-role.html

*HLSS will no doubt add to their market share by acquiring more MSR's that banks are shedding due to new banking regulations.

So why would HLSS, Ocwen, Walter and NationStar want these MSR's?These new regs do not apply to companies such as HLSS et al.