The Market for Servicing: Who is Buying What From Whom May Be a Surprise

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Posted To: Pipeline Press

Lenders can make, and lose, plenty of money on a) income from servicing, and b) changes in value of that servicing. Of course all the news about servicing rights write-downs are roiling the industry, and company earnings. Versus the larger companies that have been buying servicing at high multiples, however, smaller lenders have been reaping the benefits by selling to those larger companies that are now taking the hits for loans that pay off early or have less value. In its most simplistic terms, why would a small to mid-sized lender, who has the ability to retain servicing, and who values it at a multiple of 3.5:1, hold it if someone else is willing to pay them 4:1? More on the servicing market below. Turning to bank news, the Swiss government approved its final “too-big-to-fail” bank rules…(read more)

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