Ginnie Mae on Wednesday revealed in a ranking compiled with Recursion how the top holders of mortgage servicing rights shifted in the past year and it has one marked change in the top 10 but still leaves the market concentrated in the hands of a consistent top three players.
Newrez shot up the ranks from No. 8 all the way to No. 4 during a year when its corporate parent, Rithm, bought Computershare’s servicing unit. It changed places with Wells Fargo, which has been shedding servicing since 2023 in line with an exit from correspondent.
While Newrez — which Rithm is considering spinning off — did move up in the rankings during the past year, its 5.5% stake is still relatively small compared to what’s held by the top three nonbank players: Lakeview, Freedom and Pennymac.
“An interesting stat you can pull from these rankings is that the top three servicers make up 41% of the market,” said Mike Carnes, a managing director at Mortgage Industry Advisory Corp. who works with proprietary analytics used in MSR valuations.
The market value of these companies’ MSRs — and their operational responsibilities — largely depends on the composition of their portfolios and future public policy decisions.
“Pricing can be lower. Pricing can be really, really rich. It just depends on what collateral is being sold,” Carnes said, commenting on valuations and noting that more recent vintages have been seeing higher delinquencies.
Delinquency rates in this market generally are higher than in other sectors because the majority of government mortgages other agencies back at the loan level and get securitized through Ginnie Mae-guaranteed bonds go to first-time homebuyers who often have lower incomes.
Fees to those who take operational responsibility for Ginnie Mae servicing generally is relatively higher than part of the market too. Scale typically improves efficiencies for those in that business.
Ginnie Mae MSR holders have been managing delinquency risk by using portfolio analysis to determine the probability of redefault because it can generate value if the odds the loans reperform, Carnes said.
Repetitive redefault risk that rose due to the proliferation of multiple forms of loss mitigation post-pandemic and that has contributed to delinquencies in this market, he noted.
Carnes declined to comment on policy’s market impact. But there were some initiatives recently put in place to reduce redefaults and end foreclosure delays for certain government loans. It remains to be seen where these efforts go from here because they span two administrations.
Another aspect of policy under President Trump that could have bearing on this MSR market’s dynamics is how the current administration handles government-backed housing programs and the Community Redevelopment Act, said Ted Tozer, the former president of Ginnie Mae.
During the first Trump term, then-Department of Housing and Urban Development Secretary Ben Carson was on board with the idea that HUD and an affiliate that provides loan-level backing for some mortgages in Ginnie securitizations should be the main lender to first time home buyers.
Currently the banks lean on government-sponsored enterprises Fannie Mae and Freddie more for loans to fill their CRA requirements, but there’s widespread speculation they’ll be privatized, in which case banks lending through FHA may choose to retain the related servicing.
However, the housing department — which confirmed it was ending the Affimatively Furthering Fair Housing Rule on Wednesday — could scale back CRA.
“It’s all tied together on what the future of CRA is in terms of how much banks feel like they’ve got to do affordable lending in the future,” said Tozer, who is currently a nonresident fellow at the Urban Institute’s Housing Finance Policy Center.
Tozer said that Ginnie MSRs face some “minimal” risks from HUD budget changes that include the “de-obligation” of a total of $1.9 billion in master subservicing line items the Department of Government Efficiency touted on Trump advisor Elon Musk’s X platform,
Tozer said he had no direct knowledge of DOGE’s action on the three master subservicing contracts but based on what he’s seen posted or reported in regard to them and his past experience, the de-obligation is unlikely to be a cost-saver and could pose some risks.
To Tozer, the funds look like they correspond to maximum limits for stand-by backup servicing contracts that Ginnie, a corporation within HUD, keeps ready in case a mortgage-backed securities issuer fails and it needs to take responsibility for operational work quickly.
He likened them to undrawn credit lines and said they were unlikely to have a cost unless an issuer were to fail, in which case the lack of one could be a risk as it could take six months to a year to negotiate a new contract or re-negotiate an existing one with a limit that is too low.
Tozer said he anticipated that public officials would ultimately decide to keep efficient, cost-effective safeguards in place, keeping the risks for investors in check. He said he hoped to see an end to politicization of such issues.
“I don’t think they will see any difference because the work has got to get done,” Tozer said, referring to investors.
