Consumer demand for mortgages is down, and lenders are trying innovative marketing tactics to raise their slumping production volumes. On top of that challenge, several wholesale or correspondent buyers are engaging in a price war that has caused several lenders to purchase loans at negative margins.
Activity in the secondary market for home equity loans, also known as 2nd lien loans, has ramped up across most market segments in 2018. The spur behind the increased trading has been greater supply driven by higher prices, according to a new report from MountainView Financial Solutions, a Situs company.
From the third quarter of 2017 through the first quarter of 2018, the volume of re-performing loans (RPLs) traded in the secondary market exceeded the volume of non-performing loans (NPLs) for the first time. Amid these market conditions, RPL pricing has firmed up and in certain instances increased, while NPL pricing has held steady. These are two key findings in the Q1 2018 1st Lien Whole Loan Secondary Market Color report recently released by MountainView Financial Solutions, a Situs company.
“Demand is high and values are up, so it’s a good time to sell,” could be one potential summary statement about the current state of the residential mortgage servicing rights (MSR) market. On the other side of the market, many buyers and holders of the MSR asset are saying, “yields are attractive and MSR financing is readily available, so it’s time to buy” or, “I need to keep those customer relationships, so I’m going to retain the servicing instead of releasing it.