Rocket sells roughly $20B in MSRs to JPMorgan Chase

By Real Estate News

Add Rocket Mortgage to the list of companies selling mortgage servicing rights (MSR) in a difficult operating environment. 

The Detroit, Michigan-based lender sold about $20 billion in MSRs to JPMorgan Chase in April, following a decline in its servicing book in the first quarter of 2023. The company’s unpaid principal balance reached $524.8 billion as of March 31, compared to $535 billion at the end of December, according to Securities and Exchange Commission (SEC) filings

“In April, Rocket Mortgage made a small MSR sale, representing roughly 4% of the company’s servicing book,” a company spokesperson wrote in a statement to HousingWire. The spokesperson did not provide additional details on loan type or characteristics. 

JPMorgan Chase, which likely surpassed Wells Fargo as America’s largest mortgage servicer last month, declined to comment. Between the acquisition of First Republic Bank and the purchase of Rocket’s MSRs, JPMorgan Chase has acquired approximately $126 billion worth of MSRs in the last two months.

Several borrowers took to social media this week to opine about the change in servicing to JPMorgan Chase, which will be effective June 1.

In an interview with HousingWire in early May, Bill Banfield, Rocket’s executive vice president of capital markets, said Rocket retains “almost all” of its loans to service borrowers. 

“My team, over the last couple of years, bought billions of dollars of MSRs. We’ve also sold billions,” Banfield said. “We look at what we call the lifetime value of the client. And if we have categories of loans that we believe have a higher lifetime value, we want to service those; we want to do retention on those. And in other categories with lower lifetime value, let’s let somebody else service those.” 

Rocket’s transaction follows the sale of billions in MSRs this year in the secondary market. 

Wells Fargo recently put an MSR portfolio worth roughly $50 billion up for auction related to its exit from the correspondent channel and a plan to drastically reduce its servicing portfolio. Mr. Cooper won this deal, sources told HousingWire. 

In addition, Mr. Cooper, which had $853 billion in UPB at the end of March, will inherit Home Point’s $84 billion servicing portfolio as part of its acquisition of the struggling company for $324 million in cash. The transaction will ultimately result in the seller shutting down operations. 

Despite the MSR sale, Rocket’s executives hinted at buying servicing portfolios in a call with analysts several weeks ago. 

“Some things that could be interesting could be MSR portfolios,” Jay Farner, Rocket’s CEO, who is leaving the company, told analysts. “And, you know, we’re active in that space. We’re not necessarily willing to pay any type of premium just through an M&A transaction rather than just buying in the open market.”