Exclusive: Bank of America to sell service rights on $100 billion of mortgages

Bank of America Corp is looking to sell collection rights on at least another $100 billion of mortgages after announcing similar deals for more than $300 billion on Monday, according to two sources familiar with the situation.

The sources, who declined to be identified because they are not allowed to speak to the press, expect Bank of America to announce more sales of collection rights, known as mortgage servicing rights, in the next several weeks.

On Monday, the bank said that it is selling mortgage servicing rights on $215 billion of home loans to Nationstar Mortgage Holdings for $1.3 billion, and MSRs on another $93 billion of mortgages to Walter Investment Management for $519 million.

Big banks are looking to sell residential mortgage servicing rights as Basel III capital rules start going into effect making it more costly for banks to hold onto the rights.

Ally Financial Inc.'s banking subsidiary is also looking to sell $122 billion of MSRs. Ocwen Financial Corp, Nationstar and Walter are among a handful of firms looking at purchasing a portion of Ally's MSRs, according to the sources.

Bank of America spokesman Dan Frahm declined to comment on any specific transactions, but said the bank had been selling mortgage servicing rights for years and that approach remained part of its strategy.

"By reducing the size of our portfolio, we improve customer service capacity and resolve legacy mortgage issues and reduce risk in our portfolio," he said.

Representatives at Ocwen, Nationstar and Walter did not return calls. Ally spokeswoman Gina Proia declined to comment.

Bank of America shares were down 1.4 percent at $11.92 on Tuesday morning.


Mortgage servicing rights allow banks to earn fees from mortgage investors in exchange for collecting home loan payments from borrowers. The housing bust has made collecting such payments an expensive business as more borrowers become delinquent and go into foreclosure.

New capital rules will also make mortgage servicing rights more expensive for banks, so at least some of the assets are migrating toward non-bank companies like Ocwen, Nationstar, and Walter Investment Management.

Many banks are likely looking at selling portions of their mortgage servicing rights, the sources said.

"There is a huge amount of servicing that is going to come off the banks," said one of the sources. "It is going to be the trade for the next three years."

Denmar Dixon, executive vice chairman of Walter Investment Management, said he expected more MSR sales coming.

"I think we are in the third, fourth inning of the game here," he said, in a conference call discussing the MSR acquisition from Bank of America. "There's plenty more to do."

(Additional reporting by Rick Rothacker in Charlotte, N.C.; editing by Jeffrey Benkoe, Matthew Lewis and Leslie Gevirtz)