Flow Market Gains Steam.(Brief Article)

When it comes to servicing prices, it's a tale of two markets right now, servicing brokers say.

The huge refinancing wave hitting the mortgage industry has caused bulk servicing prices to retrench a bit but is creating somewhat of a bull market in flow servicing.

Most servicing advisory firms that sell receivables anticipate a banner year in flow transactions.

"This year we expect that about 80% of our deals will be flow-related," said Ted Jadlos, a principal in Phoenix Capital, a brokerage firm based in Denver. "Last year about 60% of our transactions were flow."

Bulk servicing sales involve the exchange of existing receivables whereas flow deals entail the forward delivery of newly-originated servicing.

In the current low note rate environment, newly originated loans (and the attached or detached servicing rights) are less likely to prepay any time soon.

Tom Donatacci, a broker with Cohane Rafferty Securities Inc., Harrison, N.Y., noted that bulk servicing packages with low note rates are, "still pretty liquid and can trade" but added that "high coupon" packages where the note rate is north of 7.5% are difficult to sell.