Rate Drop Hurts Deals.

Investors in mortgage servicing rights - and the investment bankers that broker deals - were anticipating a strong first quarter in which the long ailing "bulk" market would revive.

But as Mortgage Servicing News went to press this month, interest rates had unexpectedly fallen, and all bets on a bulk "revival" were off.

When interest rates took a dive in early March after a weak U.S. jobs report, several pending bulk servicing transactions were hurt with investors either backing off entirely or lowering their bids.

Investment bankers told MSN that a $1 billion bulk offering was scrapped entirely, one business day after the yield on the 10-year Treasury fell from to 3.7% to just over 4%.

The identity of the brokerage offering the receivables - as well as the actual seller - was not revealed, but advisors that play in that market said one thing is certain: buyers once again are becoming skittish.

"Whenever you have a drop like that, the people on the buy-side become more cautious," said one New York-based investment banker. "Prepayment speeds begin to ratchet up which will hurt values."

One executive who evaluates portfolios for a living noted, "With the end of the quarter coming up I wouldn't want to be the one telling management that they have to reduce the carrying value of their portfolio."