Servicing Brokers: Get Ready to Start Your Engines.

As I write this, the yield on the 10-year Treasury is at 4.8% and by the time you receive this issue of Mortgage Servicing News it very well could be at 5%. Mortgages, as we all know, are priced off the 10-year and as rates head north, that spells bad news for conventional lenders that have been feasting on the refi mania of the past two-plus years.

But this is a newspaper that deals with the "other" side of the mortgage business, the side that has been smacked upside the head by servicing impairment charges and faster-than-anticipated prepayment speeds.

Name a servicer, any servicer, and then look at their quarterly earnings statements of the past six to eight quarters. You will find millions of dollars worth of servicing "impairment" charges.

Does the name Cendant Mortgage ring a bell? What about Principal Residential? Countrywide Home Loans? All have seen their servicing-related earnings suffer during the refi carnage of 2001-2003. Tiring of the vicissitudes of impairment charges, Principal's parent is selling its mortgage subsidiary to Citigroup. And now that rates are heading north, north, north, it would appear Cendant Corp. could make a nice little killing by selling CM's $138 billion portfolio. Right?

Yes, conventional mortgage rates are rising like the morning tide and servicing values soon will begin firming up like granite. Right? Yes, it certainly looks that way, which means firms that buy, sell, trade and evaluate servicing rights for a living should be dancing in their Dilbert cubicles right now.

In the coming months you should begin to see bucket loads of servicing deals being offered by Cohane Rafferty, Griffin Capital, Hamilton Carter Smith, Hanover Capital, MIAC, Interactive Mortgage Advisors, Phoenix Capital, take your pick. (If I left any firms out, I apologize in advance.)

Indeed, the days of starving in the desert ...