A new commitment by M&G Investments brings Rice Park Capital Management’s new fund for mortgage servicing rights investment halfway to its $600 million target for 2022.

M&G will add a $300 million equity commitment to the fund, which will allow it to purchase approximately $70 million in MSRs, Matt Kennedy, Rice Park’s co-chief investment officer, announced in a press release.

He expects competition in the increasingly hot mortgage servicing rights market will ultimately be limited by the barriers to entry.

“MSRs represent a $120 billion market opportunity that is difficult to access for most investors,” Kennedy said. “Rice Park believes it is well positioned within the market at an attractive time in the rates cycle.”

M&G will be the anchor strategic investor in Rice Park’s MSR strategy, according to Nick Smith, Rice Park’s founder, CEO, and co-chief investment officer.

“Finding the right equity capital is a key ingredient for Rice Park to build a large scale and durable MSR investing business,” he said in the release.

The company is working with a network of subservicers and originators to cultivate opportunities in the MSR market, and plans to expand upon this effort, Smith said.

The servicing rights market has been heating up as mortgage rates have risen, and the pace of prepayments is expected to slow in tandem, driving MSR values up. Some MSR buyers have become more confident in their prepayment rate projections.

“There’s a significant amount of capital committed to the asset,” Tom Piercy, president of national enterprise business development at Incenter LLC, said in a recent interview.

The latest weekly agency prepayment forecast from Barclays calls for a 17% consecutive-month drop in January based on a reduced business-day count and a 12% reduction in the refinancing index.

“Some of the slowdown in refis should be offset by rising buyouts, already seen in December, as foreclosure moratoriums end, and borrowers are increasingly forced to negotiate modifications,” Michael Khankin, head of residential mortgage-backed securities research, and Pratham Saxena, assistant vice president in Barclays’ securitization group, noted in the report.

Source link