This year has drastically changed the retention strategy for many MSR originators, and many now have the largest value of MSRs on their balance sheet that they have seen in recent memory. As the MSR asset continues to grow, it is critical that owners think strategically about when a good time might be to sell a portion, or all, of their MSR portfolio. Below are a few key points PHOENIX talks through with our clients to help them determine if the timing is right for their own bulk MSR sale.

Capital Gains Tax: A very important item that can go overlooked when considering a bulk MSR sale is the tax impact of the sale. If you plan strategically with your sales selection and sale timing, you could take advantage of long-term capital gains tax rates on the assets vs. ordinary income tax rates. The difference between these two tax rates will play a tremendous role in the overall return on the asset you will achieve if you chose to retain the asset for a given period of time and then sell off a portion of the MSR portfolio.

Forthcoming Cash Needs: Bulk sales typically take anywhere from 45 – 60 days from the time you begin negotiations with an interested buyer to the time you as the seller are receiving your initial proceeds from the sale. With this timeline, it’s paramount that you consider the future cash needs of your company several months in advance to strategically time your bulk sale. These future cash needs may be driven by one or more new company initiatives that are being launched, decreasing origination margins, enterprise-level tax payments, and an array of others.

Current MSR Market Dynamics: Knowing current supply and demand information for the bulk MSR market can be a critical determinant of optimal sale timing. Year-end can be particularly tricky.

The above items are just three examples from a long list of items, that you should evaluate when considering a bulk MSR sale. PHOENIX always ensures our clients understand how critical the timing of a bulk sale can be, and we set our clients up to successfully execute on the strategy that best achieves their goals by selling, retaining or any combination of the two. Please contact your PHOENIX representative so we can help you determine when is the best time for you to execute a bulk MSR sale.