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Servicing Mortgage Portfolios: Strategies and Applications for Buying, Selling and Managing Mortgage Loan Portfolios.

Servicing Mortgage Portfolios: Strategies & Applications For Buying, Selling and Managing Mortgage Loan Portfolios

Tim Cohane and Larry Rafferty, Editors Probus Publishing 1925 N. Clybourn Avenue Chicago, Illinois 60614 1991, 400 pages, $50 (MBA members), $60 (non-members) Hardcover

In an ideal world, mortgage bankers would expand their servicing portfolios, book predictable origination fees and experience no delinquencies or prepayments. Unfortunately, the realities of mortgage banking in the 1990s preclude dreams of the ideal, replacing them instead with survival strategies. For the mortgage servicer, survival as well as profitability is dependent upon how well loans are serviced and how well transfers of servicing are managed.

Servicing Mortgage Portfolios gives insights on managing serving transfers based on the collective experience of Tim Cohane and Larry Rafferty in transacting more than 800 servicing sales. It is a detailed "from-the-trenches" manual that introduces the thought processes involved in analyzing whether or not to sell or purchase servicing; progresses through the planning stages of a transfer; and finally discusses the actual contracting, funding and follow-up of a transfer.

To assist the recent entrant into the world of servicing transactions, the authors go back 20 years describing how servicing was presented and sold. They contrast the complexities of valuing portfolios today with the past when a one-page synopsis of unpaid principal balance (UPB), weighted average coupon (WAC), weighted average maturity (WAM), number of delinquent loans and location was all that was necessary to formulate a servicing bid. The differentiation is made between market value and economic value, and an analysis of each step of the valuation process illustrates the exacting science that portfolio valuation has become. Detailed case studies further support the discussion.

One of the most interesting sections of the book is the play-by-play account of an actual servicing sale as seen through the eyes of a broker. The scenario starts with the decision to sell, addresses bidding and acceptance of the best bid and concludes with the actual funding of the sale.

An appendix comprises a large portion of the book and contains useful forms and checklists that include a sample listing contract, offering letter, pretransfer questionnaire, list of transfer requirements, comparison chart of agency transfer policies and procedures and state-by-state interest-on-escrow laws. I predict many readers will spend hours with this section face down on the copy machine reproducing its valuable contents.

In summary, Servicing Mortgage Portfolios is a real working book. The first-time servicing buyer or seller will appreciate its easy-to-understand structure, while the seasoned servicer will gain insights on improving present transfer procedures. After all, most veteran players will admit to some "instinct" dealings with the sale or purchase of servicing, a practice that becomes more and more dangerous as the process grows more sophisticated and complex.

Reviewer Michael Hyman is manager of commercial loan servicing for Wendover Funding, Inc., a national contract subservicing organization in Greensboro, North Carolina.
COPYRIGHT 1991 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Hyman, Michael
Publication:Mortgage Banking
Article Type:Book Review
Date:Sep 1, 1991
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