“There’s not a lot of low-coupon stuff that’s being traded today — at least newly originated product. There are some legacy assets that are trading where the coupons are a little bit lower, but the pricing is reflective of that.”
Although these lower-coupon notes generate less revenue for a servicer, there’s also a safety net factor that must be considered. Borrowers who secured rates of 4% or less during the pandemic-era purchase and refi frenzy are less likely than others to be searching for a new loan today. They entail less risk for an MSR portfolio than today’s more common note rates of 6% to 7%, which are more likely to be paid off and dilute the value of a portfolio.
On average, servicers have only retained 30% of their borrowers in the past 15 years, according to ICE Mortgage Technology.
“We tend to be mindful of that,” Price said. “We want to make sure that the things we buy strategically, from a coupon perspective, will perform the way we’re forecasting, and that the weighted average life of that asset will be aligned with the way that we’re modeling it to make sure that the return requirements we have meet those objectives.”
Government loan risk
According to data from Inside Mortgage Finance, the vast majority of BSI’s servicing portfolio — valued at $30.6 billion in unpaid principal balance at the end of Q3 2025 — consisted of agency notes. More than half of that amount was tied to Fannie Mae notes, with another $9.8 billion to Ginnie Mae notes.
Servicers must be aware of the higher delinquency rates for Ginnie Mae pools, which are comprised of mortgages insured by the Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA).
In February, the Mortgage Bankers Association (MBA) issued a warning about the growing gap between conventional and FHA delinquencies as the spread reached 841 basis points. The spread between conventional and VA late-payment rates, while also rising, was only 208 bps.
MBA delinquency data for the third quarter has yet to be released, but second-quarter figures showed declining risk in the government channels. The FHA late-payment rate was down 5 bps to 10.57% and the VA rate dropped 31 bps to 4.32%. By comparison, the conventional delinquency rate was 2.60%.
Price said higher risk is inherent when purchasing FHA and VA loans, and that BSI has built a servicing process that “really caters to the higher-touch assets.” He was also complimentary of the VA’s new loss-mitigation option, which was implemented at the end of July through the passage of the VA Home Loan Program Reform Act.
The replacement for the now-defunct Veterans Affairs Servicing Purchase (VASP) program, Price said, doesn’t have “a whole lot of variation, because, quite frankly, a lot of work was done in the original VASP program.” But he does think it’s a “step in the right direction for everyone in the mortgage ecosystem.”
Home equity investments
Secondary market demand for home equity investments (HEIs) — which primarily differ from traditional home equity products in that they don’t require monthly payments — is on the rise. Multimillion-dollar securitizations announced in the past two years by Hometap, Point and Unison are illustrative of the trend.
Price has been working on HEI deals for more than a decade and began serving earlier this year on the Information Management Network’s Home Equity Investment Advisory Board — a group of industry leaders who are trying to advance these products through innovation and strategy.
“There’s a lot more liquidity in the marketplace now. Wall Street has awakened around shared equity. When these deals go to securitization, they are oftentimes oversubscribed by several hundred million (dollars),” he said.
Price said it’s not uncommon for a homeowner to have first- and second-lien loans with low balances, a large amount of equity and a need for cash. They can benefit from an HEI by monetizing their equity without taking on additional debt. And more consumers have chosen this route, as evidenced by Hometap surpassing $2 billion in HEI originations earlier this year.
But Price also acknowledged the rising risk of these products from a legal perspective. A lawsuit against Unison is likely to change how they’re marketed and sold after a U.S. appeals court ruled that the company’s product is a reverse mortgage under Washington state law. Hometap, meanwhile, is facing similar accusations from the Massachusetts attorney general.
“You’re going to start seeing other states come up with a similar type of approach at how they look at the product. When that happens en masse, that’s going to impact how investors look at it,” he said.
“It’s kind of early to tell with any kind of specificity what the real impact is going to be to (sales) volumes. The disclosures that homeowners are going to get will probably change. In Washington state, if you’re a shared equity originator, you’re going to have to change your disclosures — which may not necessarily mean a whole lot, but that’s more cost. You’ve got more training, more consumer education you have to do.”
