MSRs are hot. Condos are a nightmare. 🔥😱

Close your eyes. You've cleared income, assets, credit & the appraisal came in fine. Your borrower is golden ☀. Now you just need a 10-person HOA board to answer an email. Good luck!

Sources tell The Mortgage Scoop that LOs are dealing w/ three-week waits, four-figure HOA document fees, paywalls for basic insurance documents & condo associations that seem determined to make a mortgage closing as painful as possible. And the GSEs are making it worse.

Meanwhile, the mortgage servicing market is getting very interesting. Rocket still sits comfortably on top of the agency servicing pile, but CrossCountry Mortgage is about to crash into the Top 10, thanks to its pending Two Harbors acquisition. And MSR buyers are getting quite aggressive on low-coupon paper.

All that & more in today’s free edition of The Mortgage Scoop.

At the end of Q2'26, the unpaid principal balance ("UPB") of one-to-four family agency mortgages rose to $8.9 trillion, a 0.6% increase from Q1'26. The top servicers continued to consolidate market share, though notable shifts occurred as portfolios were sold and transferred throughout the quarter.

Rocket Mortgage was the largest servicer with approximately 13.0% of the agency servicing market, followed by Lakeview Loan Servicing at 9.9% and PennyMac at 7.1%. Other leading servicers included Freedom Mortgage, JPMorgan Chase, NewRez, Wells Fargo, and Onslow Bay. 

The top 20 servicers now manage 76.7% of the agency mortgage servicing market. 

Compared to Q2'25, CrossCountry Mortgage share saw the largest market share increase (1.0 percentage point increase to 2.2%), while Wells Fargo saw the largest market share decrease (1.0 percentage point reduction to 3.8%). Nonbank servicers, as a group, now represent 67.2% of the agency servicing market, up from 65.0% a year earlier.

We anticipate meaningful change in the mortgage servicer listings over the next several years. In the short-term, CCM will leap into the Top 10 among mortgage servicers following its pending acquisition of Two Harbors. And, as regulators relax capital treatment of MSR assets for depository banks, expect to see changes in the Top 20 servicers over the next 24 months.

This report is brought to you by Milliman. Milliman provides strategic and quantitative consulting services across the mortgage market with expertise in origination, servicing and capital investment.

Source: Fannie Mae, Freddie Mac, and Ginnie Mae MBS Data Disclosure

Speaking of MSRs — as if servicing value in a still-high rate environment needed more ink — Rocket sold $53B in MSRs for $795M, largely low-coupon servicing rights. It wasn't the only one moving a good-sized piece of its book in Q2. loanDepot sold $10B in a deal that closes later this year; execs wouldn't specify proceeds or name the buyer, but capital markets folks told me low-WAC is trading around 6.9x(!) these days.

Buyers want this paper badly. Sources told The Scoop that Annaly Capital Management, Sage Residential & Truist have all been aggressive of late. "The sale price for MSR depends on the seller," said one capital markets source. "Rocket, Freedom, & UWM will take a reduction in price for high WAC stuff since their stuff pays fast."

My wife & I just had an offer accepted on a new-development condo in Brooklyn. Boutique project — 10 units — & we're not taking a GSE loan, so w/ any luck we skate past the mess LOs & agents keep flagging to me about HOA management companies.

Because it is a goddamn mess. And it's getting worse.

An LO in California told me he's sick & tired of the delays & the gouging during escrow. "Everything from the thousands of dollars charged to both seller and buyer for HOA docs for just sending an email. And if there is a necessary rush order? Hundreds of dollars are tacked on," he grumbled. "Also, in my experience, the HOA management companies are non-responsive & it's like pulling teeth to get a simple email response to a question."

Sure, some of the forms are genuinely nuanced. But plenty are standard docs that get emailed or uploaded to an HOA doc-order vendor. So what happens if the project lands on the "blacklist," or the borrower walks to another lender?

"They might need to restart the document ordering process," the Cali LO said. "I have to discuss upfront that they could pay $500 to $1,000 dollars for HOA docs on top of ordering the appraisal. This is for a $550,000 condo in Orange County. Also, in a recent escrow, we needed the HOA Master insurance to reference the lender. We reached out to the insurance broker & voila! 'Please access our doc request for HOA master insurance for $150.' It's really bad."

A mortgage broker in Florida put it more bluntly. This is universally considered "the single worst part of the entire real estate industry,” he said. “I just had an HOA charge a client $1K for a condo questionnaire & it took them almost 3 weeks to complete. A lot of times they will even charge you more depending on how fast you want it & the thing is it's standard form — the data doesn't really change."

Florida does offer one small mercy: the state made HOA & condo documentation public record, so LOs can go dig up budgets, insurance policies & permits themselves.

The Cali LO thinks the root of it is how many HOAs have been blacklisted by Fannie Mae. But even when the project is warrantable, "whenever there is a need by the lender for clarification on some condo condition, it becomes this cat-and-mouse game of getting a hold of the right person, & even when you do they throw a paywall your way in the form of going through a 3rd party doc vendor w/ egregious fees. These fees are then passed onto the consumer."

Under the updated GSE rules, starting in January condo associations will need to put at least 15% of annual dues income toward reserves, up from 10%. A lot of associations aren't going to clear that bar.

Per the WSJ, 39% of condo associations nationally are operating in a "weak" financial state (reserve funds less than 30% funded), according to Association Reserves, which compared buildings' total savings against their physical wear. Florida's 🐊 balances are meaningfully worse than the rest of the country, thanks to old state laws that let unit owners vote every year to waive reserve funding.

Predictably, buildings w/ underfunded reserves are the ones carrying deferred maintenance. Associations w/ dwindling reserves were over 20% more likely to hit owners with a special assessment than those with stable or growing balances, per Vantaca, which tracked year-end reserve trends across 4K-plus associations from '21 through '25.

"The big mistake boards make is thinking that reducing reserve funding reduces reserve expenses," Robert Nordlund of Association Reserves told the WSJ. "Mother Nature & Father Time scoff at boards thinking they have a say in the matter."

I believe the GSE changes are going to reshuffle the competitive deck a bit. Several depository bank leaders told me they expect to take meaningful share over the next two-to-three years. NonQM lenders are licking their chops at all the non-warrantable paper headed their way.

Anyway, wish me luck on the Brooklyn condo! The inspection is Monday afternoon.

A large wholesaler out of Pontiac, MI was downgraded by Fitch on Friday to a BB- from B+. The downgrades apply to long-term issuer default ratings as well as senior unsecured debt ratings. 

Fitch said that given the structure of the new equity agreement w/ Oaktree Capital & the Ishbia family, it’s classifying the preferred shares as debt for UWM rather than as equity. Doing so pushed Fitch’s calculation of UWM’s corporate leverage to 6.1x at the end of June from 3.2x at the end of March. 

“Fitch believes leverage will remain above the previous downgrade trigger of 2.0x over the [rating] outlook horizon,” the rating service added. Fitch’s outlook horizon is one to two years.

(I did a deep dive of UWM’s deal w/ Oaktree on Friday, so def check that out.)

(🙏 If you like what you’re reading, tell a fellow mortgage junkie to sign up here.)