B of A may be getting a bargain in CFC’s mortgage servicing rights(MSR) CFC’s MSR services $1.48 trillion in mortgages and the cash flow alone is 7.5 billion/month (using 6% avg interest rate – my be higher/lower) (9million mortgages)
Even with a .5% service fee, the annual service fee is 440 million or npv of about 9.8 billion – scale the .5% up or down to get a better idea of the real value of the loan processing – somewhere between 5 and 10 $billion before losing a two million customers to foreclosure.
Yes there can be some real losses in the loan portfolio, but the loan servicing may be worth what BofA is paying. Iam holding my BofA shares.