Morgan Stanley Plans to Exit Mortgage Servicing Business

""Morgan Stanley"":http://www.morganstanley.com/ announced Monday that it plans to hand off its servicing arm in a major sale, making it the newest bank in a growing line of others leaving or substantially reducing their share of activity in the mortgage markets.

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The financial institution said in a ""statement"":http://www.morganstanley.com/about/press/articles/3656d44e-fecc-424a-8fc6-bf0b1ad8ef96.html that it would sell Saxon Mortgage Services to ""Ocwen Financial Corp."":http://www.ocwen.com/ for $59.3 million. The buyer will also pay $1.4 billion to cover fees for advance receivables outstanding, with the transaction expected to close over the first few months of 2012.

A spokesperson for Morgan Stanley could not be immediately reached for comment.

The Saxon sale marks the second big grab for Ocwen this year. In June the financial firm picked up Litton Loan Servicing from ""Goldman Sachs"":http://www2.goldmansachs.com/, which it secured for $263.7 million.

Morgan Stanley joins a number of banks on their way out of the originations and servicing sectors, with many in the industry attributing their departures to onerous rules and regulation.

Following moves by Goldman Sachs, ""Bank of America"":https://www.bankofamerica.com/ decided to ""shut down its correspondent lending unit"":https://themreport.com/articles/b-of-moves-to-shut-down-correspondent-unit-2011-10-04 when it failed to find a buyer in September.

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Life insurer ""MetLife"":http://www.metlife.com/ more recently opted out of the mortgage originations business by ""announcing that it plans to find a buyer for MetLife Home Loans"":https://themreport.com/articles/citing-regulations-metlife-may-sell-stake-in-originations-2011-10-13.

The life insurer chalked up the departure to today's ""uncertain marketplace and regulatory environment,"" which it said taxed ""people and capital"" and soured profitably in the mortgage lending business.

Paul Miller, managing director with ""FBR Capital Markets"":http://www.fbr.com/, tells _MReport_ the departures ""don't shock anybody. If you're a big bank, why do you want to foreclose on old ladies and get crucified by Occupy Wall Street? The reputation for doing it is just too harsh. Why not just sell it?""

Many citing rules and regulations in their departures make references to the Dodd-Frank Act, which critics charge with crimping the industry and slowing economic recovery.

Earlier Tuesday, former ""Sen. Chris Dodd"":http://chrisdodd.com/ (D-Connecticut), vigorously defended his namesake in a ""_Washington Post_"":http://www.washingtonpost.com/opinions/five-myths-about-the-dodd-frank-financial-regulations/2011/10/19/gIQAtq7j4L_story.html editorial by characterizing the law as one that ""took aim at the riskiest practices"" in housing finance.

""Whether or not you agree with the law's provisions, repealing it would return us to a time in which nobody - not consumers, not regulators, not even other banks - knew what the Wall Street gamblers were doing until it was too late,"" he wrote in the _Post_. ""It would destroy confidence in our markets and faith in our financial system, certainly hindering our recovery.""

Asked whether Dodd-Frank remains a factor in the steady flow of departures by big lenders from the originations and servicing sectors, Miller says he thinks it does.

""A lot of the regulation was done very quickly by people who really didn't understand the process,"" he says.

""It was jammed through Congress,"" he adds. ""If I am Goldman Sachs or Morgan Stanley, I want out of the business.""