Mortgage

5 methods mortgage firms can get probably the most out of their MSRs

Mortgage servicing rights research tools

Yurii Kibalnik – stock.adobe.com

With rates rising and originations falling, lenders have returned their focus to mortgage servicing rights as a means of keeping their income up. In some cases, companies have started earning more pretax income from servicing than from their slowing loan-production channels.

MSRs have benefits besides the fee income — they can be sold for cash or mined for origination leads at a time when that business is slow. But only if lenders are able to manage them correctly in conjunction with their lending and hedging efforts, the latter of which address MSRs’ rate-related risks.

For banks and other institutions that offer additional financial products, they may be used to cross-sell. MSRs can also secure lines of credit for corporate expenses or other needs.

To make the most out of all those opportunities, it helps to know about some of the nuances that go into the economics of mortgage servicing rights and their valuations, and how to manage them efficiently with technology or through collaborative work with subservicers.

What follows are tips on five ways lenders who hold onto their mortgage servicing rights can get the most out of them from four experts familiar with the nuances involved in the various aspects of this segment.

These tips include information about current conditions in the markets for financing, subservicing and technology. Also discussed below are existing and proposed rules for remittances and escrows that may affect the value, and some creative recapture and marketing strategies that can be executed using mortgage servicing rights.

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