A Bull Year is Ahead for MSR Trading

by Bill Conroy, HousingWire | April 21, 2023

Mortgage servicing rights on lower-rate legacy loans dominate the market, and buyer demand is robust, industry observers say

The trading volume of mortgage-rights servicing (MSRs) so far this year is on pace to meet or exceed last year’s robust mark, when MSRs on some $1 trillion worth of home loans exchanged hands — then fueled by the spike in interest rates, industry players say.

As of late April 2023, mortgage interest rates, though still volatile, have been on a downward trajectory since the start of the year. That should be a drag on MSR pricing and trading, given MSR values tend to decline as interest rates drop because lower rates prompt more refinancing — lowering the long-term payout for the asset.

That trend, however, is not materializing in the market so far, according to several MSR market experts interviewed by HousingWire. The main reason for that is that the bulk of the MSRs now being traded are linked to solidly underwritten mortgages originated in 2020 and 2021, when interest rates were in the 3% range — hence they represent quality MSRs that are now at very low risk of prepayment.

Read the full article at HousingWire.