Featured Insight

Mortgage Servicing Rights - The Good, the Bad, and the Ugly

June 2022

As origination profits wane, many lenders are winning the fight with positive revenue due to the increased valuation of their servicing book. The strategy of creating a counter cyclical business model has been a successful plan to smooth the ups and downs of the mortgage market, with the last decade seeing a broad expansion of lenders playing in this space. 

Those with a history in the servicing space know that the ease of navigating a servicing book primarily focused on posting on-time payments and handling basic requests can shift quickly as loans season and delinquencies increase. A web of complex regulatory requirements, escalating complaints, and increased costs of higher-skilled team members to evaluate loss mitigation options can quickly transition to rough waters. And while Mortgage Servicing Rights (MSRs) markups are putting many P&Ls in the black today, hedging MSRs can be imprecise and volatile, creating risk of future write-downs and reduced profits.

How do you get in front of these challenges to avoid the battles that may breakout through the industry?

Although not easy, there is a way. Gaining a full understanding of the risks, putting in proper oversight and controls, and ensuring a robust staffing plan is in place to recruit and train a skilled team is vital to keeping both the consumers and regulators satisfied.

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