Thanks to rising interest rates the value of mortgage servicing rights has increased roughly 15% since the end of the third quarter, according to Interactive Mortgage Advisors of Denver.
"Just on the technicals alone it's risen that much," said IMA managing member Tom Piercy, adding that despite all the "noise" out there about the future of GSE servicing contracts, "MSRs are still a valuable asset." (IMA is a servicing advisory and brokerage firm.)
Two weeks ago, PHH Corp., Mt. Laurel, N.J., a top 10 ranked servicer, pre-announced its 4Q results, saying it expected strong earnings in the period due to a $287 million upward adjustment in the value of its MSRs.
Servicing advisors and analysts are keeping a close eye on both coming changes to GSE servicing contracts, and new Basel III accords that cap how much MSRs can count toward Tier I capital at depositories.
A new report out from Credit Suisse estimates that banks, over the short term, may have to shed $12 billion worth of MSRs to meet the servicing component of the Basel rules. (The MSR threshold has a multi-year phase-in stretching out until 2018.)
However, there is a fear that if too many banks try to sell their MSRs at the same time it will depress values. "That's a concern of mine," CS analyst Mukul Chhabra told National Mortgage News.
