As the Federal Reserve officially leaves the mortgage-backed securities market this week, mortgage servicers will likely step up their hedging efforts to shield portfolios from any major rise in interest rate volatility.

Interest rates have fallen to historic lows and have been unusually steady since the Fed began buying large quantities of MBS in late 2008, prompting many servicers to pare back their hedging. But servicers fear that, without the Fed's stabilizing influence, rates will go up, boosting the value of their portfolios but also increasing their need to hedge against unexpected gyrations in mortgage rates.

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