Mortgage-backed securities are finding a new niche as tools that help lenders manage their servicing portfolios. Industry experts say that, from a trickle two years ago, billions of dollars of derivative mortgage securities are now routinely bought and sold to hedge against prepayment runoff, the bane of every mortgage servicer.

"We've seen a dramatic increase" and expect the use of mortgage derivatives to grow, said Michael H. Koegler, vice president of the Chase Securities unit that helps lenders set up hedging programs.

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