The ALM First Difference

Robust Analysis

Generates a variety of stress testing and scenario analyses

Manage Risk

Identifies market risks, shock scenarios and returns

Smart Evaluation

Enables institutions to determine the outcome of MSR values and evaluate them relative to the number of different hedging instruments

What is Mortgage Servicing Rights Hedging?

A regular part of the mortgage origination business is the creating of Mortgage Servicing Rights (MSR) as institutions sell their production to one of the GSEs or private investors Market value sensitivity of MSR assets can create income statement volatility for your financial institution.  We work with many financial institutions to hedge this risk through the use of various financial instruments, including Treasuries (cash and futures) interest-rate derivatives, and MBS.

ALM First’s Mortgage Servicing Rights Hedging

ALM First offers both risk measurement valuation and hedging solutions to reduce the impact MSRs may have on your institution’s financial statements.  We provide a sound solution, as well as an opportunity to:

  • Generate a variety of stress testing and scenario analyses
  • Identify market risks, shock scenarios and returns
  • Enable institutions to determine the outcome of MSR values and evaluate them relative to the number of different hedging instruments

Why Partner with ALM First for Your Mortgage Servicing Rights Hedging?

Dynamic strategies require frequent monitoring and trading level analytics which is why many financial institutions eschew this type of strategy in favor of buying options.  They simply don’t have the resources internally.

However, asset manages such as ALM First who have both the ability to perform regular surveillance as well as necessary analytical systems in place to enact the strategy can help financial institutions go this route as it typically outperforms options over the long run.

Mortgage Servicing Rights Hedging FAQs

What does MSR stand for?

MSR is Mortgage Servicing Rights. They are contractual agreements where the right, or rights, to service an existing mortgage are sold by the original lender to another party who specializes in the various functions of servicing mortgages.