What are Mortgage Servicing Rights?

A growing number of institutions are choosing to retain their mortgage servicing rights (MSRs) rather than release their servicing when they sell loans in the secondary market. ALM First provides a rigorous process for valuing the MSRs of your financial institution. This enables you to make well-informed risk management decisions utilizing our sophisticated in-depth analyses and reporting of expected performance under different rate scenarios.

Measure Your MSR Risk and Performance with ALM First

The Key Components

  • Mortgage Servicing Rights Portfolio Valuation
  • Annual valuation reports
  • Detailed loan level data analyses for the entire portfolio
  • Frequent monitoring and trading level analytics

The Benefits of MSR Risk and Valuation

  • 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 a number of different hedging instruments.

Our rigorous valuation process uses sophisticated modeling software where principal and interest cash flows, along with servicing income and expenses, are projected at the loan level in accordance with contractual pay-downs and projected prepayments. Servicing income and expenses are then discounted to the present. We provide these results by risk tranche in a detailed, yet user-friendly, report.

Why Choose ALM First?

  • Sophisticated modeling software: leverage our extensive, multi-factor prepayment model based on reputable observed and projected data.

  • Unbiased Strategic Consulting: we focus on strategic positioning to improve institutional performance and profitability while minimizing risk.


>> Contact us today to establish your dynamic MSR strategy.

Mortgage Servicing Rights Risk and Valuation FAQs

What affects Mortgage Servicing Rights valuations?

Changes in the valuation of mortgage servicing rights depend upon the growth in the mortgage portfolio along with any notable market swings. Fluctuations in prepayment speeds and the weighted average discount rate, along with movements in the weighted average life of the portfolio, lead to differences month-over-month. An institution’s servicing fees and servicing costs also play a large role in the calculations.

What drives monthly/quarterly changes?

The ALM First report outlines the entire mortgage portfolio, stratified by coupon, showing coupons, terms, ages, servicing spreads, CPRs, and discount rates. In addition, the analysis breaks down the MSR valuation, showing each component and its impact on the total. ALM First outlines the major changes since the previous report, explaining the driving factors.