The secondary market for mortgage servicing rights, or MSRs, has been heating up recently as interest rates tick up, increasing the value of MSR assets, and as other revenue streams for lenders begin to slow — such as loan refinancing.
It’s also the time of year that many nondepository lenders, also called nonbanks, typically will look to sell off some of the MSR assets on their books to bolster liquidity for future endeavors. Those are normal market dynamics, according to Azad Rafat, MSR senior director at Mortgage Capital Trading Inc.
MSR assets aren’t complicated in conception. They are simply the loan-servicing component that goes along with any mortgage — collecting taxes, interest and principal payments, and forwarding that revenue stream to the appropriate parties, in exchange for a small cut of the interest on the mortgage. And those servicing rights, with a revenue stream backed by the underlying mortgage, can be packaged, bought and sold like any other asset or security.