IMBs Hoard MSRs As New Production Falters – NMP Skip to main content

IMBs Hoard MSRs As New Production Falters

Nov 05, 2024
IMBs Hoard MSRs
Contributing Writer

MSRs are back to trading at a premium of roughly 5x multiples of servicing fees for agency loans.

With capital markets pricing a 25-basis-point (bps) cut to the Federal Reserve’s benchmark rate following this week’s Federal Open Market Committee (FOMC) meeting, Mortgage Capital Trading Inc. (MCT), a mortgage secondary market advisory firm, predicts mortgage rates “will remain elevated through the remainder of 2024, barring any political or economic surprises.”

MCT’s forecast affirms mortgage lenders’ fears that meaningful rate relief is still quarters away. “All of the mortgage market euphoria about lower rates and higher anticipated increase in production has since evaporated,” the report’s author(s) noted. The appetite for mortgage servicing rights (MSRs) remains “as high as ever,” though, subsequent to mortgage rates’ sharp increase following the Fed’s first rate cut in mid-September.

“We continue to advocate caution when capitalizing new production as the market navigates a mortgage rates roller-coaster,” the report read. “Higher capitalization rates in this current and volatile rates environment could lead to fair value write-downs or impairments as we close 2024.”

The volatility has flowed from various sources. In a purchase drought, pending home sales notched a surprising bump in September. New-home sales hit a three-year low in September, but rose 6.3% on an annual basis that month. Elevated rates mean affordability constraints are bottlenecking new purchase demand, with first-time homebuyers and renters stuck renting.

Meanwhile, with the broader economy finding firmer footing, the financial health of average consumers is being closely watched by economists across the housing and finance industries.

Consumer spending fueled healthy growth of gross domestic product (GDP) in the third quarter, but October’s employment data clouded analysts’ view of the labor market, attention to which has sharpened since the Fed began cutting rates amidst fears of interest rate-induced weakening.

Aggregators dropped their pricing temporarily as lower rates fueled a bump in refinance activity in the third quarter, but the dearth of refinance and purchase volume in the fourth quarter has led aggregators to raise prices for new originations to 125-130 bps for a 30-year, par-rate loan.

Bulk MSR trading values reflect premiums of 4.95x – 5.20x multiples of servicing fees for agency loans. That premium is indicative of MSR buyers' elevated appetite for new originations amidst a shortage of supply of new originations. Yet, the lack of steady production has many MSR holders preferring to “wait a little bit more before selling some of their MSR holdings.” 

“Many potential MSR sellers remain hesitant to sell their MSRs due to loan production uncertainty driven by higher than anticipated mortgage rates,” MCT’s blog notes. “Many MSR holders depend on their MSR holdings fee income to maintain their business operations.”

About the author
Contributing Writer
Ryan Kingsley is a contributing writer for NMP.
Published
Nov 05, 2024
Jobs Report Comes In Weak After Mortgage Rates Surge

Employers added just 29,000 jobs in September, sending Treasury yields lower and offering a potential counterweight to the recent rise in mortgage rates

Oct 02, 2026
Price Cuts Hit Four-Year High As Mortgage Rates Top 7%

More than one in five listings took a price cut in September, but pending sales still posted their sharpest annual decline since March 2025

Oct 01, 2026
Serious Mortgage Delinquencies Rise 19% After Five Months Of Improvement

ICE data shows 574,000 mortgages were at least 90 days past due in August, while early-stage delinquencies remained below year-ago levels

Sep 29, 2026
Smaller Down Payments Give Buyers More Room, But Rates Limit The Savings

The typical down payment fell 9% from a year ago, while shifting market conditions are giving originators different affordability conversations across the country

Sep 25, 2026
Mortgage Rates Break 7% Just As Builders Find A Way To Move Buyers

New-home sales rose 6.4% in August as builders cut prices, offered incentives, and sold more lower-priced homes. Now mortgage rates are moving against buyers again

Sep 25, 2026
Borrowers Want Digital Closings, But Some Originators Remain Hesitant

ServiceLink finds 45% of surveyed LOs cite borrower reluctance as a barrier, even though most recent buyers say digital options would influence their choice of mortgage provider

Sep 23, 2026