Mortgage Servicing Rights (MSRs) are an asset
that represents the right to service a portfolio of mortgage loans. Servicing
is the act of collecting and distributing payments. The value of an MSR is
dependent on assumptions, such as prepayment speeds, loan delinquency and
, a financial institution
Excess MSR and Basic Fees are key components. A
$10 million pool of mortgages, with 100 loans and an average principal balance of
$100,000, amortized over 30 years at a rate of 6 percent, pay a monthly payment
of $60,000. The owner of the mortgage pool receives $57,500 after the servicing
company collects 30 basis points, or $2,500 for the collection and distribution
of the interest and principal payments. A basic fee of $500, or 6 basis points,
is paid to the servicing company. The right to receive Excess MSR, at 24 basis
points, or $2,000, can be sold.
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. The company
acquired Excess MSRs on residential mortgage loans with an aggregate unpaid
principal balance of over $400 billion. This esoteric asset represents 58
percent of the company’s equity.