Rising Interest Rates to Help MSR Holders

first_img The Best Markets For Residential Property Investors 2 days ago Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Demand Propels Home Prices Upward 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Subscribe Data Provider Black Knight to Acquire Top of Mind 2 days ago  Print This Post Non-mortgage banking companies in the U.S. that hold  interest-rate-sensitive mortgage servicing rights (MSR) will soon get a “generous increase” in their capital positions thanks to a recent rise in interest rates, according to a report recently released by Moody’s Investors Service.The report said the rise in the 10-year Treasury yield, which increased to approximately 2.55 percent to year end from 1.65 percent  as of Q3 will result in mortgage companies reporting significant write-ups in their fair value MSRs for the fourth quarter of 2016. Fourth quarter earnings of US banks indicate a significant reversal of MSR fair value declines observed during the first nine months of 2016. Moody’s expects significant MSR write-ups for some of the six public non-bank mortgage companies Moody’s rates, reversing the declines in equity they incurred because of the MSR deterioration.”The prolonged low interest rate environment has led to significant declines in MSRs, eroding the capital and profitability of US non-bank mortgage companies that hold MSRs, but relief is on the way,” Gene Berman, Moody’s AVP-Analyst said.Of the six public mortgage companies Moody’s rates, Nationstar Mortgage Holdings, Inc. (B2 stable) and Walter Investment Management Corp. (Caa1 negative) should benefit the most from interest rate increases. Both Nationstar and Walter experienced large material reductions of MSRs at 10 percent and 23 percent of fair value of their MSRs during the first nine months of 2016, owing to the significant decline in interest rates. Assuming the MSR reductions are reversed, the capital levels of Nationstar would both increase by 1.7 percent (TCE to TMA), or a respective increase of 20 percent and 170 percent in percentage terms. Tagged with: Interest rates MSR MSRs About Author: Phil Banker Phil Banker began his career in journalism after graduating from the University of North Texas. He has covered a number of communities across Texas and southern Oklahoma, writing news and sports for publications including the Ardmoreite, Ennis Daily News and the Plano Star-Courier. He is currently a contributor to DS News and The MReport. February 3, 2017 2,032 Views Demand Propels Home Prices Upward 2 days agocenter_img Previous: EXCLUSIVE: Barney Frank Responds to Trump Order Next: The Week Ahead: Talking Appraisal Share Save Home / Daily Dose / Rising Interest Rates to Help MSR Holders Rising Interest Rates to Help MSR Holders The Week Ahead: Nearing the Forbearance Exit 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Sign up for DS News Daily Related Articles Interest rates MSR MSRs 2017-02-03 Phil Banker Servicers Navigate the Post-Pandemic World 2 days ago in Daily Dose, Featured, Headlines, News The Best Markets For Residential Property Investors 2 days agolast_img read more

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