by Dr Thomas J Healy, CMB

Residential MSR Multiples

Wednesday, June 15, 2022

Servicing values remain strong as rates rise.  The slow-down in prepays we are seeing is more than offsetting the higher yields being required to invest in these assets.  There is, however, an increase in expected volatility as rates are now nowhere near their theoretical minimum.  That is, we now have a situation where we know rates could conceivably drop 300 basis points.  A year ago, that was essentially impossible (absent negative rates).

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