by Kate Ledford

10Q MSR Value (in basis points)

Monday, May 16, 2022

Though the U.S. economy is still in recovery mode, historic inflation, supply chain issues and sanctions all contributed to GDP shrinking in the first quarter for the first time since the pandemic began. The good news is consumer spending and business investments grew in the first quarter, and unemployment remains incredibly low at 3.6%, nearly fully recovered (though demand for labor remains strong). The Federal Reserve is planning on continuing its series of aggressive interest rate hikes in an attempt to curb inflation.

There was an increase in the yield curve this month, and the slope of the curve remains positive, although essentially flat from the 2nd year on. The 10-year Treasury increased from March 31st and ended the month at 2.85%, up 50 basis points from last month and 130 bps from year-end. The 30-year fixed rate mortgage is at 5.15%, up 68bps from last month and 196 bps from year-end.

This all appears to be good for the servicing market. Prepay speeds are down and the secondary market for servicing rights is vibrant.

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