Mortgage Servicing Rights (MSRs)

Mortgage Servicing Rights (MSRs) are the rights to manage and service a mortgage loan after it has been issued. This includes tasks like collecting monthly payments, managing escrow accounts for property taxes and insurance, and communicating with borrowers. Companies that own MSRs earn money from these servicing fees. MSRs can be bought and sold independently from the mortgages themselves, creating a market for them. Investors value MSRs based on the expected future cash flows from these servicing fees, which can change with interest rates and borrower behavior.