Kroll Bond Rating Agency Releases Overview of Mortgage Servicing Rights

Business Wire


Kroll Bond Rating Agency released an overview today of Mortgage Servicing Rights. The term "MSR" generally describes a party's contractual rights with respect to servicing or controlling the servicing of a pool of mortgage loans owned by others, including the entitlement to receive servicing compensation. Outside the US, the concept of an MSR is not even accepted by many financial regulators and accounting rules which do not recognize intangible assets. In the US, however, the MSR is an important asset in the world of housing finance and investing. Over the past decade, MSRs on residential mortgage loans have evolved from an obscure intangible asset originated and held by mortgage lenders into a highly attractive alternative asset class sought by institutional investors.

KBRA believes that mortgage servicing rights or “MSRs” are an attractive asset class for both lenders and investors, but carry considerable risks in terms of compliance and operational factors. Regulatory and compliance concerns remain among the most significant and immediate risks to investors operating in the MSR sector, but we believe these risks are likely to be relatively short-term.

KBRA sees valuations for MSRs remaining high, roughly 2x historical levels, both due to the Fed’s tightening of interest rates policy and an influx of investors seeking to exploit negative duration and the supra-normal, high single digit returns available in this asset class. Like legacy RMBS and non-performing loans (both legacy and current), there remains far more cash on hand to put to work in MSRs than risk assets and the servicing capacity available to meet investor demand.

To view the report, please visit

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Kroll Bond Rating Agency
Analytical Contacts:
Christopher Whalen, 646-731-2366
Marjan Riggi, 646-731-2354

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