With the rewards of investing in the residential mortgage servicing rights (MSR) asset come significant accounting and management challenges. Many of those challenges are based on how frequently the asset can change in value and the overall opaqueness of what’s causing the change in value.
Holders of the asset recognize these challenges and gather annually at the Accounting and Financial Management Conference of the Mortgage Bankers Association (MBA). Both seasoned and new investors view the conference as must-attend education on current best practices for MSR valuation.
In the MSR Valuation and Assumptions session at this year’s conference, being held this week through Wednesday in Orlando, panelists from three firms that provide independent valuation of MSRs are offering their perspectives on how to better model, analyze and report on the asset. The panel will review the importance of the valuation function, current assumptions used in the valuation process, how to best analyze interest rate scenarios, the decision between the two different types of accounting treatment for MSRs, stress testing the asset, and the latest enhancements in off-the-shelf and third-party valuation models.
Mark Garland, managing director and head of MSR valuation at MountainView Financial Solutions, a Situs company, is one of the three panelists in this session. Garland has been a frequent presenter at the annual conference, sharing insights gained as a MSR valuation analyst and leader at MountainView. He works daily on portfolios of some of the largest holders of the MSR asset and will also provide insights gained from his prior accounting roles at Dovenmuehle Mortgage Inc. and the mortgage division of PNC Financial Services.
“Whether you’re a portfolio manager or analyst solely focused on this financial asset or a CFO or accountant where the asset is very significant to your balance sheet, the dynamic nature of MSRs requires continuous education in order to make your work as precise as possible,” said Garland