MSR portfolio hedging left asset values unchanged in Q3

Risk management activities for 14 of the largest holders of residential mortgage servicing rights (MSR) held asset values flat for the third quarter of 2018, according to the MSR Industry Report released last week by MountainView Financial Solutions, a Situs company. The largest gain among the 14 companies was 3.6% and the largest loss was -5.6%.

In the report, net risk management results are calculated as the sum of two components: change in value due to market inputs and assumptions, and change in hedge values.

MountainView’s report has recorded positive MSR risk management results in 22 of the last 23 quarters; Q4 2017 was the only quarter with negative results. Over these 23 quarters, the largest annualized hedge benefit relative to MSR value was 7.9% in Q2 2015, and the smallest benefit (a cost) was -3.2% in Q4 2017.

The industry on average has produced a 2.5% net return on the MSR asset over the last five years, according to an analysis of the average net hedge performance for 18 of the largest MSR holders. The top five companies’ performance has averaged 13%, while the five worst performers have averaged only a 3.4% loss. These net results for the largest companies in the industry show that hedges have been performing effectively over the last five years.

MountainView’s MSR Industry Report is produced quarterly using data from press releases of publicly traded companies. The Q3 2018 report analyzes 20 companies in total, including 14 banks and six non-banks.

The report includes additional metrics for industry MSR results, including detailed analyses of MSR risk measures, detailed analyses of MSR values, additional MSR portfolio characteristics and sensitivities, and trends in unpaid principal balances. All of these data points are reported for the industry as a whole and for the individual companies.

To purchase the Q3 report or a quarterly subscription, contact analyst Jason Dekdebrun at MountainView ( or 303.633.4749).