MCT's Update for the Current MSR Market June 2023

By Danielle Dvorchak posted 06-06-2023 17:12


At Mortgage Capital Trading, we strive to provide not only our clients but the community as a whole on insights we are seeing in the industry. In this discussion thread, our group of MSR industry experts dive into the recent volatility in mortgage rates and indices during April. Read on to learn insights into anticipated fair value changes for portfolios, GNMA fair value estimates, and an overall examination of market values of existing MSR portfolios. 

Please reach out and comment on any questions or comments!

Mortgage rates and most indices remained volatile during April. However, mortgage rates managed to close the month at slightly higher than 4/30 levels, while float income rates increased by about 42 bps by 5/31.  Mortgage production remained weak during May due to mortgage rate volatility and low real estate/housing inventories.
Market values for existing MSR portfolios also remained relatively flat during May. Bulk MSR market values continue to show some resiliency including a moderate increase during May and are very close to current portfolios’ Fair Values. The number of potential bulk MSR buyers has declined as buyers await further market and rate certainty. Current market values are now within approximately 5 bps of Fair Values.
As of May 31, 2023, the current 30 Year base mortgage rate is 6.5541%, which represents about a six (6) bps increase from the April 30th mark. We anticipate that existing portfolio fair values will remain either unchanged or slightly higher from their 4/30/2023 marks in the range of about 1-3 basis points, depending on underlying portfolio characteristics.
For portfolios that have a mix of Conventional and Government loans, we anticipate Fair Value changes as follows:

  • Conventional loans between -1 to +3 bps change from April 30, 2023 marks.
  • Government loans between -1 to +4 bps change from April 30, 2023 marks.
    • GNMA loans are experiencing a continuous uptick in delinquency rates which generally began in Q2, 2022.  Due to the increase in delinquencies, we are currently monitoring and more cautious with our GNMA fair value estimates at this time.