Mortgage rates and most indices continued their ascend during the first three weeks of August, then retreated by the end of August. However, mortgage rates managed to end the month higher than 7/31/2023 levels by about 9 basis points, while float income rates have been relatively unchanged since 7/31/2023. Mortgage production remained weak during August due to higher mortgage rates in addition to continued low real estate/housing inventories throughout the country.
Market values for existing MSR portfolios remained strong during August compared to the first two quarters of 2023. Bulk MSR market values continue to maintain some resiliency and also experienced a moderate increase during July and August, coming in slightly higher than existing portfolios’ Fair Values. The number of potential bulk MSR buyers remained strong as the buyers believe that higher rates will likely persist. However, we did observe some buyers, particularly banks, starting to pull back from the bulk market and became more selective. The current market values are now higher but within approximately 5-10 bps of Fair Values. New buyers continue to enter the MSR space as new production remains very low.
As of August 31, 2023, the current 30 Year base mortgage rate is 6.8666%, which represents about a 9 bps increase from the July 31st mark. We anticipate that existing portfolio fair values will be flat to slightly higher from their 7/31/2023 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 +2 bps change from July 31, 2023 marks.
- Government loans between -1 to +3 bps change from July 31, 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 those trends and are consequently more cautious with our GNMA fair value estimates at this time.
if you have any questions or comments, please contact MCT's MSR team.