MSRs Poised for Comeback?(mortgage servicing rights)

No, the market for bulk portfolios of mortgage servicing rights hasn't picked up that much steam yet, but we think the potential is there for MSR trading to enjoy a new heyday in the near future. After seeing MSR values plummet during a three-year long refinancing boom, you might expect the market to remain cautious. And we probably won't see valuations climb back to the record territory we saw around the turn of the millennium, when some deals had prices as high as a multiple of seven times the servicing fee.

But that doesn't mean the MSR market is dead. In fact, already we've seen an increase in the number of deals coming to market. And with rates edging up - the average 30-year mortgage rate hit a 15-month high in October - the market may be on the verge of a significant comeback.

While flow deals on new product have been common, bulk MSR trades really have fallen off the radar screen in recent years.

Consider this: multiples on MSRs for 30-year terms with attractive coupons already exceed five in some cases, according to Mortgage Industry Advisory Corp.'s Generic Servicing Asset measures. That suggests the market is firming up and giving potential sellers an ...