MSR Values Stabilize.

NEW YORK -- The value of mortgage servicing rights was fairly flat in the fourth quarter of last year, but as rates edged up in the early weeks of 2007, the servicing industry looked poised for strong financial gains in the first quarter.

And as portfolios got bigger, the biggest MSR assets became more valuable than ever before.

Wells Fargo, the nation's largest mortgage servicing value, reported that changes in the value of its MSR asset net of hedging results were "negligible" in the fourth quarter. (See related story, page 3). In fact, Wells Fargo reported MSR values that were relatively flat for last year as a whole.

The company listed a fair value for its MSR asset (for a $1.37 trillion home loan portfolio, of which $1.28 trillion were loans serviced for others) of $17.6 billion as of Dec. 31, 2006. At year-end 2005, Wells said the single-family MSR was worth $13.8 billion a year earlier.

The company's weighted average note rate was 5.92%. And the MSR asset for loans serviced for others was valued at 1.42% of the portfolio.

Washington Mutual, the nation's third largest servicer, valued its MSR asset at $6.2 billion at the end of last year. That was down sharply from a year earlier, reflecting a smaller balance of loans serviced for third parties. WaMu sold much of its MSRs on government loans and on home loans from outside of its banking footprint to Wells Fargo last summer. The company serviced $445 billion of loans for others at the end of last year as part of its total $795 billion of home loans being serviced.

The company valued its MSR asset on loans serviced for others at a ratio of 1.39% of the balance as of Dec. 31, 2006, four basis points lower than the valuation ratio used at the end of 2005.