When a typical mortgage is originated, alongside that mortgage is the right to collect monthly payments from the borrower. Low interest rates also mean that any money being held in escrow by the servicer isn’t earning much in interest. But this is a new world of rising mortgage rates and a shrinking refinance market. And with short-term interest rates rising, the value of being able to earn interest on that float of escrow money is too. For some mortgage firms with relatively large servicing businesses, rising MSR values can be enough to offset what happens with originations.

Source: Wall Street Journal April 03, 2022 03:24 UTC