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MSR Losses Eat Into Mortgage Servicer Earnings

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Mortgage Daily

                                                 June 7, 2016

First-quarter earnings at independent home loan servicers worsened as losses piled up from the valuations and hedging of mortgage servicing rights.

Average loans serviced per full-time mortgage servicing employee at residential loan servicers came to 1,297 mortgages in the first-quarter 2016.

Efficiency improved compared to the final-three months of last year, when the average independent servicer had 1,318 loans serviced per employee.

Productivity was also better than in the first-quarter 2015, when an average of 1,245 loans were serviced per employee.

The
Quarterly Mortgage Bankers Performance Report Q1 2016 from the Mortgage Bankers Association was the source of that information.

While 248 independent mortgage servicers participated in the survey, data from just the 200 that were included in the current- and prior-quarter surveys was used for quarter-over-quarter comparisons.

The average servicing portfolio crept to 75,634 loans for $12.449 billion from 75,009 loans for $12.253 billion as of Dec. 31, 2015.

Average portfolios have also grown since March 31, 2015, when 73,265 loans were serviced for an average of $12.333 billion.

Mortgage servicers lost an average of 7 basis points in net financial income on each loan they serviced.

Servicing earnings
swung from a 6-basis-point profit in the fourth-quarter 2015 and widened from the 4-basis-point loss in the first-quarter 2015.

The quarter-over-quarter deterioration was mostly due to losses on MSRs valuations and hedging, which swung to a negative 14 basis points from a positive 1 basis point in the last three months of 2015.

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