March 2026 MSR Market Update: Valuation Trends, Bulk Pricing, and Prepayment Dynamics

• Mortgage rates declined modestly, increasing refinance incentive and creating some incremental pressure on MSR valuations
• MSR pricing remains supported by strong investor demand, though pricing continues to reflect sensitivity to rate volatility and prepayment expectations
• Recapture assumptions continue to create material pricing gaps, particularly in higher WAC portfolios
• Higher WAC MSRs remain more sensitive to rate movements due to increased refinance propensity
• GNMA delinquency balances increased, with continued dispersion across servicers and extended resolution timelines

Mortgage rates declined following the Federal Reserve’s rate cuts during the second half of 2025, though market expectations for the pace of additional easing have moderated. While rates initially moved lower, more recent Federal Reserve commentary has emphasized a data-dependent approach to future policy decisions, contributing to a stabilization in mortgage rate levels. 

MIAC’s Base Mortgage Rate declined from 6.04% at the end of January to 5.86% at the end of February as Treasury yields moved lower across the curve amid moderating inflation data and shifting market expectations regarding the timing of future Federal Reserve policy easing. Mortgage spreads also tightened modestly during the period.

The U.S. Treasury 10 year ended February at approximately 3.97%, down from 4.26% at the end of January. Primary mortgage rates moved modestly lower during the month, increasing near term refinance incentives and creating some incremental pressure on MSR valuations. 

Bulk Agency pricing was generally stable to slightly firmer month over month. Most portfolios continue to trade in the 5.25x to 5.75x range, with well seasoned, geographically diversified assets and clean performance profiles still capable of clearing near or above 6.0x. Pricing dispersion remains elevated, with execution increasingly driven by collateral composition, note rate dispersion, recapture optionality, and buyer specific return hurdles rather than broad market rate movement alone. 

Higher WAC portfolios saw improved bid depth relative to January as prepayment expectations moderated, though these assets remain more sensitive to small shifts in the rate outlook. Lower WAC portfolios were comparatively stable. Overall, spreads suggest institutional demand for servicing assets remains structurally strong despite modest rate volatility. 

In the Government MSR segment, execution continues to be highly bifurcated. High quality GNMA portfolios with low delinquency rates, controlled advance exposure, and stable cure trends are generally trading in the 4.25x to 4.75x range. Portfolios with elevated 60 plus day balances or higher advance exposure are clearing at meaningful discounts, as buyers continue to underwrite resolution timelines and liquidity exposure more conservatively. 

Recapture assumptions continue to create material pricing gaps. The spread between sellers without retention platforms and buyers modeling 25 to 35 percent borrower retention can approach 0.75x to 1.00x, particularly for higher WAC portfolios. 

For institutions reporting under LOCOM accounting, the modest decline in rates during February reintroduced some pressure on market values. That said, with liquidity solid and bid depth intact, the current environment continues to offer a constructive window for sellers evaluating balance sheet optimization or risk transfer strategies. Numerous buyers also continue to underwrite recapture value more aggressively, which has helped support pricing even as rate volatility persists. 

Price movements during the period were generally negative across the MSR universe, reflecting the decline in Treasury yields and the resulting increase in refinancing expectations. As rates moved lower, prepayment assumptions increased modestly across most sectors, with the degree of price movement varying by product type and coupon. 

Within the conventional sector, 30-year MSR values declined approximately 3.64 basis points month over month, while 15-year conventional servicing declined roughly 2.10 basis points. Government portfolios saw somewhat larger movements, particularly within VA servicing, where prices declined between roughly 5 and 6 basis points across both standard and IRRL cohorts. 

Within the FHA sector, prices declined about 4.7 basis points for standard production and roughly 4.1 basis points for streamline loans. These changes were accompanied by modest increases in prepayment activity across most sectors, with CPRs rising most noticeably within VA portfolios and higher coupon collateral, which historically exhibit greater refinance sensitivity. 

Looking at the data by coupon cohort, higher coupon MSRs showed greater price sensitivity. Agency MSRs with note rates of 6.00 percent or higher declined about 6.30 basis points month over month, compared with a roughly 2.63 basis point decline for lower coupon portfolios. This pattern was also evident across product types, with higher coupon cohorts and government portfolios, particularly VA loans with historically higher refinance propensity, experiencing greater valuation pressure than lower coupon conventional assets. 

While higher coupon MSRs generally exhibit shorter expected lives due to elevated prepayment propensity, their price sensitivity is driven less by traditional duration considerations and more by changes in prepayment expectations. As market rates decline, refinance incentives increase more materially for higher coupon loans, resulting in larger revisions to expected cash flows and, in turn, greater valuation volatility. 

This dynamic highlights that MSR price behavior is primarily governed by prepayment risk rather than duration alone, underscoring the importance of precise prepayment modeling and OAS-based price sensitivity analysis in evaluating and hedging MSR exposure. 

Despite the month over month decline, overall MSR pricing levels remain broadly supported by strong investor demand and continued market activity. Servicing multiples remain within healthy historical ranges across most product segments, although recent movements highlight the ongoing sensitivity of MSR valuations to interest rate shifts and changes in prepayment expectations. 

Recent regulatory developments have moved beyond prior Federal Reserve commentary into a formal proposal to recalibrate key elements of the Basel III Endgame framework. In March 2026, the Fed, FDIC, and OCC jointly proposed updates that include more explicit treatment of residential mortgage exposures under the standardized approach.

One notable component is the introduction of LTV based risk weighting for residential mortgages. This approach would align capital requirements more closely with observed credit performance across LTV bands and improve capital efficiency for lower LTV production.

Importantly, these LTV driven changes primarily affect the capital treatment of whole loans rather than mortgage servicing rights directly. Any impact on MSRs would be indirect and would depend on how banks choose to allocate capital across mortgage related assets.

On the MSR side, the proposal represents a structural improvement relative to the current framework, while still maintaining meaningful capital intensity. MSRs would no longer be subject to the CET1 deduction threshold and would instead carry a 250 percent risk weight. This reduces binding capital constraints and should improve the relative economics of MSRs for banks, though it does not fully normalize their capital treatment.

It is also important to recognize that the shift in MSR ownership away from banks was not driven solely by capital considerations. The post Dodd Frank servicing environment, particularly for FHA and VA loans, introduced significant operational and compliance burdens, which played a major role in the migration of servicing to nonbanks. Recent regulatory commentary continues to reinforce that capital was only one component of this broader structural shift.

If the final Basel framework is adopted broadly in line with the current proposal, and capital is better aligned with underlying risk across both loans and MSRs, banks should have greater flexibility in how they deploy capital. In that context, bank participation in MSRs could increase, particularly in lower risk segments where banks are already active. Any re entry is likely to be measured and driven primarily by balance sheet considerations rather than changes in servicing fundamentals.

These changes remain in proposed form and are subject to comment and potential revision prior to final adoption.

In December 2025, the Office of the Comptroller of the Currency issued a proposed rule and related preemption determination that could significantly affect state laws requiring mortgage lenders to pay interest on borrower escrow accounts. Roughly a dozen states, including large markets such as New York and California, currently require lenders to pay a minimum rate of interest on funds held in escrow for taxes and insurance. The OCC proposal would clarify that federally chartered national banks and federal savings associations have discretion under federal law to determine whether to pay interest on escrow balances, effectively overriding state laws that impose such requirements. 

The proposal follows the Supreme Court’s 2024 decision in Cantero v. Bank of America, which emphasized a case by case analysis of federal preemption in the banking context. The OCC requested public comment on the proposal, with the comment period closing on January 29, 2026, and is expected to review submissions in the coming months. A final determination could be issued later in 2026, depending on the volume and substance of comments received. 

If finalized, the rule could create a competitive distinction between federally chartered and state regulated institutions, reduce compliance fragmentation for national banks, and meaningfully affect escrow income economics in states that currently require interest payments. 

For the most recent reporting month (January 2026), Ginnie Mae servicers reported approximately $3.14 billion in total loss mitigation related removals. This includes completed workouts, liquidations, charge offs, and other involuntary resolutions. 

Despite this activity, the 60 plus day delinquent balance increased to $146.1 billion, up from $139.5 billion in December. That represents a roughly $6.6 billion increase month over month and approximately $29 billion over the past three months. As a result, 5.3% of all GNMA MSRs are now 60 or more days delinquent. 

The recent rise reflects typical seasonal patterns, as consumer cash flow pressures and higher household spending in the back half of the year often lead to modest delinquency upticks. In addition, structural aspects of the Ginnie Mae loss mitigation framework can contribute to elevated reported balances. Many resolution options require borrowers to document income and demonstrate the ability to sustain modified payments. When documentation or affordability thresholds are not met, loans can remain in delinquent status longer while alternatives are evaluated. For FHA loans in particular, the partial claim and modification waterfall process can also extend resolution timelines. At the same time, elongated foreclosure timelines, especially in judicial states, continue to keep loans in delinquent status for longer periods even as servicers work toward resolution. 

Portfolio performance remains uneven across servicers: 

• 103 servicers, up from 75 two months ago, including 42 with more than $1 billion in GNMA MSRs, reported 90 plus day delinquency rates at or above 4.5%. 

An additional 107 servicers, including 39 billion dollar platforms, posted total delinquency rates exceeding 10%. 

Market concentration remains significant: 

• The top 3 servicers control 41.15% of Ginnie Mae UPB. 

• The top 10 collectively manage 71.63%, and the top 20 oversee 84.25% of total UPB. 

This concentration underscores the outsized role of large servicers in managing Ginnie Mae delinquency pipelines, while smaller and mid tier platforms continue to experience greater variability in performance outcomes. 

When sellers engage MIAC, they are not simply looking for a list of buyers. They are seeking a clear understanding of market value, how their portfolio will be perceived by investors, and how to position assets for the strongest possible execution. 

MIAC’s analytics platform supports the valuation of more than $50 trillion of residential and commercial MSRs annually, providing clients with independent fair value opinions, portfolio analytics, and market benchmarks used by banks, independent mortgage companies, and institutional investors across the servicing industry. Our modeling framework incorporates proprietary prepayment analytics, credit assumptions, servicing cost structures, and scenario analysis. Central to this process is CORE™, MIAC’s behavioral prepayment model, which evaluates borrower incentive, credit characteristics, and loan-level attributes to generate forward-looking prepayment expectations across a wide range of market environments. 

Because MIAC both values and actively brokers servicing assets, we maintain a real-time perspective on market execution, including pricing multiples, buyer appetite, capital flows, and structural considerations that influence transaction outcomes. This combination of valuation insight and transaction experience provides clients with a practical understanding of how portfolios are likely to perform in the marketplace. 

Our brokerage platform maintains longstanding relationships across banks, REITs, hedge funds, IMBs, aggregators, and institutional investors, enabling efficient placement and competitive tension across a broad buyer base. We cover the full MSR spectrum, including FNMA, FHLMC, GNMA, non-agency, and commercial servicing, across primary MSRs, excess servicing, retained strips, recourse pools, and EBO structures. 

From smaller strategic sales to multi-billion-dollar bulk transactions, MIAC approaches each engagement with a disciplined and transparent advisory process designed to maximize execution while managing risk. 

For many market participants, MIAC’s analytics and transaction insights serve as a benchmark for understanding MSR valuation trends and market execution across the servicing industry. 

At its core, MSR valuation and brokerage require credibility, market insight, and execution. MIAC brings all three together.