Residential MSR Market Update – April 2025

By Mike Carnes, Managing Director; Jennifer Howell, Managing Director; Nicholas Manolis, SVP – MIAC MSR Valuations Group

Fair Market Value Update

From end-of-month February 2025 to end-of-month March 2025, MIAC’s primary 30-year mortgage rate (C30 PMR) remained essentially flat while earnings rate (SOFR 5Y) dropped by 9 basis points.

Source: MIAC Analytics™

Source: MIAC Analytics™

MIAC’s Retrospective Analysis: Attribution Framework

MIAC’s Retrospective Analysis can provide a detailed evaluation of the performance of your MSR and/or hedge positions over a defined period (e.g., daily, weekly, or monthly). With reference to the month-over-month GSA Retrospective Analysis shown below, the observed changes in value can be attributed to the following key market drivers:

  1. Parallel Shift (SOFR10Y): Captures the impact of a parallel movement in the long end of the curve. The analysis is run as of Day 0, substituting only the SOFR10Y rate from Day 1 to recalculate the market value.

  2. Non-Parallel Shift (SOFR Swap + Treasury Rates, excluding SOFR10Y): Measures the steepness or flatness of the yield curve. The analysis uses all Day 1 rates—except SOFR10Y—while holding all other variables constant from Day 0.

  3. Primary-Secondary Spread (PS Spread): Assesses the impact of changes in mortgage rates. The Day 0 analysis is rerun using the Day 1 PS Spread to determine its influence on market value.

  4. Secondary-Secondary Spread (SS Spread): Also measures mortgage rate impact, but focuses on movements in secondary pricing. The analysis is conducted by applying the Day 1 SS Spread to the Day 0 framework.

  5. Volatility: Evaluates changes in implied market volatility. The volatility surface from Day 1 is applied to the Day 0 environment to isolate its effect on market value.

  6. Time (Aging): Isolates the effect of time decay. The analysis is conducted as of Day 1, with all other inputs held constant from Day 0, to reflect the impact of one additional day of passage.

Source: MIAC Analytics™

While outcomes depend on specific portfolio characteristics, MIAC’s GSA Retrospective Analysis showed a 3.67 basis point increase from the end of February to the end of March, driven primarily by a reduction in the weighted average option-adjusted spread (OAS) from 635 to 585 basis points. This adjustment was made to align valuations with prevailing conditions in what continues to be a historically strong and competitive MSR market.

As reflected in MIAC’s in Generic Servicing Assets™ (GSAs), daily pricing of representative benchmark mortgage servicing rights from the end of February through the end of March indicated modest but broad-based price appreciation, with average gains ranging from approximately 1 to 4 basis points depending on product type.

The most significant monthly price increase was observed in 30-year conventional collateral, which rose 4.21 basis points to 135.66, reflecting growing investor appetite and continued upward pressure on execution multiples. Ginnie Mae servicing also saw meaningful improvement, with 30-year GNMA VA and FHA segments gaining 3.05 and 2.63 basis points, respectively. Notably, these gains occurred despite little to no change in prepayment speeds, suggesting the rally was driven more by market technicals than by improved performance fundamentals.

The price changes translated into higher servicing multiples across the board, with the 30-year conventional multiple rising from 5.26x to 5.43x. These moves reflect a strong demand environment and can support MIAC’s aforementioned adjustment to its assigned OAS levels.

Source: MIAC Analytics™

nGSA Rate Shock Curve – Value Sensitivity Overview

The rate shock curve below illustrates the interest rate sensitivity of MIAC’s nGSAs™ as of end-of-month March. A +100 basis point parallel shift in rates results in a 10.28 basis point increase in value, while a -100 basis point shift produces a 14.16 basis point decline. This convexity profile—characterized by steady value gains in rising rate environments and sharper compression when rates decline—is, in our opinion, consistent across asset types and aligned with historical MSR performance.

The asymmetric response underscores the unhedged risk embedded in mortgage servicing assets and highlights the importance of sound risk management practices, including hedging or balance sheet alignment, particularly when navigating volatile interest rate cycles.

Source: MIAC Analytics™

Bulk Pricing Update

The U.S. Treasury 10-year ended March at 4.23%, essentially flat from 4.24% in February. Despite relatively stable rates, select MSR offerings have continued to command high premiums, with some trading at mid-6x multiples. For years, the market has operated under the assumption that “normal” turnover implied a minimum lifetime CPR of 6%. At MIAC, we challenge rigid assumptions like these—recent trades confirm that portfolios can clear at lifetime CPRs in the mid-4% range, paired with yields in the mid-8s. These results underscore how MSR pricing dynamics continue to evolve and reinforce the importance of precision in valuation methodologies.

Recapture remains a key component of value, even for smaller offerings. While pricing continues to reflect traditional drivers such as note rate, geography, average balance, borrower credit, payment history, and escrow balances, strong demand and limited supply are allowing some deals to achieve execution levels as high as 6.5x. That said, the majority of Agency MSR bulk trades remain concentrated in the 5.0x to 5.5x range.

Execution levels for Government MSRs remain more variable. While stronger portfolios are drawing bids in the mid-4x range or higher, weaker performers continue to clear at discounted levels. Credit quality and delinquency performance remain the primary determinants of pricing. Lower note rate Ginnie Mae MSRs can, in some cases, model at or above 5x multiples, assuming favorable underlying fundamentals. However, not all servicers have the portfolio performance to command such pricing. As of March month-end, 69 of the 296 Ginnie Mae servicers—23 of which hold over $1 billion in MSRs—reported a 90+ day delinquency (DQ3%) of 4.5% or higher. Moreover, 93 servicers, including 30 billion-dollar shops, are now reporting total delinquency rates above 10%, highlighting continued sector stress.

With interest rate volatility reemerging and the mortgage servicing rights (MSR) market continuing to evolve, recapture has taken on new strategic significance. Recent execution trends show that buyers are increasingly willing to pay premiums not just for current cash flows, but for the potential to recapture borrowers—often regardless of whether the seller has any recapture capability at all. This has created a compelling window for opportunistic sellers to monetize value that may otherwise remain permanently unrealized.

At the center of this shift is a key question: how strong is your internal recapture capability? For sellers with established platforms, recapture has long added incremental margin. But today’s market rewards even those without it—if they’re willing to transact. Buyers with robust recapture platforms are pricing in their own ability to extract future value, effectively compensating sellers for upside they themselves could never access. It’s a rare moment where understanding your own limitations can unlock significant execution benefits.

In this environment, we believe the market is temporarily offering credit for future value that many firms will never extract on their own. Waiting may mean watching that opportunity disappear. Strategic MSR management is no longer just about cash flow retention—it’s about knowing when to sell, how to value recapture, and when the market is giving you more than the asset is worth to your own platform.

The gap between market value and economic reality is particularly stark for sellers with little to no ability to retain existing borrowers. Without recapture, these sellers will never realize the full market value of their MSR portfolio over its life. The only way to bridge that gap is to sell to a buyer with scale and execution capabilities. The difference is quantifiable: in some cases, the execution multiple for a 0% recapture portfolio versus a 30%+ recapture scenario can range from 0.5x to 1x, depending on note rates and prepayment assumptions. This is not a theoretical value gap—it’s a real one that plays out in the bid-ask spread.

A similar dynamic is at play for firms using the lower of cost or market (LOCOM) accounting method. Over the past couple of years, these firms have built up significant book-value cushions due to elevated earnings and recapture performance. However, unless they transact in the market, much of that value will never be realized. If rates decline, that cushion will erode quickly, narrowing the gap between book and market and removing the opportunity to monetize it while it still exists.

These realities raise important strategic considerations. Sellers must assess their internal recapture capabilities and understand how they compare to what the market is currently willing to pay. For firms with weaker infrastructure or conservative accounting treatment, it may make sense to pursue partial or full sales—especially in segments of the book with high prepay risk or above-market note rates. Importantly, these firms should also be thinking about how to reinvest in assets where they can meaningfully capture value through their own platforms.

Ginnie Mae Delinquencies See Temporary Relief—But Structural and Macro Risks Persist

There was a modest but welcome improvement in Ginnie Mae delinquencies in March, with the balance of MSRs that are 60 or more days delinquent declining from $116.1 billion to $110 billion. However, this reduction appears to be largely seasonal, driven by tax refund activity and nearly $4 billion in pool removals, rather than a fundamental improvement in borrower performance.

Despite this short-term relief, at MIAC we remain deeply concerned about the broader trajectory. Regional pressures—particularly the rising cost of homeowners insurance—are exacerbating borrower stress in several high-exposure states. Compounding this is the fact that an increasing number of loans appear to be nearing a terminal stage, where loss mitigation options are limited or no longer available. The expiration of the VASP program has removed a key federal support mechanism that previously helped mitigate systemic risk in this space.

At the same time, judicial foreclosure timelines continue to lengthen, forcing servicers—especially non-depositories—to carry extended advance obligations that many may not be positioned to sustain over time. Layered on top of these servicing pressures are growing macroeconomic concerns. The introduction of tariffs, combined with stubborn inflation in core household expense categories, could further erode borrower capacity and lead to renewed stress across lower-income segments of the Ginnie Mae universe.

These risks are amplified by loan-level credit characteristics that have historically correlated with higher default probability, including elevated LTV and DTI ratios. While the recent data suggests a temporary improvement, we believe the underlying structural and macroeconomic challenges warrant close monitoring and proactive risk management.

About MIAC

Before contemplating any MSR valuation or brokerage exercise, consider the following:

  • In business since 1989, MIAC has been providing asset valuation services for 36 years
  • MIAC’s team of MSR valuation team is led by seasoned industry professionals with over 50 years of combined MSR valuation and brokerage experience
  • MIAC’s MSR valuation team is made up of 11 professionals with the shortest tenured individual at nearly 8 years
  • Not including other asset types, in 2024 MIAC valued residential MSRs totaling $48.95T in unpaid principal balance for over 200 institutions
  • In 2024, MIAC valued commercial mortgage MSRs totaling $1.7T for approximately 40 institutions
  • Since 2021 has brokered or served as a buyside advisor for nearly $600 B in residential and commercial MSRs

Author, Mike Carnes, Managing Director, MSR Valuations Group  Mike.Carnes@miacanalytics.com

Contributor, Jennifer Howell, Managing Director, MSR Valuations Group Jennifer.Howell@miacanalytics.com

Contributor, Nicholas Manolis, Senior Vice President, MSR Valuations Group Nicholas.Manolis@miacanalytics.com

 

Disclosures: The material and analysis provided by or through MIAC is not a recommendation that must be followed or an offer, or solicitation of an offer to buy or sell any financial product; MIAC does not recommend that you enter into a particular transaction or represent that any product or service described here is suitable for you or your company. Nor is any information displayed here promoting any particular trading strategy in any jurisdiction where such an offer or solicitation, or trading strategy may be prohibited. As all prudent investors know, some transactions, including but without limitation, those involving high-yield securities, give rise to substantial risk and any investment decision you may make is your own. You should not enter into any transactions unless you have fully understood all such risks and have independently determined that such transactions are appropriate for you. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or complete discussion of the risks mentioned.

The information presented here is accurate to the best of our knowledge and is based on information that has been provided to us. Certain information contained in this website constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “seek,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue,” “believe,” the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance may differ materially from those reflected or contemplated in such forward-looking statements. All opinions and conclusions in this report reflect MIAC’s judgment as of this date and are subject to change. All analyses are based on certain assumptions noted herein and different assumptions could yield substantially different results. You are cautioned that there is no universally accepted method for analyzing financial instruments. You should review the assumptions; there may be differences between these assumptions and your actual business practices. Further, we do not guarantee any results and there is no guarantee as to the liquidity of the instruments involved in our analysis. The decision to adopt any strategy remains your responsibility.

Past performance is not necessarily indicative of future results and there can be no assurance that equivalent results will be achieved. MIAC does not make any representation or warranty, express or implied, regarding future performance. Targeted results are subjective and should not be construed as providing any assurance to the results that may be realized by MIAC in the future.

This document does not constitute, or form part of, an offer to purchase or issue interests in any security or investment product. Any such offer or solicitation will only be made only pursuant to the relevant subscription documents.