what are mortgage servicing rights msr 
mortgage servicing rights msr refer to a contractual agreement in which the right to service an existing mortgage is sold by the original mortgage lender to another party that specializes in the various functions involved with servicing mortgages understanding mortgage servicing rights msr mortgages have ongoing administrative duties that are regularly processed for the entire length of a mortgage common rights included in msrs are the right to collect mortgage payments monthly set aside taxes and insurance premiums in escrow and forward the interest and principal portions to the mortgage lender in return the servicer is compensated with a specific fee which is outlined in the contract that has been established and entered into at the beginning of the servicing agreement 1the mortgage payment amount interest rate type of loan and other factors remain the same as far as the borrower is concerned only the address to which payments are sent is changed and you should contact the servicer rather than your original mortgage lender with any questions you may have regarding your loan your servicer can change at any time but you should receive notice from your original lender at least 15 days before it happens and your new servicer should notify you within 15 days of assuming rights as well 1federal banking laws let financial institutions sell mortgages or transfer servicing rights to other institutions without consumer consent 1 example of selling an msrsarah takes out a 500 000 mortgage from lender a she sends the lender a monthly payment of principal and interest three years later lender a decides to transfer its msr on sarah s mortgage to company b under the terms of the contract company b is paid a fee by lender a for processing all of sarah s remaining mortgage payments the mortgage lender can then spend more time and money providing new mortgages while the company assuming the msr forwards the mortgage payments to the lender sarah now sends her monthly payment to company b instead of lender a special considerationsa lender will often sell msrs as a means of freeing up lines of credit so it can lend money to additional borrowers the majority of mortgages are in effect for 15 to 30 years and the bank needs billions of dollars to lend money to other consumers requesting mortgages during this time because the term is so long it is important to do thorough research among the best mortgage lenders in a roundabout way selling msrs means that more people can become homeowners because the sale of these rights produces revenue lenders also make money by charging fees for originating mortgages and earning monthly interest from payments mortgages are simply additional assets that bring in more revenue for banks history of msrsthe market for msrs tends to be strong during periods of economic growth due to higher quality mortgage originations and fewer defaults hedge funds banks and real estate investment trusts reits find these assets attractive because msrs can yield high amounts of interest for example suntrust purchased 8 billion in msrs in the first quarter of 2016 as a means of earning a solid return on investment roi and within months its msr portfolio contained 1 123 billion in unpaid principal balances of loans that the bank was servicing for lenders 2national mortgage news reported in june 2019 that msrs have been one of the best performing fixed income asset classes over the past five years however it also reported that since october 2018 as medium and long term interest rates have fallen projected and actual mortgage prepayment assumptions have accelerated causing the expected average life of msrs to shorten considerably as a result msr values from april to may were down consistently by a half multiple that said reports national mortgage news the demand from msr buyers is still very strong and there is general consensus around msr values 3