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Inside Mortgage Trends

September 29, 2006

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Servicers are Enjoying A ‘Fairly Active’ Year, But Changing Markets Make the Job Harder

“The service industry is back in the black,” declared Thomas Healy, president of Predictive Data, during the Institute for Intergovernmental Research’s MSR conference in Chicago. He based the conclusion on the Mortgage Bankers Association’s 2004 cost study, which showed servicers returning to profitability after sinking into the red during 2003. Healy acknowledged that the 2005 results have not yet been released, although he expected them to... Read More

ARM Resets Poise Big Concern for Servicers Trying To Figure Out the Most Effective Hedging Strategies

The current rate rally has created a lot of volatility and with rates backing up, the market is beginning to see the run-off in the lower coupons, reported Bob Koets, head of MSR advisory services for hedge fund, AVM, during a hedging strategy workshop held at Institute for Intergovernmental Research’s 12th annual MSR conference in Chicago. In 2005, the runoff was at a much higher coupon than what was being originated, 6.44 percent for runoff and 5.39 percent for... Read More

Hedging Basic Risks Becomes Much Tougher Now That the Market Has Swung to Tighter Times

The new mortgage environment has created many more risks that MSR managers must now consider. They are well aware that hedged portfolios can lose money faster than they can make money and that reality was the topic of several panel discussions at the recent MSR conference in Chicago hosted by IIR. Traditional MSR hedging strategies focused mostly on two risks, interest rate and convexity, which is simply trying to predict when cash, in this case mortgage payments, is received... Read More

Servicers Thought They Had Found the Perfect Hedging Tool Only to Find Disappointment

Mortgage servicers now have a fairly new hedging tool, but it might be gone before many have a chance to use it. Bob Koets of hedge fund AVM felt even as recently as a few days ago, that the “constant maturity mortgage” was the “perfect hedge.” But he used the opportunity of hosting a panel discussion on CMMs during the Institute for Intergovernmental Research’s 12th Annual MSR Conference in Chicago to voice serious concerns about the instrument’s viability going forward. Until recently... Read More

FAS 156 is Making Life Abit Easier for Prime Servicers, Subprime Firms ‘Wait and See’

The mortgage industry is still struggling with how to value its mortgage servicing rights as it weans itself from the old mixed attribute accounting nightmare of FAS 133 and begins using the fair value rules of FAS 156, reported Tim Forrester, the deputy national audit planner for Deloitte & Touche. Despite the new fair value rules, accounting for MSR remains “squishy,” Forrester said during Institute for Intergovernmental Research’s 12th Annual MSR Conference in Chicago. MSR accounting has been called... Read More

Irwin Mortgage Closes the Sale of Its Residential Mortgage Platform to Freedom for $275m Cash

Irwin Mortgage has completed the sale of nearly its entire conforming mortgage platform to Freedom Mortgage. The final purchase price was $275 million in cash. The sale will enable Irwin to focus on its non-conforming and HELOC businesses. It also means that the firm is shedding a platform that had a net loss of $5.19 million, which was caused in part by a huge decline in net interest income... Read More

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