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Home » Store » News » Most Mortgage Firms Continue to Undervalue Their Servicing Rights; But are Some Being Too Conservative?

Most Mortgage Firms Continue to Undervalue Their Servicing Rights; But are Some Being Too Conservative?

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In general, newly-created mortgage servicing rights are being valued at 4 to 4.5 times the servicing fee, which has become the industry norm of late, but there’s a school of thought that says lenders are being a bit too conservative in their “marks.” “Whether your company is public or private you have to be within [generally accepted accounting principles] on these valuations,” said Ken Richey, managing partner in Richey & Co., an accounting and advisory firm based in Englewood, CO. “GAAP dictates that you have to book it at fair value. But what’s fair value?” On a Fannie Mae or Freddie Mac loan, 4 times the servicing fees translates...
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