An MSR Update from MIAC Analytics

Mike Carnes is Managing Director of MSR Valuations with MIAC Analytics.

The U.S. Treasury 10-year closed April at 4.17%, from 4.23% at the end of March. Despite the slight downtick in rates, investor demand for MSRs remains strong, with select offerings clearing at mid to high 6x execution multiples. For years, conventional wisdom has assumed that “normal” turnover implies a minimum lifetime Conditional Prepayment Rate of 6%. At MIAC, we challenge those assumptions — 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 the evolving nature of MSR pricing and highlight the importance of precision in valuation and analytics.

Recapture remains a meaningful driver of value, even for smaller offerings. While traditional pricing factors like geography, note rate, credit, loan size, and escrow balances still apply, strong demand and constrained supply are supporting elevated executions. While the majority of trades still cluster in the 5.0x to 5.5x range, we’re now seeing Agency trades price in the mid to high 6x range, particularly for low-WAC, high-quality pools that offer recapture potential.

Execution levels for Government MSRs remain more variable. Premium pricing is achievable for stronger portfolios, with bids in the mid-4x range or above, while weaker credit or high-delinquency books continue to see discounted levels. Some low note rate Ginnie Mae MSRs are still modeling at or above 5x, but only where underlying fundamentals are sound. As of March month-end, 67 of 296 Ginnie Mae servicers — including 22 with over $1 billion in MSRs—reported 90+ day delinquencies (DQ3%) of 4.5% or more, while 95 servicers, including 32 billion-dollar platforms, now report total delinquency rates above 10%, reflecting continued sector pressure.

Strategic Importance of Recapture

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, 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.

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, MIAC remains deeply concerned about the broader trajectory. Regional pressures — particularly rising homeowners insurance costs — are exacerbating borrower stress in several high-exposure states. Compounding this, 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 backstop that previously helped mitigate systemic risk in this segment.

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. These operational pressures are further strained by macroeconomic risks. The introduction of new tariffs, combined with persistent inflation in core household expenses, threatens borrower capacity and could 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 recent data shows short-term improvement, the structural and macroeconomic headwinds facing the Ginnie Mae sector remain material and warrant close monitoring.

(Views expressed in this article do not necessarily reflect policies of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes submissions from member firms. Inquiries can be sent to Editor Michael Tucker or Editorial Manager Anneliese Mahoney.)