Improved Management of​ Mortgage Servicing Rights (MSR) Portfolio for a Major U.S. Bank

A blue-chip U.S. bank wanted to improve forecasting of performance for its mortgage servicing rights (MSR) portfolio and required monthly loan-level pricing for each asset – with a single servicing right containing up to 10,000 calculations. More importantly, the bank needed enhanced analytics to build a sophisticated and disciplined risk-management program around the assets to enable internal teams to predict performance in a variety of interest rate environments. While the MSR asset comprised a relatively small portion of the balance sheet, the fluctuations in value had an outsized impact on the income statement. The bank’s massive MSR portfolio contained every possible type of residential real estate loan so it needed a partner who could understand all the elements involved in the underlying collateral.

The bank engaged SitusAMC to provide an expert predictive opinion of fair value and consult on its risk-management strategy. The bank was familiar with SitusAMC’s team which had helped price its MSR portfolio and buy and sell assets starting in the early 2000s. SitusAMC assisted in the bank’s migration from static analysis to stochastic analysis, which helps to determine the asset’s vulnerability to interest rate risk. The analytics gave the bank superior insight into its portfolio, driving better predictability around results, superior forecasting of returns and improved decision-making around which assets to hold on the balance sheet and which to sell.