Mortgage Servicing Rights (MSR)

Mortgage Servicing Rights (MSR) is the right to service a mortgage loan, including collecting payments, managing escrow accounts, and handling customer service, typically sold by the original lender or servicer.

Mortgage Servicing Rights (MSR) refer to the contractual rights associated with servicing a mortgage loan. When a borrower obtains a mortgage from a lender, the lender may choose to retain the servicing rights or sell them to another party, such as a mortgage servicer or an investor.

The mortgage servicer is responsible for various aspects of loan administration, which typically include collecting monthly payments from borrowers, maintaining escrow accounts (if applicable), managing delinquencies and defaults, handling customer inquiries and complaints, and ensuring compliance with relevant regulations.

The transfer of MSR from one entity to another often occurs in the secondary mortgage market, where mortgage-backed securities (MBS) are bought and sold. Investors or financial institutions may purchase MSRs as an investment, as they can provide a steady stream of cash flows from the servicing fees collected on the mortgage loans.

It’s important to note that the transfer of MSR does not involve the transfer of the underlying mortgage note itself. The ownership of the loan and the associated risks remain with the original lender or investor. The MSR only represents the right to service the loan and earn the associated fees and compensation for the servicing activities.


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