Servicing Insights Vol. 10 provides guidance on the MCT’s approach to recapture and its impact on servicing. We will define recapture, how to measure it, how to include it in MSR valuation exercises, and whether it should be included in a fair value assessment of MSR.
Since the data on recapture is rather thin, there is more uncertainty around the results than, say prepayment or credit modeling. Therefore, including recapture in a servicing model is a complicated process, that requires a lot of data and modeling to accurately capture the full impact.
In this latest servicing insights volume, we will consider the value of recapture in an MSR valuation by taking into account the number of refinances, the Gain on Sale, and the likelihood that a borrower would have made a decision to pursue a new loan independent of their servicer.
“The idea of getting a borrower who is exploring new loan options to complete a refinance with the current servicer is a simple concept. However, the value of that activity is what we must measure, if we are going to include it in our MSR modeling.” – Excerpt from Servicing Insights Vol. 10
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Recapture: Impact on Servicing
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Servicing Insights & Strategies for Success
The series explains detailed aspects of servicing valuation & modeling for experienced mortgage bankers.
These strategies are defined by our industry veteran and author of the Servicing Insights series, Phil Laren. We are proud to make the insights from our servicing and modeling expert available through the Servicing Insights Series. Phil Laren leads the MSR services group at MCT, which provides robust software, consulting, and valuation solutions.
We are dedicated to sharing seasoned insights and strategies for success with mortgage professionals everywhere.
About The Author – Phil Laren
Phil Laren has 30 years experience in all aspects of servicing, modeling, pricing, trading, negotiating, hedging, risk analysis, accounting analysis and operations.
He created MSRlive!, our newly launched mortgage servicing software, based on the same Desktop Servicing Model that has helped countless Mortgage Banking professionals make the right decisions in their servicing valuations.
Continue to Explore the Servicing Insights Series
We hope that this series of Servicing Insights will give you the assurance as a professional to weigh your risks and inform your judgments while managing your MSR portfolio.
By utilizing these valuable and practical insights, you can look forward to a measurable difference in the certainty of your servicing decisions that will impact your bottom line directly. Download, read, and learn more from our experts.
Explore the servicing insights whitepaper collection below!
- Servicing Insights Vol. 1 – Foreclosure Costs in Servicing Valuation
- Servicing Insights Vol. 2 – Late Fee Revenue In Servicing Valuation
- Servicing Insights Vol. 3 – Prepayments in Servicing Valuation
- Servicing Insights Vol. 4 – Appropriate Discounting Methodology
- Servicing Insights Vol. 5 – Yield & Arbitrage Theory
- Servicing Insights Vol. 6 – Tax & Insurance Escrows: Calculation & Impact on Servicing Values
- Servicing Insights Vol. 7 – Intro to Hedging a MSR Portfolio
- Servicing Insights Vol. 8 – Aggregated Structural Equations (ASE) Model: An Alternative View of Value and Risk – Part 1
- Servicing Insights Vol. 9 – Aggregated Structural Equations (ASE) Model: An Alternative View of Value and Risk – Part 2