Join our newsletter to receive every MSR update!The Fed has decided not to cut the overnight rate in its recent FOMC meeting and has announced that it will pause further rate changes until the new administration presents its economic policies. Such measure was expected by the financial markets. The 10 Years Treasury rate has remained around its highest level in over a year at around 4.50% since the Fed’s December FOMC meeting. A new level of uncertainty now clouds the mortgage industry’s earlier optimistic outlook but remains hopeful about the overall rate direction during 2025. Many financial markets participants still expect mortgage rates to drop below 6.50% during the second half of 2025, barring any economic or political surprises.On the brighter side of MSR news, MSR values have held steady and have recovered most of the losses that MSR portfolios experienced during Q3, 2024. The overall MSR losses during that period averaged between eight and ten (8-10) basis points. Since September 30, 2024, MSR values reflected steady increases in values month after month closing the year in a strong fashion and regained all the losses back, and in some cases even more. As we analyze January 31, 2025 portfolios, we expect MSR values to reflect a total recovery from September 30, 2024 value loss. However, we do anticipate that fair values will remain relatively flat from December 31, 2024 mark since most rate indices have remained relatively unchanged since the end of the year.Loan production volume continued its decline after mortgage rates rose in December in addition to the seasonality impact on mortgage applications. New mortgage applications and refinancing are expected to remain low during Q1, 2025. The current SRP prices for new origination should remain as strong as they currently are as aggregators continue to purchase as many loans as possible just to maintain their book of business and market share. Many aggregators are still hoping to gain from any refinancing activity through their recapture channels which many remain optimistic that 2025 will be that year.On the bright side, the Non-QM, HELOC, and second mortgages originations closed out the year with solid foundation heading into 2025, as many borrowers opted (for different reasons) for alternative mortgage financing. That market segment continues to expand at a double-digit rate of increases on quarterly basis and there is no slowing down in site. Many investors are entering this market and are encouraging lenders to produce such loan products. The demand is on the rise and should remain so during 2025.Mortgage prepayments, though historically very low, continue to reflect steady and persistent upticks across all vintages. Aside from the seasonality effect, the trend continues in its upward direction. Delinquencies also continue in their upward trend as borrowers struggle with their rising debt and higher property taxes and insurance.New Production Value Trends:Current servicing releas
