The MSR remedy

Hedging of mortgage servicing rights has been a perennial bugbear for risk managers. New US accounting rules have attempted to simplify matters, but some complexity and confusion remain. By Navroz Patel

As this year's first annual reports begin to be filed later this month, an important new chapter for many US mortgage banks begins. Mortgage servicing rights (MSRs), which are generated when a firm sells mortgages and retains servicing of the loans or enters into a contract to service the mortgages of a third party, have always caused a tremendous headache for risk managers. But last year, the US