MSR Valuation The Perfect World
The value of an MSR is based upon expected cash inflows (loan servicing Loan servicing income (retained spread) 500
income, float, escrow and
ancillary income) net of Float, escrow and ancillary income 60
costs to service.
Less: MSR amortization 360
Net servicing revenue 200
Less: Costs to service 75
Net income before tax 125
Income tax expense 50
Net income (time value of money) 75
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