Mortgage Servicing Rights - MSR

See: Mortgage.

As of 2018, Americans collectively owed over $10 trillion—that’s “trillion” with a “t”—in mortgage debt. Nearly $2 billion worth of mortgages were originated that year, and if we consider that the average purchase price of a home was somewhere in the neighborhood of $300,000, that’s a whole lot of mortgages. Our point is that mortgage originators are busy people. So when it comes time to manage those mortgages—billing borrowers, collecting and processing payments, dealing with property taxes, etc.—a lot of mortgage originators say, “Ain’t nobody got time for that.”

Enter MSRs, which stands for “mortgage servicing rights.” MSRs happen when the original lending company contracts with a third party to handle all of the mortgage administration stuff we mentioned above. In essence, the MSR is buying the mortgage from the original lender, which means the lender can go off and lend more money to other wannabe homeowners. MSRs handle billing, deal with mortgage insurance premiums, and tackle tax issues and interest rate concerns and everything else that goes along with managing a mortgage. And all they ask for in return is (surprise!) a fee.