In the Numbers


MIAC Mortgage Market Data

MIAC has produced the mortgage industry’s best analytical tools, but the company is much more than a software development firm. In our advisory work, we make use of all of our tools on a daily basis. In a real sense, we are our own first users. It’s just one more way we ensure that the products our customers use meet their every need.

Market Spreads (bps)

Another benefit of using our own tools on a daily basis is that we develop a very good sense of where the market is trending. This data section is designed to give you a sample of what we see there today.

Our clients have access to significantly more information. If you have a question about any of this information or need additional data, please contact us directly at (212) 233-1250 or visit us online at www.MIACAnalytics.com.

Prepayment Speeds



Quarter to Quarter changes in the MIAC Generic Servicing Asset Portfolio (GSA) increased slightly for the 3rd quarter of 2006 and the 4th quarter of 2006.

Earnings Rates based on the Libor and Swap based index were flat period to period with no change in our One Month LIBOR benchmark (5.32%). The Five Year Swap Rate held steady at 4.70% versus 4.69%.



Mortgage Rates period to period were quite steady with a slight downward bias between the two quarters. The benchmark FHLMC 30 Year Fixed Rate Survey Rate (NMCMFUS) had declined from 6.30% to 6.18%. Current mortgage rates have shown some upward bias since quarter end. Should we continue the upward rate trend, less refinancing propensity coupled with slowing home price appreciation should lead to slower prepayment projections. This should bode well for MSR (Mortgage Servicing Rights) values.



Short term versus long term rate inversion should reduce the appetite for Adjustable Rate MSR’s. However deep discount hybrid ARMS should remain attractive.

MIAC Mortgage Market Data MIAC has produced the mortgage industry’s best analytical tools, but the company is much more than a software development firm. In our advisory work, we make use of all of our tools on a daily basis. In a real sense, we are our own first users. It’s just one more way we ensure that the products our customers use meet their every need. Another benefit of using our own tools on a daily basis is that we develop a very good sense of where the market is trending. This data section is designed to give you a sample of what we see there today. Our clients have access to significantly more information. If you have a question about any of this information or need additional data, please contact us directly at (212) 233-1250 or visit us online at www.MIACAnalytics.com. Quarter to Quarter changes in the MIAC Generic Servicing Asset Portfolio (GSA) increased slightly for the 3rd quarter of 2006 and the 4th quarter of 2006. Earnings Rates based on the Libor and Swap based index were flat period to period with no change in our One Month LIBOR benchmark (5.32%). The Five Year Swap Rate held steady at 4.70% versus 4.69%. Mortgage Rates period to period were quite steady with a slight downward bias between the two quarters. The benchmark FHLMC 30 Year Fixed Rate Survey Rate (NMCMFUS) had declined from 6.30% to 6.18%. Current mortgage rates have shown some upward bias since quarter end. Should we continue the upward rate trend, less refinancing propensity coupled with slowing home price appreciation should lead to slower prepayment projections. This should bode well for MSR (Mortgage Servicing Rights) values. Short term versus long term rate inversion should reduce the appetite for Adjustable Rate MSR’s. However deep discount hybrid ARMS should remain attractive. The low Volatility levels of 2006 are projected to increase going forward leading to additional MSR pricing swings.

MSR Market Update

Although mortgage rates dropped slightly in the 4th quarter of 2006, the value of mortgage servicing rights rose slightly over the same period due to a further inversion of the yield curve, which helped the value of float and escrows, while prepayment speeds did not change materially. There were several bulk MSR offerings in the market during the quarter, ranging in size from a $50 million to $5 billion. Pricing was relatively flat for any offering with a weighted average coupon above 6.25% and many sellers did not achieve their desired bid levels, resulting in the portfolio being withdrawn from the market.

Also of note was the announcement by Citigroup of their acquisition of ABN AMRO Mortgage and its $224 billion MSR portfolio. This transaction and the sale of WAMU’s $140 billion GNMA Fixed rate conforming portfolio to Wells Fargo in July may cause the demand for larger portfolios to diminish in the near term. Small bulk portfolios are still struggling, with a limited appetite for portfolio offerings under $500 million in unpaid principal balance. Pricing for Alt-A, Non-Conforming Prime, and Subprime servicing rights continued to show weakness with most of the major originators and securitizers holding onto their MSRs rather than sell into a weak market.

New Subprime MSR’s sold either through mini-bulk or flow arrangements has held fairly steady. Wall Street purchasers of Subprime originators (Barclays-HomeEq, Morgan Stanley-Saxon, Merrill- First Franklin) has taken some of the subprime supply keeping prices steady for the quarter.

Q1 2007

Historically, a heavy supply of bulk MSR portfolio offerings start coming to the market beginning in the third week in January and continues throughout the quarter. The reason for this dynamic has typically been twofold: sellers want to take advantage of buyers’ new acquisition budgets for the year, and sellers want to get their portfolio to market before there is a glut of supply on the market. Outside of the large megaservicer acquisitions, the current supply of MSR portfolios available in the market is approximately 50% less than this time last year. Most of this can be attributed to the general upheaval in the mortgage industry that has been widely chronicled by the media, resulting in uncertainty for mortgage related assets. As reported, over ten medium-to-large subprime mortgage companies have had serious earnings pressure beginning late last year and continuing through the beginning of 2007. Early Payment Defaults (EPDs) have been the main culprit, leaving a trail of large losses at many large originators and causing deep reverberations throughout the entire securitization community. In addition, several industry leaders have been rumored to be for sale, including the large originators Ameriquest and Option One Mortgage, furthering the perception of a market in transition or perhaps turmoil.

Of note

Several buyers have returned to the bulk market looking for opportunities to purchase sub-6% note rate servicing portfolios under $500 million. Struggling sectors continue to be the smaller portfolios under $100 million where demand is very weak. This could represent an opportunity for buyers with incremental servicing cost advantages.