Changes in prepayments, accounting drive up values

Mortgage banks are profiting from the increase of service valuations since 1994. A strong mortgage market has increased servicing rates. In addition, large mortgage banks are content with buying servicing rights at high prices from small to medium ones because of their low servicing costs. Servicing costs have also increased because buyers are using new gauges for calculating investment values, basing them on return on assets rather than on internal returns.
North American Mortgage Co. says it has been selling servicing on some of its new loans for as much as 180 basis points. To anybody who cut their teeth in [...]