Mortgage Servicing Rights - MSR

A contractual agreement where the right, or rights, to service an existing mortgage are sold by the original lender to another party who specializes in the various functions of servicing mortgages. Common rights included are the right to collect mortgage payments monthly, set aside taxes and insurance premiums in escrow, and forward interest and principal to the mortgage lender.

The mortgage servicer must supply an annual statement outlining the duties that were performed. In return for this assistance, the servicer is compensated with a specific fee outlined in the contract established at the beginning of the agreement. Mortgage servicing rights can be bought and sold, resulting in the transfer of any administrative obligations.

Many vertically integrated lenders today will service their mortgages in-house, which means they will also own both the loan and the servicing rights. These firms will also save money in the process.

The business of selling servicing rights for mortgages represents a large business niche, and is a multi-billion dollar industry.