UCM, Inc. - Profit

UCM recommends reflecting the full value of MSRs in production pricing, maximizing both production volumes and margins.
Many institutions are uncomfortable with the perceived volatility of MSRs so they record them at very “conservative” values, often well below market value. This penalizes earnings by not fully reflecting the value of servicing produced. If this conservatism is carried over into production pricing, then production volumes are depressed, penalizing earnings by both price and volume.
“Best practices” include offering a diverse product mix to assure your full market share.
Increasing recorded MSRs accentuates financial volatility; therefore, UCM recommends using profit generating hedges to minimize such volatility.
In early 2006, the Financial Accounting Standards Board issued Statement No. 156, requiring initial bookings of MSRs at fair value and allowing an election to subsequently account for MSRs at fair value, rather than the lower of amortized cost or market.