Basel III Proposal Would Loosen MSR Rules

Federal banking regulators are currently evaluating a proposal to increase the maximum percentage of mortgage servicing rights (MSRs) eligible for Tier 1 capital calculations, according to a piece in Asset Securitization Report. Currently, only 10% of an institution’s Tier 1 capital can be comprised of MSRs, while the new proposal would allow MSRs to account for up to 25% of the capital requirement. Industry participants have speculated such a move would increase incentives for banks to retain their servicing rights.

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