A service release price (SRP) is a payment received by a lending institution, such as a bank or retail mortgage lender, on the sale of a closed mortgage loan to the secondary mortgage market. Secondary mortgage market buyers are usually Wall Street investment banks, Fannie Mae, Freddie Mac, or Ginnie Mae, as the first step in the creation of mortgage-backed security (MBS). Today, almost all closed mortgages are bought by the US government through the GSE Securities Backed Securities Purchase Program
The amount of SRP paid is based on the market value of the mortgage note, influenced by several major variables, such as interest rates, loan type, margin (for ARM loans), and the inclusion or exclusion of other items such as prepaid penalties. Also considered are LTV loans (loan to value), credit score of the borrower, the existence of personal mortgage insurance (PMI), the risk of pre-payment of the borrower and other factors beyond the scope of this article.
Since services are carried to the balance sheet by all lenders, there is consolidation in the service market as many servicers believe they can cross sell their products through portfolio services. While this strategy has not been profitable as many think it has worked well for some people. Therefore, servicers pay a premium for services compared to the present value.
Source of the article : Wikipedia
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