Fed Plan to Ease Bank Capital Rules for MSRs Rekindles Asset-Risk Debate

Mortgage servicing rights, or MSRs, entitle their holders to income from administering home loans, but their value can fluctuate sharply with interest rates, prepayments and default rates. The United States increased their capital burden after the financial crisis. Banks’ share of the mortgage-servicing market fell from 69% in 2016 to about 39%, as business shifted to nonbank firms, raising questions about financial stability and a level competitive playing field.

The Fed, OCC and FDIC issued a joint proposal on March 19, 2026, to eliminate the capital deduction requirement for MSRs and instead apply a 250% risk weight to all MSRs. The comment period ran through June 18. The Fed released a stress analysis on June 4 estimating that MSR values could fall by 8.3% to 13.4%, reigniting debate over the volatility risks posed by the proposed easing.