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Mortgage Servicing Rights | 6 Months Ended
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Jun. 30, 2024
Transfers and Servicing [Abstract] |
Mortgage Servicing Rights | Mortgage Servicing Rights Mortgage servicing rights are recognized as assets on the Condensed Consolidated Balance Sheets when loans are sold, and the associated servicing rights are retained. The Company maintains one class of MSRs asset and has elected the fair value option. These MSRs are recorded at fair value, which is determined using an internal valuation model that calculates the present value of estimated future net servicing fee income. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, and contractual servicing fee income, among others. The following table summarizes changes to the MSR assets:
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Fair value, beginning of period | $ | 6,691,341 |  |  | $ | 6,669,939 |  |  | $ | 6,439,787 |  |  | $ | 6,946,940 |
MSRs originated | 345,545 |  |  | 314,840 |  |  | 568,342 |  |  | 519,400 |
MSRs sales | (74,395) |  |  | (594,463) |  |  | (125,739) |  |  | (676,001) |
MSRs purchases | 314,543 |  |  | — |  |  | 331,238 |  |  | — |
Changes in fair value (1): |  |  |  |  |  |  |
Due to changes in valuation model inputs or assumptions | 74,988 |  |  | 245,495 |  |  | 302,357 |  |  | 27,693 |
Due to collection/realization of cash flows | (189,332) |  |  | (192,179) |  |  | (353,295) |  |  | (374,400) |
Total changes in fair value | (114,344) |  |  | 53,316 |  |  | (50,938) |  |  | (346,707) |
Fair value, end of period | $ | 7,162,690 |  |  | $ | 6,443,632 |  |  | $ | 7,162,690 |  |  | $ | 6,443,632 |
(1) Reflects changes in market interest rates and assumptions, including discount rates and prepayment speeds, and the effects of contractual prepayment protection associated with sales or purchases of MSRs. It does not include the change in fair value of derivatives that economically hedge MSRs identified for sale or the effects of contractual prepayment protection resulting from sales or purchases of MSRs. The Company retains the right to service a majority of these loans upon sale through ownership of servicing rights. The total UPB of mortgage loans serviced, excluding subserviced loans, at June 30, 2024 and December 31, 2023 was $492,361,763 and $468,237,971, respectively. The portfolio primarily consists of high-quality performing agency and government (FHA and VA) loans. As of June 30, 2024 and December 31, 2023, delinquent loans (defined as 60-plus days past-due) were 1.26% and 1.23%, respectively, of our total portfolio. During the three and six months ended June 30, 2023, the Company sold excess servicing cash flows on certain agency loans for total proceeds of $246,778. The following is a summary of the weighted average discount rate and prepayment speed assumptions used to determine the fair value of MSRs as well as the expected life of the loans in the servicing portfolio:
| June 30, 2024 |  | December 31, 2023
Discount rate | 9.9 | % |  | 9.9 | %
Prepayment speeds | 7.4 | % |  | 7.5 | %
Life (in years) | 7.86 |  | 7.83
The key assumptions used to estimate the fair value of MSRs are prepayment speeds and the discount rate. Increases in prepayment speeds generally have an adverse effect on the value of MSRs as the underlying loans prepay faster. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and therefore, the estimated life of the MSRs and related cash flows decrease. Decreases in prepayment speeds generally have a positive effect on the value of MSRs as the underlying loans prepay less frequently. In a rising interest rate environment, the fair value of MSRs generally increases as prepayments decrease and therefore, the estimated life of the MSRs and related cash flows increase. Increases in the discount rate result in a lower MSRs value and decreases in the discount rate result in a higher MSRs value. MSRs uncertainties are hypothetical and do not always have a direct correlation with each assumption. Changes in one assumption may result in changes to another assumption, which might magnify or counteract the uncertainties. The following sensitivity analysis shows the potential impact on the fair value of the Company’s MSRs based on hypothetical changes in key assumptions, including the discount rate and prepayment speeds:
| Discount Rate |  | Prepayment Speeds
| 100 BPS Adverse Change |  | 200 BPS Adverse Change |  | 10% Adverse Change |  | 20% Adverse Change
June 30, 2024 |  |  |  |  |  |  |
Mortgage servicing rights | $ | (301,452) |  |  | $ | (578,454) |  |  | $ | (186,762) |  |  | $ | (364,196) |
December 31, 2023 |  |  |  |  |  |  |
Mortgage servicing rights | $ | (279,493) |  |  | $ | (536,573) |  |  | $ | (183,254) |  |  | $ | (356,871) |

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 210 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-04(11)) -Publisher 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