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Mortgage Servicing Rights and Related Liabilities | 6 Months Ended
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Jun. 30, 2021
Transfers and Servicing [Abstract] |
Mortgage Servicing Rights and Related Liabilities | 3. Mortgage Servicing Rights and Related Liabilities The following table sets forth the carrying value of the Company’s mortgage servicing rights (“MSRs”) and the related liabilities. In estimating the fair value of all mortgage servicing rights and related liabilities, the impact of the current environment was considered in the determination of key assumptions.
MSRs and Related Liabilities | June 30, 2021 |  | December 31, 2020
Forward MSRs - fair value | $ | 3,307 |  |  | $ | 2,703 |
Excess spread financing - fair value | $ | 867 |  |  | $ | 934 |
Mortgage servicing rights financing - fair value | 21 |  |  | 33 |
MSR related liabilities - nonrecourse at fair value | $ | 888 |  |  | $ | 967 |
Forward Mortgage Servicing Rights The following table sets forth the activities of forward MSRs:
| Six Months Ended June 30, |  |  |
Forward MSRs - Fair Value | 2021 |  | 2020 |  |  |
Fair value - beginning of period | $ | 2,703 |  |  | $ | 3,496 |  |  |  |
Additions: |  |  |  |  |  |
Servicing retained from mortgage loans sold | 554 |  |  | 249 |  |  |  |
Purchases of servicing rights | 218 |  |  | 24 |  |  |  |
Dispositions: |  |  |  |  |  |
Sales of servicing assets | (12) |  |  | — |  |  |  |
Changes in fair value: |  |  |  |  |  |
Changes in valuation inputs or assumptions used in the valuation model | 270 |  |  | (717) |  |  |  |
Changes in valuation due to amortization | (460) |  |  | (338) |  |  |  |
Other changes | 34 |  |  | 43 |  |  |  |
Fair value - end of period | $ | 3,307 |  |  | $ | 2,757 |  |  |  |
During the six months ended June 30, 2021 and 2020, the Company sold $1,076 and $71 in unpaid principal balance (“UPB”) of forward MSRs, of which $1,008 and none were retained by the Company as subservicer, respectively. MSRs measured at fair value are segregated between investor type into agency and non-agency pools (referred to herein as “investor pools”) based upon contractual servicing agreements with investors at the respective balance sheet date to evaluate the MSR portfolio and fair value of the portfolio. Agency investors primarily consist of government sponsored enterprises (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”), and the Government National Mortgage Association (“Ginnie Mae” or “GNMA”). Non-agency investors consist of investors in private-label securitizations. The following table provides a breakdown of UPB and fair value for the Company’s forward MSRs:
| June 30, 2021 |  | December 31, 2020
Forward MSRs - UPB and Fair Value Breakdown | UPB |  | Fair Value |  | UPB |  | Fair Value
Investor Pools |  |  |  |  |  |  |
Agency | $ | 248,799 |  |  | $ | 2,955 |  |  | $ | 227,136 |  |  | $ | 2,305 |
Non-agency | 38,656 |  |  | 352 |  |  | 44,053 |  |  | 398 |
Total | $ | 287,455 |  |  | $ | 3,307 |  |  | $ | 271,189 |  |  | $ | 2,703 |
In the second quarter of 2021, the Company refined its estimate of the fair value of forward MSRs by incorporating an estimate of future cash flows from existing loans that are expected to be recaptured. The estimate of future cash flows related to recapture is consistent with recent pricing observed from various market participants, including the Company’s independent, third-party valuation firms. As a result of considering the recapture rate, the Company adjusted its discount rate assumption in order to ensure that the fair value of forward MSRs remains consistent with current market participant pricing and was also corroborated with valuations provided by independent, third parties. The net impact on the overall forward MSRs fair value was not significant during the three and six months ended June 30, 2021. Refer to Note 13, Fair Value Measurements, for further discussion on key weighted-average inputs and assumptions used in estimating the fair value of forward MSRs. The following table shows the hypothetical effect on the fair value of the Company’s forward MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated:
| Discount Rate |  | Total Prepayment Speeds |  | Cost to Service per Loan
Forward MSRs - Hypothetical Sensitivities | 100 bps Adverse Change |  | 200 bps Adverse Change |  | 10% Adverse Change |  | 20% Adverse Change |  | 10% Adverse Change |  | 20% Adverse Change
June 30, 2021 |  |  |  |  |  |  |  |  |  |  |
Mortgage servicing rights | $ | (112) |  |  | $ | (216) |  |  | $ | (139) |  |  | $ | (268) |  |  | $ | (43) |  |  | $ | (87) |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Mortgage servicing rights | $ | (100) |  |  | $ | (192) |  |  | $ | (181) |  |  | $ | (347) |  |  | $ | (45) |  |  | $ | (89) |
These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Excess Spread Financing - Fair Value The Company had excess spread financing liability of $867 and $934 as of June 30, 2021 and December 31, 2020, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of excess spread financing. The following table shows the hypothetical effect on the Company’s excess spread financing fair value when applying certain unfavorable variations of key assumptions to these liabilities for the dates indicated:
| Discount Rate |  | Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities | 100 bps Adverse Change |  | 200 bps Adverse Change |  | 10% Adverse Change |  | 20% Adverse Change
June 30, 2021 |  |  |  |  |  |  |
Excess spread financing | $ | 30 |  |  | $ | 61 |  |  | $ | 34 |  |  | $ | 70 |
December 31, 2020 |  |  |  |  |  |  |
Excess spread financing | $ | 30 |  |  | $ | 62 |  |  | $ | 41 |  |  | $ | 84 |
These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Also, a positive change in the above assumptions would not necessarily correlate with the corresponding decrease in the net carrying amount of the excess spread financing. Excess spread financing’s cash flow assumptions that are utilized in determining fair value are based on the related cash flow assumptions used in the financed MSRs. Any fair value change recognized in the financed MSRs attributable to related cash flows assumptions would inherently have an inverse impact on the carrying amount of the related excess spread financing. Mortgage Servicing Rights Financing - Fair Value The Company had MSR financing liability of $21 and $33 as of June 30, 2021 and December 31, 2020, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of the MSR financing liability. Servicing Segment Revenues The following table sets forth the items comprising total revenues for the Servicing segment:
| Three Months Ended June 30, |  | Six Months Ended June 30,
Total Revenues - Servicing | 2021 |  | 2020 |  | 2021 |  | 2020
Contractually specified servicing fees(1) | $ | 275 |  |  | $ | 285 |  |  | $ | 551 |  |  | $ | 582 |
Other service-related income(1) | 214 |  |  | 62 |  |  | 359 |  |  | 111 |
Incentive and modification income(1) | 14 |  |  | 8 |  |  | 28 |  |  | 18 |
Late fees(1) | 16 |  |  | 20 |  |  | 34 |  |  | 47 |
Mark-to-market adjustments(2) | (180) |  |  | (261) |  |  | 174 |  |  | (644) |
Counterparty revenue share(3) | (76) |  |  | (88) |  |  | (159) |  |  | (164) |
Amortization, net of accretion(4) | (158) |  |  | (107) |  |  | (314) |  |  | (191) |
Total revenues - Servicing | $ | 105 |  |  | $ | (81) |  |  | $ | 673 |  |  | $ | (241) |
(1)The Company recognizes revenue on an earned basis for services performed. Amounts include subservicing related revenues. (2)Mark-to-market (“MTM”) adjustments include fair value adjustments on MSR, excess spread financing and MSR financing liabilities. The amount of MSR MTM includes the impact of negative modeled cash flows which have been transferred to reserves on advances and other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio. The impact of negative modeled cash flows was $8 and $3 for the three months ended June 30, 2021 and 2020 and $20 and $13 for the six months ended June 30, 2021 and 2020, respectively. (3)Counterparty revenue share represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements and the payments made associated with MSR financing arrangements. (4)Amortization is net of excess spread a ccretion of $70 and $79 during the three months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021 and 2020, amortization is net of excess spread accretion of $146 and $147, respectively.

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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 -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 30 -Section 50 -Paragraph 1A -Subparagraph (c)(3) -URI 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