MORTGAGE BANKING OPERATIONS

12 Months Ended

Dec. 31, 2024

MORTGAGE BANKING OPERATIONS:

LHFS consisted of the following:


	At December 31,
(in thousands)	2024		2023

Single family	$	20,312	$	12,849
CRE, multifamily and SBA	—		6,788
Total	$	20,312	$	19,637

Loans sold consisted of the following for the periods indicated:


	Years Ended December 31,
(in thousands)	2024		2023

Single family	$	404,952	$	335,751
CRE, multifamily and SBA(1)	1,103,742		26,839
Total	$	1,508,694	$	362,590

(1) 2024 amounts include the sale of $990 million of multifamily loans in the fourth quarter.

Gain (loss) on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following:


	Years Ended December 31,
(in thousands)	2024		2023

Single family	$	9,573	$	8,500
CRE, multifamily and SBA(1)	(86,463)		846
Total	$	(76,890)	$	9,346

(1) 2024 amounts include loss of $88.8 million on the sale of $990 million of multifamily loans in the fourth quarter.

The Company's portfolio of loans serviced for others is primarily comprised of loans held in U.S. government and agency MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. The unpaid principal balance of loans serviced for others is as follows:


	At December 31,
(in thousands)	2024		2023

Single family	$	5,179,373	$	5,316,304
CRE, multifamily and SBA	1,918,172		1,900,039
Total	$	7,097,545	$	7,216,343

Under the terms of the sales agreements for single family loans sold to GSEs and other entities, the Company has made representations and warranties that the loans sold meet certain requirements. The Company may be required to repurchase mortgage loans or indemnify loan purchasers due to defects in the origination process of the loan, such as documentation errors, underwriting errors and judgments, early payment defaults and fraud. The total unpaid principal balance of loans sold on a servicing-retained basis that were subject to the terms and conditions of these representations and warranties totaled $5.2 billion and $5.3 billion as of December 31, 2024 and 2023, respectively. The following is a summary of changes in the Company's mortgage repurchase liability for single family loans sold on a servicing-retained basis included in accounts payable and other liabilities on the consolidated balance sheet for the periods indicated:


	Years Ended December 31,
(in thousands)	2024		2023

Balance, beginning of period	$	1,481	$	2,232
Additions, net of adjustments (1)	(284)		(330)
Realized losses (2)	(165)		(421)
Balance, end of period	$	1,032	$	1,481

(1)Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans.

(2)Includes principal losses and accrued interest on repurchased loans, "make-whole" settlements, settlements with claimants and certain related expenses.

The Company has agreements with certain investors to advance scheduled principal and interest amounts on delinquent loans.

Advances are also made to fund the foreclosure and collection costs of delinquent loans prior to the recovery of reimbursable amounts from investors or borrowers. Advances of $1.6 million and $2.9 million were recorded in other assets as of December 31, 2024 and 2023, respectively.

When the Company has the unilateral right to repurchase Ginnie Mae pool loans it has previously sold (generally loans that are more than 90 days past due), the Company records the balance of the loans as other assets and other liabilities. At December 31, 2024 and 2023, delinquent or defaulted mortgage loans currently in Ginnie Mae pools that the Company has recognized on its consolidated balance sheets totaled $5.1 million and $5.6 million, respectively. The recognition of previously sold loans does not impact the accounting for the previously recognized MSRs.

Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following:


	Years Ended December 31,
(in thousands)	2024		2023

Servicing income, net:
Servicing fees and other	$	25,798	$	26,134
Amortization of single family MSRs (1)	(6,500)		(6,378)
Amortization of multifamily and SBA MSRs	(5,612)		(5,778)
Total	13,686		13,978
Risk management, single family MSRs:
Changes in fair value of MSRs due to assumptions (2)	1,743		414
Net gain (loss) from economic hedging (3)	(2,932)		(1,744)
Total	(1,189)		(1,330)
Loan servicing income	$	12,497	$	12,648

(1)Represents changes due to collection/realization of expected cash flows and curtailments.

(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily reflected by changes in mortgage interest rates.

(3)The interest income from US Treasury notes securities used for hedging purposes, which is included in interest income on the consolidated income statements, was $1.2 million and $1.4 million in 2024 and 2023, respectively.

The Company determines fair value of single family MSRs using a valuation model that calculates the net present value of estimated future cash flows. Estimates of future cash flows include contractual servicing fees, ancillary income and costs of servicing, the timing of which are impacted by assumptions, primarily expected prepayment speeds and discount rates, which relate to the underlying performance of the loans. The changes in single family MSRs measured at fair value are as follows:


	Years Ended December 31,
(in thousands)	2024		2023

Beginning balance	$	74,249	$	76,617
Additions and amortization:
Originations	3,409		3,136
Purchases	—		460

Amortization (1)	(6,500)		(6,378)
Net additions and amortization	(3,091)		(2,782)
Changes in fair value assumptions (2)	1,743		414
Ending balance	$	72,901	$	74,249

(1)Represents changes due to collection/realization of expected cash flows and curtailments.

(2)Principally reflects changes in model assumptions, including prepayment speed assumptions, which are primarily affected by changes in mortgage interest rates.

Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows:


	Years Ended December 31,
(rates per annum) (1)	2024		2023

Constant prepayment rate ("CPR") (2)	18.07	%	14.89	%
Discount rate	10.23	%	11.99	%

(1)Based on a weighted average.

(2)Represents the expected lifetime average CPR used in the model.

For single family MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below:


	At December 31, 2024			At December 31, 2023

	Range of Inputs	Average (1)		Range of Inputs	Average (1)
CPRs	6.00% - 13.50%	6.60	%	6.80%- 32.50%	7.00	%
Discount Rates	10.00% - 17.00%	11.00	%	10.00% -17.00%	10.00	%

(1) Weighted averages of all the inputs within the range.

To compute hypothetical sensitivities of the value of our single MSRs to immediate adverse changes in key assumptions, we computed the impact of changes in CPRs and in discount rates as outlined below:


(dollars in thousands)	At December 31, 2024

Fair value of single family MSRs	$	72,901
Expected weighted-average life (in years)	8.37
CPR
Impact on fair value of 25 basis points adverse change in interest rates	$	(759)
Impact on fair value of 50 basis points adverse change in interest rates	$	(1,594)
Discount rate
Impact on fair value of 100 basis points increase	$	(2,133)
Impact on fair value of 200 basis points increase	$	(4,669)

Generally, increases in the CPR or the discount rate utilized in the fair value measurements of single family MSRs will result in a decrease in fair value. Conversely, decreases in the CPR or the discount rate will result in an increase in fair value. These sensitivities are hypothetical and subject to key assumptions of the underlying valuation model. As the table above demonstrates, the Company's methodology for estimating the fair value of MSRs is highly sensitive to changes in key assumptions. Changes in fair value resulting from changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; in reality, changes in one factor may be associated with changes in another, which may magnify or counteract the sensitivities. Thus, any measurement of MSR fair value is limited by the conditions existing and assumptions made as of a particular point in time. Those assumptions may not be appropriate if they are applied to a different point in time.

MSRs resulting from the sale of multifamily loans are recorded at fair value and subsequently carried at the lower of amortized cost or fair value. Multifamily MSRs are amortized in proportion to, and over, the estimated period the net servicing income will be collected.

The changes in multifamily and SBA MSRs measured at LOCOM or fair value were as follows:


	Years Ended December 31,
(in thousands)	2024		2023

Beginning balance	$	29,987	$	35,256
Origination	2,190		509
Amortization	(5,612)		(5,778)
Ending balance	$	26,565	$	29,987

Key economic assumptions used in measuring the initial fair value of capitalized multifamily MSRs were as follows:


	Years Ended December 31,
(rates per annum) (1)	2024		2023


Discount rate	13.10	%	13.00	%

(1)Based on a weighted average.

For multifamily MSRs, we use a discounted cash flow valuation technique which utilizes CPRs and discount rates as significant unobservable inputs as noted in the table below:


	At December 31, 2024			At December 31, 2023

	Range of Inputs	Average (1)		Range of Inputs	Average (1)

Discount Rates	13.00% - 15.00%	13.10	%	13.00% - 15.00%	13.00	%

(1) Weighted averages of all the inputs within the range.

At December 31, 2024, the expected weighted-average life of the Company's multifamily and SBA MSRs was 11.41 years. Projected amortization expense for the gross carrying value of multifamily and SBA MSRs is estimated as follows:


(in thousands)	At December 31, 2024

2025	$	5,278
2026	4,807
2027	4,101
2028	3,645
2029	3,286
2030 and thereafter	5,448
Carrying value of multifamily and SBA MSRs	$	26,565

The projected amortization expense of multifamily and SBA MSRs is an estimate and subject to key assumptions of the underlying valuation model. The amortization expense for future periods was calculated by applying the same quantitative factors, such as actual MSR prepayment experience and discount rates, which were used to determine amortization expense. These factors are inherently subject to significant fluctuations, primarily due to the effect that changes in interest rates may have on expected loan prepayment experience. Accordingly, any projection of MSR amortization in future periods is limited by the conditions that existed at the time the calculations were performed and may not be indicative of actual amortization expense that will be recorded in future periods.