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SERVICING RIGHTS | 12 Months Ended
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Dec. 31, 2017
Transfers and Servicing [Abstract] |
SERVICING RIGHTS | SERVICING RIGHTS The Company retains MSRs from certain of its sales of residential mortgage loans. MSRs on residential mortgage loans are reported at fair value. Income earned by the Company on its MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment costs and third party subservicing costs. The Company retains servicing rights in connection with its SBA loan operations, which are measured using the amortization method. The following table presents a composition of total income from servicing rights, which is reported in Loan Servicing Income on the Consolidated Statements of Operations, on a consolidated operations basis, for the periods indicated:
|  | Year Ended December 31,
($ in thousands) |  | 2017 |  | 2016 |  | 2015
Servicing fees for sold loans with servicing retained |  | $ | 19,642 |  |  | $ | 23,117 |  |  | $ | 11,739 |
Losses on the fair value and runoff of servicing rights |  | (17,066 | ) |  | (17,732 | ) |  | (8,765 | )
Total income from servicing rights |  | $ | 2,576 |  |  | $ | 5,385 |  |  | $ | 2,974 |
During the year ended December 31, 2016, the Company entered into a flow-agreement establishing general terms for the purchase and sale to a third party MSR investor in connection with residential mortgage loan sales to GSEs. The flow-agreement allowed the Company to sell its MSRs to a third party MSR investor contemporaneous with the Company’s sales of its servicing retained residential mortgages to the GSEs. Accordingly, entering into the flow-agreement reduced the impact of volatility associated with the Company's MSRs by allowing the Company to sell its MSRs immediately, thus reducing the Company's exposure to market and other conditions. During the three months ended March 31, 2017, the Company suspended sales of MSRs under the flow-agreement. The Company does not expect to resume sales under the flow-agreement, as the Company has discontinued its Mortgage Banking segment operations. The following table presents a composition of servicing rights as of the dates indicated:
|  | December 31,
($ in thousands) |  | 2017 |  | 2016
Mortgage servicing rights, at fair value |  | $ | 31,852 |  |  | $ | 76,121 |
SBA servicing rights, at cost |  | 1,856 |  |  | 1,496 |
Total |  | $ | 33,708 |  |  | $ | 77,617 |
Mortgage loans sold with servicing retained are not reported as assets and are subserviced by a third party vendor. The unpaid principal balance of these loans at December 31, 2017 and 2016 was $3.94 billion and $7.58 billion, respectively. Custodial escrow balances maintained in connection with serviced loans were $17.8 million and $34.2 million at December 31, 2017 and 2016, respectively. The reductions in these balances were principally driven by the sale of $37.8 million of MSRs during the year ended December 31, 2017 as a part of discontinued operations. Mortgage Servicing Rights At December 31, 2017, MSRs held-for-sale of $29.8 million were valued based on a market bid adjusted for value associated with early payoffs and paydowns and included as Level 3 fair value. The following table presents the key characteristics, inputs and economic assumptions used to estimate the Level 3 fair value of the MSRs, other than the MSRs held-for-sale, as of the dates indicated:
|  | December 31,
($ in thousands) |  | 2017 |  | 2016
Fair value of retained MSRs |  | $ | 2,059 |  |  | $ | 76,121 |
Discount rate |  | 13.00 | % |  | 10.18 | %
Constant prepayment rate |  | 16.54 | % |  | 11.84 | %
Weighted-average life |  | 5.07 years |  |  | 6.50 years |
The following table presents activity in the MSRs for the periods indicated:
|  | Year Ended December 31,
($ in thousands) |  | 2017 |  | 2016 |  | 2015
Balance at beginning of year |  | $ | 76,121 |  |  | $ | 49,939 |  |  | $ | 19,082 |
Additions |  | 12,127 |  |  | 49,293 |  |  | 45,263 |
Changes in fair value resulting from valuation inputs or assumptions |  | (10,240 | ) |  | (5,709 | ) |  | (3,568 | )
Sales of servicing rights (1) |  | (39,345 | ) |  | (5,382 | ) |  | (5,862 | )
Other—loans paid off |  | (6,811 | ) |  | (12,020 | ) |  | (4,976 | )
Balance at end of year |  | $ | 31,852 |  |  | $ | 76,121 |  |  | $ | 49,939 |
(1) Includes $37.8 million of MSRs sold as a part of discontinued operations for the year ended December 31, 2017. SBA Servicing Rights The Company used a discount rate of 8.50 percent to calculate the present value of cash flows and an estimated prepayment speed based on prepayment data available. Discount rates and prepayment speeds are reviewed quarterly and adjusted as appropriate. The following table presents activity in the SBA servicing rights for the periods indicated:
|  | Year Ended December 31,
($ in thousands) |  | 2017 |  | 2016 |  | 2015
Balance at beginning of year |  | $ | 1,496 |  |  | $ | 788 |  |  | $ | 484 |
Additions |  | 761 |  |  | 877 |  |  | 597 |
Amortization, including prepayments |  | (318 | ) |  | (157 | ) |  | (71 | )
Impairment |  | (83 | ) |  | (12 | ) |  | (222 | )
Balance at end of year |  | $ | 1,856 |  |  | $ | 1,496 |  |  | $ | 788 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -URI http://asc.fasb.org/topic&trid=2197590 + Details
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