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MORTGAGE SERVICING RIGHTS | 3 Months Ended
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Mar. 31, 2024
Transfers and Servicing [Abstract] |
MORTGAGE SERVICING RIGHTS | MORTGAGE SERVICING RIGHTS The following table presents the activity of MSRs for the three months ended March 31, 2024 and 2023:
|  |  |  | Three Months Ended March 31,
(in thousands) |  |  |  |  |  | 2024 |  | 2023
Balance — beginning of period |  |  |  |  |  | $ | 1,161,357 |  |  | $ | 1,139,539 |
MSRs originated |  |  |  |  |  | 34,234 |  |  | 27,493 |
MSRs purchased |  |  |  |  |  | 114 |  |  | — |
Changes in fair value: |  |  |  |  |  |  |  |
Due to collection/realization of cash flows |  |  |  |  |  | (12,119) |  |  | (11,170) |
Due to changes in valuation model inputs or assumptions |  |  |  |  |  | 32,897 |  |  | (43,701) |
Balance — end of period |  |  |  |  |  | $ | 1,216,483 |  |  | $ | 1,112,161 |
The following table presents the unobservable input assumptions used to determine the fair value of MSRs:
|  | March 31, 2024 |  | December 31, 2023
Unobservable Input |  | Range (Weighted Average)
Discount rate |  | 9.6% - 15.5% (10.9%) |  | 9.6% - 15.5% (10.9%)
Prepayment rate |  | 6.1% - 36.0% (8.0%) |  | 6.4% - 32.0% (8.5%)
Cost to service (per loan) |  | $71.9 - $657.7 ($96.2) |  | $72.1 - $366.3 ($96.4)
At March 31, 2024 and December 31, 2023, the MSRs had a weighted average life of approximately 8.2 years and 8.0 years, respectively. See “Note 2 —Fair Value Measurements” for additional information regarding the valuation of MSRs. Actual revenue generated from servicing activities included contractually specified servicing fees, as well as late fees and other ancillary servicing revenue, which were recorded within loan servicing and other fees as follows for the three months ended March 31, 2024 and 2023:
|  |  |  | Three Months Ended March 31,
(in thousands) |  |  |  |  |  | 2024 |  | 2023
Servicing fees from servicing portfolio |  |  |  |  |  | $ | 64,034 |  |  | $ | 58,980 |
Late fees |  |  |  |  |  | 2,056 |  |  | 1,668 |
Other ancillary servicing revenue and fees |  |  |  |  |  | (302) |  |  | (561) |
Total loan servicing and other fees |  |  |  |  |  | $ | 65,788 |  |  | $ | 60,087 |
At March 31, 2024 and December 31, 2023, the UPB of mortgage loans serviced totaled $86.3 billion and $85.0 billion, respectively. Conforming conventional loans serviced by the Company are sold to FNMA or FHLMC programs on a nonrecourse basis, whereby foreclosure losses are generally the responsibility of FNMA and FHLMC and not the Company. Similarly, certain loans serviced by the Company are secured through GNMA programs, whereby the Company is insured against loss by the FHA or partially guaranteed against loss by the VA. The key assumptions used to estimate the fair value of MSRs are prepayment speeds, the discount rate and costs to service. 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 generally have an adverse effect on the value of the MSRs. The discount rate is risk adjusted for key factors such as uncertainty in the mortgage banking industry due to its reliance on external influences (interest rates, regulatory changes, etc.), premium for market liquidity, and credit risk. A higher discount rate would indicate higher uncertainty of the future cash flows. Conversely, decreases in the discount rate generally have a positive effect on the value of the MSRs. Increases in the costs to service generally have an adverse effect on the value of the MSRs as an increase in costs to service would reduce the Company’s future net cash inflows from servicing a loan. Conversely, decreases in the costs to service generally have a positive effect on the value of the MSRs. MSR 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 table illustrates the impact of adverse changes on the prepayment speeds, discount rate and cost to service at two different data points at March 31, 2024 and December 31, 2023, respectively:
| Prepayment Speeds |  | Discount Rate |  | Cost to Service (per loan)
(in thousands) | 10% Adverse Change |  | 20% Adverse Change |  | 10% Adverse Change |  | 20% Adverse Change |  | 10% Adverse Change |  | 20% Adverse Change
March 31, 2024 |  |  |  |  |  |  |  |  |  |  |
Mortgage servicing rights | $ | (37,007) |  |  | $ | (73,615) |  |  | $ | (50,026) |  |  | $ | (98,014) |  |  | $ | (10,790) |  |  | $ | (23,250) |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |
Mortgage servicing rights | $ | (36,968) |  |  | $ | (72,701) |  |  | $ | (47,899) |  |  | $ | (93,196) |  |  | $ | (11,315) |  |  | $ | (23,573) |

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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 860 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 1A -Subparagraph (b)(2) -Publisher FASB -URI 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