Note 9. Mortgage Servicing Rights

We invest in mortgage servicing rights associated with residential mortgage loans and contract with a licensed sub-servicer to perform all servicing functions for these loans. The following table presents the fair value of MSRs and the aggregate principal amounts of associated loans as of September 30, 2014 and December 31, 2013.


	September 30, 2014				December 31, 2013
			Associated				Associated
(In Thousands)	MSR Fair Value		Principal		MSR Fair Value		Principal
Mortgage Servicing Rights
Conforming Loans	$	73,953	$	6,254,058	$	3,331	$	308,258
Jumbo Loans		61,199		5,962,758		61,493		5,483,500

Total Mortgage Servicing Rights	$	135,152	$	12,216,816	$	64,824	$	5,791,758

The following table presents activity for MSRs for the three and nine months ended September 30, 2014 and 2013.

MSR Activity


	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2014		2013		2014		2013
Balance at beginning of period	$	71,225	$	43,098	$	64,824	$	5,315
Additions		61,606		16,676		76,272		45,291
Changes in fair value due to:
Changes in assumptions ⁽¹⁾		4,323		1,444		(318)		11,764
Other changes ⁽²⁾		(2,002)		(984)		(5,626)		(2,136)

Balance at End of Period	$	135,152	$	60,234	$	135,152	$	60,234

(1)	Primarily reflects changes in prepayment assumptions due to changes in market interest rates.

(2)	Represents changes due to realization of expected cash flows.

We make investments in MSRs through the retention of servicing rights associated with the residential mortgage loans that we have acquired and subsequently transfer to third parties or through the direct acquisition of MSRs sold by third parties. The following table details the retention and purchase of MSRs during the three and nine months ended September 30, 2014.

MSR Additions


	Three Months Ended				Nine Months Ended
(In Thousands)	September 30, 2014				September 30, 2014
			Associated				Associated
	MSR Fair Value		Principal		MSR Fair Value		Principal
Jumbo MSR additions:
From securitization	$	4,356	$	516,004	$	6,542	$	773,205
From loan sales		-		-		488		58,793

Total jumbo MSR additions		4,356		516,004		7,030		831,998
Conforming MSR additions:
From loan sales	$	14,630	$	1,352,122	$	23,933	$	2,232,559
From purchases		42,620		3,497,224		45,309		3,770,566

Total conforming MSR additions		57,250		4,849,346		69,242		6,003,125

Total MSR additions	$	61,606	$	5,365,350	$	76,272	$	6,835,123

MSR Income

The following table presents the components of our MSR income.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In Thousands)	2014		2013		2014		2013
Servicing income, net:
Income	$	4,590	$	3,008	$	12,287	$	5,820
Cost of sub-servicer		(437)		(355)		(1,040)		(767)

Net servicing income		4,153		2,653		11,247		5,053
Market valuation adjustments		2,321		460		(5,944)		9,628
MSR provision for repurchases		(653)		-		(653)		-

Income from MSRs, Net	$	5,821	$	3,113	$	4,650	$	14,681