Note 9. Mortgage Servicing Rights

We invest in mortgage servicing rights associated with residential mortgage loans and contract with licensed sub-servicers 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 at December 31, 2014 and 2013.


	December 31, 2014				December 31, 2013
(In Thousands)	MSR Fair Value		Associated Principal		MSR Fair Value		Associated Principal
Mortgage Servicing Rights
Conforming Loans	$	81,301	$	7,705,146	$	3,331	$	308,258
Jumbo Loans		57,992		5,962,784		61,493		5,483,500

Total Mortgage Servicing Rights	$	139,293	$	13,667,930	$	64,824	$	5,791,758

The following table presents activity for MSRs for the years ended December 31, 2014 and 2013.

MSR Activity


	Years Ended December 31,
(In Thousands)	2014			2013
Balance at beginning of period	$	64,824		$	5,315
Additions		95,550			47,514
Changes in fair value due to:
Changes in assumptions ⁽¹⁾		(12,467	)		15,719
Other changes ⁽²⁾		(8,614	)		(3,724	)

Balance at End of Period	$	139,293		$	64,824

(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 acquire and subsequently transfer to third parties or through the direct acquisition of MSRs sold by third parties. We hold our MSR investments at our taxable REIT subsidiary. The following table details the retention and purchase of MSRs during the years ended December 31, 2014.

MSR Additions


(In Thousands)	December 31, 2014				December 31, 2013
	MSR Fair Value		Associated Principal		MSR Fair Value		Associated Principal
Jumbo MSR additions:
From securitization	$	8,518	$	1,002,235	$	42,920	$	4,787,264
From loan sales		488		58,793		1,092		124,359

Total jumbo MSR additions		9,006		1,061,028		44,012		4,911,623
Conforming MSR additions:
From loan sales	$	38,995	$	3,618,256	$	52	$	5,107
From purchases		47,549		3,993,387		3,450		306,669

Total conforming MSR additions		86,544		7,611,643		3,502		311,776

Total MSR additions	$	95,550	$	8,672,671	$	47,514	$	5,223,399

MSR Income

The following table presents the income from MSRs.


	Years Ended December 31,
(In Thousands)	2014			2013			2012
Servicing income
Income	$	19,362		$	9,239		$	807
Cost of sub-servicer		(1,834	)		(925	)		(184	)

Net servicing income		17,528			8,314			623
Market valuation adjustments		(21,081	)		11,995			(2,014	)
MSR provision for repurchases		(708	)		—			—

MSR income (loss)	$	(4,261	)	$	20,309		$	(1,391	)