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 March 31, 2015 and December 31, 2014.



	March 31, 2015				December 31, 2014
(In Thousands)	MSR Fair Value		Associated Principal		MSR Fair Value		Associated Principal
Mortgage Servicing Rights
Conforming Loans	$	69,203	$	6,800,645	$	81,301	$	7,705,146
Jumbo Loans	51,121		5,851,993		57,992		5,962,784
Total Mortgage Servicing Rights	$	120,324	$	12,652,638	$	139,293	$	13,667,930

The following table presents activity for MSRs for the three months ended March 31, 2015 and 2014.

MSR Activity



	Three Months Ended March 31,
(In Thousands)	2015			2014
Balance at beginning of period	$	139,293		$	64,824
Additions	18,754			2,858
Sales	(18,206		)	—
Changes in fair value due to:
Changes in assumptions ⁽¹⁾	(14,036		)	(1,125		)
Other changes⁽²⁾	(5,481		)	(1,586		)
Balance at End of Period	$	120,324		$	64,971


(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 a taxable REIT subsidiary of ours. The following table details the retention and purchase of MSRs during the three months ended March 31, 2015.

MSR Additions



(In Thousands)	Three Months Ended March 31, 2015
	MSR Fair Value		Associated Principal
Jumbo MSR additions:
From securitization	$	1,872	$	227,852
From loan sales	92		10,145
Total jumbo MSR additions	1,964		237,997
Conforming MSR additions:
From loan sales	$	13,711	$	1,352,658
From purchases	3,079		318,338
Total conforming MSR additions	16,790		1,670,996
Total MSR additions	$	18,754	$	1,908,993

MSR Income

The following table presents the components of our MSR income.



	Three Months Ended March 31,
(In Thousands)	2015			2014
Servicing income
Income	$	9,716		$	3,633
Cost of sub-servicer	(1,229		)	(316		)
Net servicing income	8,487			3,317
Market valuation adjustments	(19,517		)	(2,711		)
MSR provision for repurchases	106			—
MSR income (loss)	$	(10,924	)	$	606