Other Investments

6 Months Ended

Jun. 30, 2021

Investments, All Other Investments [Abstract]

Other investments at June 30, 2021 and December 31, 2020 are summarized in the following table.

Table 10.1 – Components of Other Investments


(In Thousands)	June 30, 2021		December 31, 2020
Servicer advance investments	$	184,551	$	231,489
Shared home appreciation options	44,319		42,440
Excess MSRs	29,988		34,418
Mortgage servicing rights	8,721		8,815

Other	41,153		31,013
Total Other Investments	$	308,732	$	348,175

Servicer advance investments

We and a third-party co-investor, through two partnerships (“SA Buyers”) consolidated by us, purchased the outstanding servicer advances and excess MSRs related to a portfolio of legacy residential mortgage-backed securitizations serviced by the co-investor (Refer to our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding the transactions). At June 30, 2021, we had funded $94 million of total capital to the SA Buyers (see Note 16 for additional detail).

At June 30, 2021, our servicer advance investments had a carrying value of $185 million and were associated with a portfolio of residential mortgage loans with an unpaid principal balance of $8.03 billion. The outstanding servicer advance receivables associated with this investment were $172 million at June 30, 2021, which were financed with short-term non-recourse securitization debt (see Note 13 for additional detail on this debt). The servicer advance receivables were comprised of the following types of advances at June 30, 2021 and December 31, 2020.

Table 10.2 – Components of Servicer Advance Receivables


(In Thousands)	June 30, 2021		December 31, 2020
Principal and interest advances	$	80,741	$	110,923
Escrow advances (taxes and insurance advances)	68,534		79,279
Corporate advances	22,543		27,454
Total Servicer Advance Receivables	$	171,818	$	217,656

We account for our servicer advance investments at fair value and during the three and six months ended June 30, 2021, we recorded $2 million and $5 million of interest income, respectively, through Other interest income, and recorded net market valuation losses of $1 million for both periods through Investment fair value changes, net in our consolidated statements of income (loss). During the three and six months ended June 30, 2020, we recorded $3 million and $6 million of interest income, respectively, through Other interest income, and recorded net market valuation losses of $0.1 million and $6 million, respectively, through Investment fair value changes, net in our consolidated statements of income (loss).

Shared Home Appreciation Options

In 2019, we entered into a flow purchase agreement to acquire shared home appreciation options. At June 30, 2021, we had acquired $47 million of shared home appreciation options under this flow purchase agreement. We account for these investments under the fair value option and during the three and six months ended June 30, 2021, we recorded net market valuation gains of $2 million and $7 million, respectively, related to these assets through Investment fair value changes, net on our consolidated statements of income (loss). During the three and six months ended June 30, 2020, we recorded a net market valuation gain of $1 million and a net market valuation loss of $7 million, respectively, related to these assets through Investment fair value changes, net on our consolidated statements of income (loss).

Excess MSRs

In association with our servicer advance investments described above, we (through our consolidated SA Buyers) invested in excess MSRs associated with the same portfolio of legacy residential mortgage-backed securitizations. Additionally, we own excess MSRs associated with specified pools of multifamily loans. We account for our excess MSRs at fair value and during the three and six months ended June 30, 2021, we recognized $3 million and $6 million of interest income, respectively, through Other interest income, and recorded net market valuation losses of $2 million and $4 million, respectively, through Investment fair value changes, net on our consolidated statements of income (loss). During the three and six months ended June 30, 2020, we recognized $3 million and $6 million of interest income, respectively, through Other interest income, and recorded a net market valuation gain of $3 million and a net market valuation loss of $7 million, respectively, through Investment fair value changes, net on our consolidated statements of income (loss).

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 majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquired and subsequently sold to third parties. During both the three and six months ended June 30, 2021, we retained $2 million of MSRs from sales of residential loans to third parties. We hold our MSR investments at our taxable REIT subsidiaries.

At June 30, 2021 and December 31, 2020, our MSRs had a fair value of $9 million and $9 million, respectively, and were associated with loans with an aggregate principal balance of $1.97 billion and $2.59 billion, respectively. During the three and six months ended June 30, 2021, including net market valuation gains and losses on our MSRs and related risk management derivatives, we recorded a net loss of less than $0.1 million and net income of $1 million, respectively, through Other income on our consolidated statements of income (loss). During the three and six months ended June 30, 2020, we recorded net losses of $1 million and $3 million, respectively, through Other income on our consolidated statements of income (loss).