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NOTE 9 MORTGAGE SERVICING | 3 Months Ended
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Mar. 31, 2013
Transfers and Servicing [Abstract] |
MORTGAGE SERVICING |
| Note 9 | Mortgage Servicing
Mortgage Servicing Rights – Amortization Method The following table summarizes our activity related to MSRs for the three months ended March 31:
|  | 2013 |  |  | 2012 |
Balance at December 31, 2012 |  | $ | 676,712 |  |  | $ | 293,152 |
Additions recognized in connection with purchase transactions (1) |  |  | 394,862 |  |  |  | — |
Additions recognized on sale of residential mortgage loans |  |  | 28,705 |  |  |  | — |
Servicing transfers, adjustments and other |  |  | (124 | ) |  |  | (204 | )
Amortization (2) |  |  | (47,987 | ) |  |  | (15,232 | )
Balance at March 31, 2013 |  | $ | 1,052,168 |  |  | $ | 277,716 |
Estimated fair value at March 31 |  | $ | 1,288,732 |  |  | $ | 316,078 |
| (1) | Includes $393.9 million acquired in the ResCap Acquisition. See Note 3 – Business Acquisitions for additional information.
| (2) | Amortization of mortgage servicing rights is reported net of the amortization of servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations.
As disclosed in Note 4 – Asset Sales and Financing, we sold certain Rights to MSRs during 2012 and in the first quarter of 2013 as part of the HLSS Transactions. The carrying value of the related MSRs which have not been derecognized at March 31, 2013 was $357.0 million. Mortgage Servicing Rights—Fair Value Measurement Method This portfolio comprises servicing rights for which we elected the fair value option and includes prime mortgage loans that were acquired by Homeward through asset or flow purchases or retained on loans originated and subsequently sold for which we hedged the related market risks. The following table summarizes our activity related to our fair value MSRs for the three months ended March 31, 2013:
Balance at December 31, 2012 |  | $ | 85,213 |
Changes in fair value: |  |  |  |
Due to changes in valuation assumptions |  |  | 4,650 |
Realization of cash flows and other changes |  |  | (5,329 | )
Balance at March 31, 2013 |  | $ | 84,534 |
Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the MSRs generally tends to diminish in periods of declining interest rates (as prepayments increase) and increase in periods of rising interest rates (as prepayments decrease). The following table summarizes the estimated change in the fair value of our MSRs as of March 31, 2013 given hypothetical instantaneous parallel shifts in the yield curve:
|  | Adverse change in fair value |
|  | 10% |  |  | 20% |
Weighted average prepayment speeds |  | $ | (5,164 | ) |  | $ | (9,912 | )
Discount rate (Option-adjusted spread) |  | $ | (2,804 | ) |  | $ | (5,444 | )
The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates. Servicing Revenue The following table presents the components of servicing and subservicing fees for the three months ended March 31:
|  | 2013 |  |  | 2012 |
Loan servicing and subservicing fees |  | $ | 269,022 |  |  | $ | 112,589 |
Home Affordable Modification Program (HAMP) fees |  |  | 40,147 |  |  |  | 12,684 |
Late charges |  |  | 25,896 |  |  |  | 18,845 |
Loan collection fees |  |  | 6,382 |  |  |  | 3,339 |
Float earnings |  |  | 1,680 |  |  |  | 787 |
Other |  |  | 26,182 |  |  |  | 6,859 |
|  | $ | 369,309 |  |  | $ | 155,103 |
Portfolio of Assets Serviced The following table presents the composition of our servicing and subservicing portfolios by type of property serviced as measured by UPB. The servicing portfolio represents loans for which we own the MSRs while subservicing represents all other loans.
|  | Residential |  |  | Commercial |  |  | Total |
UPB at March 31, 2013 |  |  |  |  |  |  |  |  |  |  |  |
Servicing (1) |  | $ | 273,970,522 |  |  | $ | — |  |  | $ | 273,970,522 |
Subservicing |  |  | 195,484,010 |  |  |  | 392,584 |  |  |  | 195,876,594 |
|  | $ | 469,454,532 |  |  | $ | 392,584 |  |  | $ | 469,847,116 |
UPB at December 31, 2012 |  |  |  |  |  |  |  |  |  |  |  |
Servicing (1) |  | $ | 175,762,161 |  |  | $ | — |  |  | $ | 175,762,161 |
Subservicing |  |  | 27,903,555 |  |  |  | 401,031 |  |  |  | 28,304,586 |
|  | $ | 203,665,716 |  |  | $ | 401,031 |  |  | $ | 204,066,747 |
| (1) | Includes UPB of $92.5 billion and $79.4 billion at March 31, 2013 and December 31, 2012, respectively, for which the Rights to MSRs have been sold to HLSS.
Residential assets serviced consist principally of residential mortgage loans, but also include foreclosed real estate. Residential assets serviced also include small-balance commercial assets with a UPB of $2.0 billion and $2.1 billion at March 31, 2013 and December 31, 2012, respectively, that are managed using the REALServicing™ application. Commercial assets consist of large-balance foreclosed real estate. Assets serviced for others are not included on our unaudited Consolidated Balance Sheet. Custodial accounts, which hold funds representing collections of principal and interest that we receive from borrowers, are held in escrow by an unaffiliated bank and are excluded from our unaudited Consolidated Balance Sheet. Custodial accounts amounted to $4.7 billion and $1.3 billion at March 31, 2013 and December 31, 2012, respectively.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122739-111746 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS140-4/FIN46(R)-8 -Paragraph 6 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=13989330&loc=d3e107207-111719 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Staff Position (FSP) -Number FAS140-4/FIN46(R)-8 -Paragraph B1-B12 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=13989330&loc=d3e107314-111719 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7519067&loc=SL6226443-111709 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122625-111746 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7519067&loc=SL6226446-111709 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122596-111746 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 140 -Paragraph 17 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7523297&loc=d3e113969-111729 + Details
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