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Mortgage Servicing (Tables) | 3 Months Ended
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Mar. 31, 2015
Transfers and Servicing [Abstract] |
Schedule of Activity Related to MSRs - Amortization Method | The following table summarizes the activity in the carrying value of amortization method servicing assets for the three months ended March 31. Amortization of mortgage servicing rights is reported net of the amortization of any servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations, if any.
|  | 2015 |  | 2014
Beginning balance |  | $ | 1,820,091 |  |  | $ | 1,953,352 |
Fair value election - transfer to MSRs carried at fair value (1) |  | (787,142 | ) |  | — |
Additions recognized in connection with business acquisitions |  | — |  |  | 20,324 |
Additions recognized in connection with asset acquisitions |  | 3,267 |  |  | 6,697 |
Additions recognized on the sale of mortgage loans |  | 8,528 |  |  | 11,614 |
Sales (2) |  | (65,627 | ) |  | — |
Servicing transfers and adjustments |  | — |  |  | (364 | )
|  | 979,117 |  |  | 1,991,623 |
Amortization |  | (38,494 | ) |  | (62,094 | )
Impairment (3) |  | (17,769 | ) |  | — |
Ending balance |  | $ | 922,854 |  |  | $ | 1,929,529 |
Estimated fair value at end of period |  | $ | 1,064,134 |  |  | $ | 2,774,910 |
(1) | Effective January 1, 2015, we elected fair value accounting for a newly-created class of non-Agency MSRs, which were previously accounted for using the amortization method. This irrevocable election applies to all subsequently acquired or originated servicing assets and liabilities that have characteristics consistent with this class. We recorded a cumulative-effect adjustment of $52.0 million (before deferred income taxes of $9.2 million) to retained earnings as of January 1, 2015 to reflect the excess of the fair value of these MSRs over their carrying amount. At December 31, 2014, the UPB of the non-Agency MSRs for which the fair value election was made was $195.3 billion.
(2) | On March 31, 2015, we closed on the sale of Agency MSRs on a portfolio consisting of 76,000 performing loans owned by Freddie Mac with a total UPB of $9.1 billion. We completed the transfer of the loan servicing on April 16, 2015.
(3) | We established a $17.8 million valuation allowance related to impairment on our government-insured MSRs, as the fair value for this stratum was less than its carrying value. This impairment was primarily due to the FHA reducing the mortgage insurance premium rate by 50 basis points during the quarter, which created a significantly lower interest rate for existing FHA borrowers and in turn, generated higher projected prepayment speed and shorter asset life inputs used to value these MSRs. The impairment charge is recognized in Servicing and origination expense in the unaudited Consolidated Statements of Operations.
Schedule of Activity Related to MSRs - Fair Value Measurement Method | The following table summarizes the activity related to fair value servicing assets for the three months ended March 31:
| 2015 |  | 2014
| Agency | Non-Agency | Total |  |
Beginning balance | $ | 93,901 |  | $ | — |  | $ | 93,901 |  |  | $ | 116,029 |
Fair value election - transfer from MSRs carried at amortized cost | — |  | 787,142 |  | 787,142 |  |  | — |
Cumulative effect of fair value election | — |  | 52,015 |  | 52,015 |  |  |
Sales | — |  | (947 | ) | (947 | ) |  | — |
Servicing transfers and adjustments | — |  | (1,139 | ) | (1,139 | ) |  | — |
Changes in fair value (1): |  |  |  |  |
Changes in valuation inputs or other assumptions | (6,110 | ) | — |  | (6,110 | ) |  | (3,155 | )
Realization of expected future cash flows and other changes | (3,276 | ) | (23,789 | ) | (27,065 | ) |  | (2,048 | )
Ending balance | $ | 84,515 |  | $ | 813,282 |  | $ | 897,797 |  |  | $ | 110,826 |
(1) | Changes in fair value are recognized in Servicing and origination expense in the unaudited Consolidated Statements of Operations.
Schedule of Estimated Change in Fair Value of MSRs | The following table summarizes the estimated change in the value of the MSRs that we carry at fair value as of March 31, 2015 given hypothetical instantaneous parallel shifts in the yield curve:
| Adverse change in fair value
| 10% |  | 20%
Weighted average prepayment speeds | $ | (40,557 | ) |  | $ | (101,371 | )
Discount rate (option-adjusted spread) | $ | (22,770 | ) |  | $ | (44,842 | )
Schedule of Composition of Servicing and Subservicing Portfolios by Type of Property Serviced | The following table presents the composition of our primary 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. The UPB of assets serviced for others are not included on our unaudited Consolidated Balance Sheets.
| Residential |  | Commercial |  | Total
UPB at March 31, 2015 |  |  |  |  |  |  |  |
Servicing (1) | $ | 337,125,187 |  |  | $ | — |  |  | $ | 337,125,187 |
Subservicing | 45,088,815 |  |  | 161,887 |  |  | 45,250,702 |
| $ | 382,214,002 |  |  | $ | 161,887 |  |  | $ | 382,375,889 |
UPB at December 31, 2014 |  |  |  |  |  |  |  |
Servicing (1) | $ | 361,288,281 |  |  | $ | — |  |  | $ | 361,288,281 |
Subservicing | 37,439,446 |  |  | 149,737 |  |  | 37,589,183 |
| $ | 398,727,727 |  |  | $ | 149,737 |  |  | $ | 398,877,464 |
UPB at March 31, 2014 |  |  |  |  |  |  |  |
Servicing (1) | $ | 391,701,237 |  |  | $ | — |  |  | $ | 391,701,237 |
Subservicing | 57,869,359 |  |  | 318,507 |  |  | 58,187,866 |
| $ | 449,570,596 |  |  | $ | 318,507 |  |  | $ | 449,889,103 |
(1) | Includes primary servicing UPB of $156.3 billion, $160.8 billion and $170.8 billion at March 31, 2015, December 31, 2014 and March 31, 2014, respectively, for which the Rights to MSRs have been sold to HLSS.
Schedule of Components of Servicing and Subservicing Fees | The following table presents the components of servicing and subservicing fees for the three months ended March 31:
| 2015 |  | 2014
Loan servicing and subservicing fees: |  |  |
Servicing | $ | 320,085 |  |  | $ | 351,823 |
Subservicing | 30,457 |  |  | 33,725 |
| 350,542 |  |  | 385,548 |
Home Affordable Modification Program (HAMP) fees | 35,176 |  |  | 36,699 |
Late charges | 24,122 |  |  | 36,835 |
Loan collection fees | 9,563 |  |  | 8,294 |
Custodial accounts (float earnings) | 1,896 |  |  | 1,721 |
Other | 25,242 |  |  | 21,362 |
| $ | 446,541 |  |  | $ | 490,459 |

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- Definition Tabular disclosure of the activity in the balance of servicing assets (including a description of where changes in fair value are reported in the statement of income for each period for which results of operations are presented), including but not limited to, the following: beginning and ending balances, additions (for instance, through purchases of servicing assets), disposals, changes in fair value during the period resulting from changes in inputs or assumptions used in the valuation model, other changes in fair value along with a description of those changes, and other changes that affect the balance along with a description of those changes. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 3 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122625-111746 + Details
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