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Mortgage Servicing (Tables) | 9 Months Ended
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Sep. 30, 2016
Transfers and Servicing [Abstract] |
Schedule of Activity Related to MSRs - Amortization Method | The following table summarizes changes in the net carrying value of servicing assets that we account for using the amortization method for the nine months ended September 30:
| 2016 |  | 2015
Beginning balance | $ | 377,379 |  |  | $ | 1,820,091 |
Fair value election - transfer of MSRs carried at fair value (1) | — |  |  | (787,142 | )
Additions recognized in connection with asset acquisitions | 15,968 |  |  | 10,055 |
Additions recognized on the sale of mortgage loans | 26,494 |  |  | 27,791 |
Sales | (23,521 | ) |  | (591,605 | )
| 396,320 |  |  | 479,190 |
Amortization (2) | (18,595 | ) |  | (88,188 | )
Increase in impairment valuation allowance (3) | (37,164 | ) |  | (25,051 | )
Ending balance | $ | 340,561 |  |  | $ | 365,951 |
Estimated fair value at end of period | $ | 357,817 |  |  | $ | 404,533 |
(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, based on a different strategy for managing the risks of the underlying portfolio compared to our other MSR classes. 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 loans related to the non-Agency MSRs for which the fair value election was made was $195.3 billion.
(2) | During 2016, principally in the third quarter, we participated in HUD’s Aged Delinquent Portfolio Loan Sale (ADPLS) program, which accelerates FHA insurance claims for a population of significantly delinquent FHA loans. The expedited claim filing process allows a servicer to reduce significantly its standard claim losses on accepted loans by shortening the servicing timeline and related expenses, some of which are not reimbursed by FHA insurance. Our participation required that we recognize $23.1 million of life-to-date losses on the claims filed in the third quarter. This loss is reported in Servicing and origination expense in the Unaudited Consolidated Statements of Operations. Because the MSRs related to the loans that were assigned to HUD had negative carrying values, our recognition of the losses on the loans reduced the negative carrying value of the MSRs thereby generating negative amortization expense for this population of MSRs. In the third quarter, this ADPLS-related negative amortization expense of $18.1 million exceeded the positive amortization expense on the remaining MSRs, generating net negative amortization for the quarter.
(3) | Impairment of MSRs is recognized in Servicing and origination expense. See Note 3 – Fair Value for additional information regarding impairment and the valuation allowance.
Schedule of Activity Related to MSRs - Fair Value Measurement Method | The following table summarizes changes in the fair value of servicing assets that we account for at fair value on a recurring basis for the nine months ended September 30:
| 2016 |  | 2015
| Agency |  | Non-Agency |  | Total |  | Agency |  | Non-Agency |  | Total
Beginning balance | $ | 15,071 |  |  | $ | 746,119 |  |  | $ | 761,190 |  |  | $ | 93,901 |  |  | $ | — |  |  | $ | 93,901 |
Fair value election - transfer of MSRs carried at amortized cost | — |  |  | — |  |  | — |  |  | — |  |  | 787,142 |  |  | 787,142 |
Cumulative effect of fair value election | — |  |  | — |  |  | — |  |  | — |  |  | 52,015 |  |  | 52,015 |
Sales | (3 | ) |  | (145 | ) |  | (148 | ) |  | (70,084 | ) |  | (1,234 | ) |  | (71,318 | )
Servicing transfers and adjustments | — |  |  | (1,326 | ) |  | (1,326 | ) |  | — |  |  | (1,139 | ) |  | (1,139 | )
Changes in fair value (1): |  |  |  |  |  |  |  |  |  |  |
Changes in valuation inputs or other assumptions | (4,654 | ) |  | — |  |  | (4,654 | ) |  | (2,592 | ) |  | 12,031 |  |  | 9,439 |
Realization of expected future cash flows and other changes | (1,399 | ) |  | (57,555 | ) |  | (58,954 | ) |  | (6,808 | ) |  | (75,888 | ) |  | (82,696 | )
Ending balance | $ | 9,015 |  |  | $ | 687,093 |  |  | $ | 696,108 |  |  | $ | 14,417 |  |  | $ | 772,927 |  |  | $ | 787,344 |
(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 September 30, 2016 given hypothetical shifts in lifetime prepayments and yield assumptions:
| Adverse change in fair value
| 10% |  | 20%
Weighted average prepayment speeds | $ | (66,764 | ) |  | $ | (135,780 | )
Discount rate (option-adjusted spread) | $ | (18,758 | ) |  | $ | (34,142 | )
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 servicing rights 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 September 30, 2016 |  |  |  |  |  |  |  |
Servicing | $ | 206,615,310 |  |  | $ | — |  |  | $ | 206,615,310 |
Subservicing | 10,276,692 |  |  | 151,432 |  |  | 10,428,124 |
| $ | 216,892,002 |  |  | $ | 151,432 |  |  | $ | 217,043,434 |
UPB at December 31, 2015 |  |  |  |  |  |  |  |
Servicing | $ | 230,132,729 |  |  | $ | — |  |  | $ | 230,132,729 |
Subservicing | 20,833,383 |  |  | 105,268 |  |  | 20,938,651 |
| $ | 250,966,112 |  |  | $ | 105,268 |  |  | $ | 251,071,380 |
UPB at September 30, 2015 |  |  |  |  |  |  |  |
Servicing | $ | 238,108,447 |  |  | $ | — |  |  | $ | 238,108,447 |
Subservicing | 49,960,702 |  |  | 180,877 |  |  | 50,141,579 |
| $ | 288,069,149 |  |  | $ | 180,877 |  |  | $ | 288,250,026 |
Schedule of Components of Servicing and Subservicing Fees | The following table presents the components of servicing and subservicing fees for the periods ended September 30:
| Three Months |  | Nine Months
| 2016 |  | 2015 |  | 2016 |  | 2015
Loan servicing and subservicing fees: |  |  |  |  |  |  |
Servicing | $ | 232,013 |  |  | $ | 274,089 |  |  | $ | 706,194 |  |  | $ | 904,062 |
Subservicing | 5,000 |  |  | 14,354 |  |  | 17,494 |  |  | 48,004 |
| 237,013 |  |  | 288,443 |  |  | 723,688 |  |  | 952,066 |
Home Affordable Modification Program (HAMP) fees | 32,029 |  |  | 32,318 |  |  | 88,141 |  |  | 108,698 |
Late charges | 15,225 |  |  | 19,162 |  |  | 51,301 |  |  | 63,557 |
Loan collection fees | 6,746 |  |  | 6,682 |  |  | 20,860 |  |  | 25,176 |
Other | 11,222 |  |  | 13,412 |  |  | 23,003 |  |  | 54,044 |
| $ | 302,235 |  |  | $ | 360,017 |  |  | $ | 906,993 |  |  | $ | 1,203,541 |

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- Definition Tabular disclosure of a sensitivity analysis or stress test showing the hypothetical effect on the fair value of the transferor's interests in transferred financial assets (including any servicing assets or servicing liabilities) of two or more unfavorable variations from the expected levels for each key assumption that is reported, independently determined from any change in another key assumption, and a description of the objectives, methodology, and limitations of the sensitivity analysis or stress test. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 4 -Subparagraph (d) -URI http://asc.fasb.org/extlink&oid=64830801&loc=d3e107314-111719 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 4 -Subparagraph (c) -URI http://asc.fasb.org/extlink&oid=64830801&loc=d3e107314-111719 + Details
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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=68078379&loc=d3e122625-111746 + Details
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