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Mortgage Servicing | 3 Months Ended
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Mar. 31, 2017
Transfers and Servicing [Abstract] |
Mortgage Servicing | Note 8 – Mortgage Servicing Mortgage Servicing Rights – 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 Three Months Ended March 31,
| 2017 |  | 2016
Beginning balance | $ | 363,722 |  |  | $ | 377,379 |
Additions recognized in connection with asset acquisitions | 1,229 |  |  | 4,263 |
Additions recognized on the sale of mortgage loans | 8,126 |  |  | 7,156 |
Sales | (430 | ) |  | — |
| 372,647 |  |  | 388,798 |
Amortization | (12,715 | ) |  | (12,806 | )
Increase in impairment valuation allowance (1) | (1,401 | ) |  | (29,953 | )
Ending balance | $ | 358,531 |  |  | $ | 346,039 |
Estimated fair value at end of period | $ | 462,289 |  |  | $ | 390,970 |
(1) | Impairment of MSRs is recognized in Servicing and origination expense in the unaudited consolidated statements of operations. See Note 3 – Fair Value for additional information regarding impairment and the valuation allowance.
Mortgage Servicing Rights – 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 Three Months Ended March 31,
| 2017 |  | 2016
| Agency |  | Non-Agency |  | Total |  | Agency |  | Non-Agency |  | Total
Beginning balance | $ | 13,357 |  |  | $ | 665,899 |  |  | $ | 679,256 |  |  | $ | 15,071 |  |  | $ | 746,119 |  |  | $ | 761,190 |
Sales | — |  |  | (228 | ) |  | (228 | ) |  | — |  |  | (142 | ) |  | (142 | )
Servicing transfers and adjustments | — |  |  | (706 | ) |  | (706 | ) |  | — |  |  | 419 |  |  | 419 |
Changes in fair value (1): |  |  |  |  |  |  |  |  |  |  |
Changes in valuation inputs or other assumptions | 494 |  |  | — |  |  | 494 |  |  | (2,709 | ) |  | (3,671 | ) |  | (6,380 | )
Realization of expected future cash flows and other changes | (445 | ) |  | (26,384 | ) |  | (26,829 | ) |  | (351 | ) |  | (22,562 | ) |  | (22,913 | )
Ending balance | $ | 13,406 |  |  | $ | 638,581 |  |  | $ | 651,987 |  |  | $ | 12,011 |  |  | $ | 720,163 |  |  | $ | 732,174 |
(1) | Changes in fair value are recognized in Servicing and origination expense in the unaudited consolidated statements of operations.
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, an improving housing market or expanded product availability (as prepayments increase) and increase in periods of rising interest rates, a deteriorating housing market or reduced product availability (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs that we carry at fair value as of March 31, 2017 given hypothetical shifts in lifetime prepayments and yield assumptions:
| Adverse change in fair value
| 10% |  | 20%
Weighted average prepayment speeds | $ | (63,546 | ) |  | $ | (129,059 | )
Discount rate (option-adjusted spread) | (12,177 | ) |  | (24,349 | )
The sensitivity analysis measures the potential impact on fair values based on hypothetical changes, which in the case of our portfolio at March 31, 2017 are increased prepayment speeds and a decrease in the yield assumption. Portfolio of Assets 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 March 31, 2017 |  |  |  |  |  |  |  |
Servicing | $ | 83,841,793 |  |  | $ | — |  |  | $ | 83,841,793 |
Subservicing | 4,196,729 |  |  | 92,817 |  |  | 4,289,546 |
NRZ (1) | 114,330,492 |  |  | — |  |  | 114,330,492 |
| $ | 202,369,014 |  |  | $ | 92,817 |  |  | $ | 202,461,831 |
UPB at December 31, 2016 |  |  |  |  |  |  |  |
Servicing | $ | 86,049,298 |  |  | $ | — |  |  | $ | 86,049,298 |
Subservicing | 4,330,084 |  |  | 92,933 |  |  | 4,423,017 |
NRZ (1) | 118,712,748 |  |  | — |  |  | 118,712,748 |
| $ | 209,092,130 |  |  | $ | 92,933 |  |  | $ | 209,185,063 |
UPB at March 31, 2016 |  |  |  |  |  |  |  |
Servicing | $ | 97,826,653 |  |  | $ | — |  |  | $ | 97,826,653 |
Subservicing | 6,517,180 |  |  | 136,473 |  |  | 6,653,653 |
NRZ (1) | 132,737,203 |  |  | — |  |  | 132,737,203 |
| $ | 237,081,036 |  |  | $ | 136,473 |  |  | $ | 237,217,509 |
(1) | UPB of loans serviced for which the Rights to MSRs have been sold to NRZ.
Residential assets serviced includes foreclosed real estate. Residential assets serviced also includes small-balance commercial assets with a UPB of $1.4 billion, $1.4 billion and $1.7 billion at March 31, 2017, December 31, 2016 and March 31, 2016, respectively. Commercial assets consist of large-balance foreclosed real estate. A significant portion of the servicing agreements for our non-Agency servicing portfolio contain provisions where we could be terminated as servicer without compensation upon the failure of the serviced loans to meet certain portfolio delinquency or cumulative loss thresholds. As a result of the economic downturn beginning in 2007 - 2008, the portfolio delinquency and/or cumulative loss threshold provisions have been breached by many private-label securitizations in our non-Agency servicing portfolio. To date, terminations as servicer as a result of a breach of any of these provisions have been minimal. Certain of our servicing agreements require that we maintain specified servicer ratings from rating agencies such as Moody’s and S&P. Of 3,762 non-Agency servicing agreements, 721 with approximately $33.1 billion of UPB as of March 31, 2017 have minimum servicer ratings criteria. As a result of our current servicer ratings, termination rights have been triggered in 174 of these non-Agency servicing agreements. This represents approximately $10.5 billion in UPB as of March 31, 2017, or approximately 6.8% of our total non-Agency servicing portfolio. Downgrades in servicer ratings could adversely affect our ability to finance servicing advances and maintain our status as an approved servicer by Fannie Mae and Freddie Mac. The servicer rating requirements of Fannie Mae do not necessarily require or imply immediate action, as Fannie Mae has discretion with respect to whether we are in compliance with their requirements and what actions it deems appropriate under the circumstances in the event that we fall below their desired servicer ratings. Servicing Revenue The following table presents the components of servicing and subservicing fees:
| For the Three Months Ended March 31,
| 2017 |  | 2016
Loan servicing and subservicing fees: |  |  |
Servicing | $ | 67,172 |  |  | $ | 76,509 |
Subservicing | 3,605 |  |  | 7,239 |
NRZ | 147,311 |  |  | 162,129 |
| 218,088 |  |  | 245,877 |
Home Affordable Modification Program (HAMP) fees | 20,983 |  |  | 22,618 |
Late charges | 16,784 |  |  | 18,603 |
Loan collection fees | 6,318 |  |  | 7,129 |
Other | 10,329 |  |  | 3,269 |
| $ | 272,502 |  |  | $ | 297,496 |
Float balances (balances in custodial accounts, which represent 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 sheets. Float balances amounted to $2.0 billion and $2.3 billion at March 31, 2017 and March 31, 2016, 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 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=64830801&loc=d3e107207-111719 Reference 2: 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=68078379&loc=d3e122596-111746 Reference 3: 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=68078379&loc=d3e122739-111746 Reference 4: 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=68078379&loc=d3e122625-111746 Reference 5: 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=65883692&loc=SL6226446-111709 Reference 6: 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=64830801&loc=d3e107314-111719 Reference 7: 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=65883692&loc=SL6226443-111709 + Details
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