Mortgage Servicing (Tables)

12 Months Ended

Dec. 31, 2017

Summary of Activity in Carrying Value of Amortization Method Servicing Assets



	Years Ended December 31,
Mortgage Servicing Rights – Amortization Method	2017			2016			2015
Beginning balance	$	363,722		$	377,379		$	1,820,091
Fair value election - transfer to MSRs carried at fair value (1)	—			—			(787,142		)
Additions recognized in connection with asset acquisitions	1,658			17,356			12,355
Additions recognized on the sale of mortgage loans	20,738			37,230			34,962
Sales	(1,066		)	(24,452		)	(586,352		)
Servicing transfers and adjustments	252			—			—
	385,304			407,513			493,914
Decrease (increase) in impairment valuation allowance (2)	3,366			(10,813		)	(17,341		)
Amortization	(51,788		)	(32,978		)	(99,194		)
Ending balance	$	336,882		$	363,722		$	377,379

Estimated fair value at end of year	$	418,745		$	467,911		$	461,555

(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. 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.


(2)	Impairment of MSRs is recognized in Servicing and origination expense in the consolidated statements of operations. See Note 3 — Fair Value for additional information regarding impairment and the valuation allowance.

Schedule of Estimated Amortization Expense for MSRs

The estimated amortization expense for MSRs, calculated based on assumptions used at December 31, 2017, is projected as follows over the next five years:



2018	$	46,705
2019	38,141
2020	34,824
2021	33,578
2022	30,552

Summary of Activity Related to Fair Value Servicing Assets



	Years Ended December 31,
	2017									2016									2015
	Agency			Non-Agency			Total			Agency			Non-Agency			Total			Agency			Non-Agency			Total
Beginning balance	$	13,357		$	665,899		$	679,256		$	15,071		$	746,119		$	761,190		$	93,901		$	—		$	93,901
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	—			(540		)	(540		)	(3		)	(145		)	(148		)	(70,930		)	(1,344		)	(72,274		)
Additions recognized on the sale of residential mortgage loans	162			—			162			—			—			—			—			1,007			1,007
Servicing transfers and adjustments	—			(2,376		)	(2,376		)	—			(1,548		)	(1,548		)	—			(2,428		)	(2,428		)
Changes in fair value (1):
Changes in valuation inputs or other assumptions	243			86,721			86,964			305			—			305			(639		)	10,684			10,045
Realization of expected future cash flows and other changes	(1,802		)	(89,702		)	(91,504		)	(2,016		)	(78,527		)	(80,543		)	(7,261		)	(100,957		)	(108,218		)
Ending balance	$	11,960		$	660,002		$	671,962		$	13,357		$	665,899		$	679,256		$	15,071		$	746,119		$	761,190


(1)	Changes in fair value are recognized in Servicing and origination expense in the consolidated statements of operations.

Summary of Estimated Change in the Value of MSRs Carried at Fair Value

The following table summarizes the estimated change in the value of the MSRs that we carry at fair value as of December 31, 2017 given hypothetical shifts in lifetime prepayments and yield assumptions:



	Adverse change in fair value
	10%			20%
Weighted average prepayment speeds	$	(69,646	)	$	(133,017	)
Discount rate (option-adjusted spread)	(14,167		)	(27,901		)

Schedule of Composition of Primary Servicing and Subservicing Portfolios by Type of Property Serviced as Measured by UPB

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 consolidated balance sheets.



	Residential (1)		Commercial (2)		Total
UPB at December 31, 2017
Servicing	$	75,469,327	$	—	$	75,469,327
Subservicing	2,063,669		—		2,063,669
NRZ (3)	101,819,557		—		101,819,557
	$	179,352,553	$	—	$	179,352,553
UPB at December 31, 2016
Servicing	$	86,049,298	$	—	$	86,049,298
Subservicing	4,330,084		92,933		4,423,017
NRZ (3)	118,712,748		—		118,712,748
	$	209,092,130	$	92,933	$	209,185,063
UPB at December 31, 2015
Servicing	$	100,058,745	$	—	$	100,058,745
Subservicing	13,764,558		105,268		13,869,826
NRZ (3)	137,142,809		—		137,142,809
	$	250,966,112	$	105,268	$	251,071,380


(1)	Includes foreclosed real estate and small-balance commercial assets.


(2)	Consists of large-balance foreclosed real estate. During 2017, we sold or transferred servicing on the remaining managed assets.


(3)	UPB of loans serviced for which the Rights to MSRs have been sold to NRZ, including those subserviced for which third-party consents have been received and the MSRs have been transferred to NRZ.

Summary of Geographic Distributions of UPB and Count of Residential Loans and Real Estate Serviced

The geographic distribution of the UPB and count of residential loans and real estate we serviced was as follows:



	December 31, 2017
	Amount		Count
California	$	40,548,633	164,652
New York	17,132,957		72,500
Florida	15,133,283		114,070
New Jersey	8,843,459		43,819
Texas	8,130,540		95,999
Other	89,563,681		730,655
	$	179,352,553	1,221,695

Schedule of Components of Servicing and Subservicing Fees



	Years Ended December 31,
Servicing Revenue	2017		2016		2015
Loan servicing and subservicing fees
Servicing	$	257,419	$	293,210	$	453,445
Subservicing	7,775		21,427		58,384
NRZ	549,411		633,545		694,833
	814,605		948,182		1,206,662
Late charges	61,763		66,709		82,690
Home Affordable Modification Program (HAMP) fees (1)	43,310		110,367		135,036
Custodial accounts (float earnings)	25,237		8,969		15,870
Loan collection fees	22,770		27,213		31,763
Other	21,691		25,180		59,776
	$	989,376	$	1,186,620	$	1,531,797


(1)	The HAMP program expired on December 31, 2016. Borrowers who had requested assistance or to whom an offer of assistance had been extended as of that date had until September 30, 2017 to finalize their modification.