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Mortgage Servicing (Tables)
 3 Months Ended
Mar. 31, 2018
Transfers and Servicing [Abstract]  
Schedule of Activity Related to MSRs - Amortization Method
Mortgage Servicing Rights – Amortization Method
Three Months Ended March 31,
2018
 
2017
Beginning balance
$
336,882

 
$
363,722

Fair value election - transfer of MSRs carried at fair value (1)
(361,670
)
 
—

Additions recognized in connection with asset acquisitions
—

 
1,229

Additions recognized on the sale of mortgage loans
—

 
8,126

Sales and other transfers
—

 
(430
)
 
(24,788
)
 
372,647

Amortization (1)
—

 
(12,715
)
(Increase) decrease in impairment valuation allowance (1) (2)
24,788

 
(1,401
)
Ending balance
$
—

 
$
358,531

 
 
 
 
Estimated fair value at end of period
$
—

 
$
462,289


(1)
Effective January 1, 2018, we elected fair value accounting for our MSRs previously accounted for using the amortization method, which included Agency MSRs and government-insured MSRs. This irrevocable election applies to all subsequently acquired or originated servicing assets and liabilities that have characteristics consistent with each of these classes. We recorded a cumulative-effect adjustment of $82.0 million to retained earnings as of January 1, 2018 to reflect the excess of the fair value of the Agency MSRs over their carrying amount. We also recognized the tax effect of this adjustment through an increase in retained earnings of $6.8 million and a deferred tax asset for the same amount. However, we established a full valuation allowance on the resulting deferred tax asset through a reduction in retained earnings. The government-insured MSRs were impaired by $24.8 million at December 31, 2017; therefore, these MSRs were already effectively carried at fair value.
(2)
Impairment of MSRs is recognized in MSR valuation adjustments, net in the unaudited consolidated statements of operations for the three months ended March 31, 2017. Impairment valuation allowance balance of $24.8 million was reclassified to reduce the carrying value of the related MSRs on January 1, 2018 in connection with our fair value election. See Note 3 – Fair Value for additional information regarding impairment and the valuation allowance.
Schedule of Activity Related to MSRs - Fair Value Measurement Method
Mortgage Servicing Rights – Fair Value Measurement Method
Three Months Ended March 31,
2018
 
2017
 
Agency
 
Non-Agency
 
Total
 
Agency
 
Non-Agency
 
Total
Beginning balance
$
11,960

 
$
660,002

 
$
671,962

 
$
13,357

 
$
665,899

 
$
679,256

Fair value election - transfer of MSRs carried at amortized cost, net of valuation allowance
336,882

 
—

 
336,882

 
—

 
—

 
—

Cumulative effect of fair value election
82,043

 
—

 
82,043

 
—

 
—

 
—

Sales and other transfers
—

 
(131
)
 
(131
)
 
—

 
(228
)
 
(228
)
Additions recognized on the sale of residential mortgage loans
2,378

 
—

 
2,378

 
—

 
—

 
—

Servicing transfers and adjustments
(1
)
 
(1,757
)
 
(1,758
)
 
—

 
(706
)
 
(706
)
Changes in fair value (1):
 
 
 
 

 
 
 
 
 

Changes in valuation inputs or other assumptions
20,460

 
—

 
20,460

 
494

 
—

 
494

Realization of expected future cash flows and other changes
(15,501
)
 
(22,088
)
 
(37,589
)
 
(445
)
 
(26,384
)
 
(26,829
)
Ending balance
$
438,221

 
$
636,026

 
$
1,074,247

 
$
13,406

 
$
638,581

 
$
651,987

(1)
Changes in fair value are recognized in MSR valuation adjustments, net 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, 2018 given hypothetical shifts in lifetime prepayments and yield assumptions:
 
Adverse change in fair value
 
10%
 
20%
Weighted average prepayment speeds
$
(94,723
)
 
$
(182,554
)
Discount rate (option-adjusted spread)
(30,858
)
 
(59,638
)
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 (1)
 
Commercial (2)
 
Total
UPB at March 31, 2018
 

 
 

 
 

Servicing
$
73,264,640

 
$
—

 
$
73,264,640

Subservicing
1,792,880

 
—

 
1,792,880

NRZ (3)
98,331,356

 
—

 
98,331,356

 
$
173,388,876

 
$
—

 
$
173,388,876

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 March 31, 2017
 

 
 

 
 

Servicing
$
83,841,793

 
$
—

 
$
83,841,793

Subservicing
4,196,729

 
92,817

 
4,289,546

NRZ (3)
114,330,492

 
—

 
114,330,492

 
$
202,369,014

 
$
92,817

 
$
202,461,831

(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.
Schedule of Components of Servicing and Subservicing Fees

Servicing Revenue
Three Months Ended March 31,
 
2018
 
2017
 
Loan servicing and subservicing fees
 
 
 
 
Servicing
$
58,995

 
$
67,172

 
Subservicing
914

 
3,605

 
NRZ
127,017

 
147,311

 
 
186,926

 
218,088

 
Late charges
14,589

 
16,784

 
Custodial accounts (float earnings)
7,263

 
4,819

 
Loan collection fees
5,018

 
6,318

 
Home Affordable Modification Program (HAMP) fees (1)
4,104

 
20,983

 
Other
4,238

 
5,510

 
 
$
222,138

 
$
272,502

 

(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.