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Mortgage Servicing (Tables)
 6 Months Ended
Jun. 30, 2018
Transfers and Servicing [Abstract]  
Schedule of Activity Related to MSRs - Amortization Method
Mortgage Servicing Rights – Amortization Method
Six Months Ended June 30,
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
—

 
1,657

Additions recognized on the sale of mortgage loans
—

 
15,032

Sales and other transfers
—

 
(1,066
)
Servicing transfers and adjustments
—

 
252

 
(24,788
)
 
379,597

Amortization (1)
—

 
(25,412
)
(Increase) decrease in impairment valuation allowance (1) (2)
24,788

 
(4,650
)
Ending balance
$
—

 
$
349,535

 
 
 
 
Estimated fair value at end of period
$
—

 
$
440,311


(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 six months ended June 30, 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
Six Months Ended June 30,
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
—

 
(155
)
 
(155
)
 
—

 
(230
)
 
(230
)
Additions
5,885

 
—

 
5,885

 
—

 
—

 
—

Servicing transfers and adjustments
—

 
(2,375
)
 
(2,375
)
 
—

 
(1,417
)
 
(1,417
)
Changes in fair value (1):
 
 
 
 

 
 
 
 
 

Changes in valuation inputs or other assumptions
20,460

 
4,989

 
25,449

 
36

 
—

 
36

Realization of expected future cash flows and other changes
(29,633
)
 
(46,063
)
 
(75,696
)
 
(950
)
 
(51,045
)
 
(51,995
)
Ending balance
$
427,597

 
$
616,398

 
$
1,043,995

 
$
12,443

 
$
613,207

 
$
625,650

(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 June 30, 2018 given hypothetical shifts in lifetime prepayments and yield assumptions:
 
Adverse change in fair value
 
10%
 
20%
Weighted average prepayment speeds
$
(94,457
)
 
$
(182,012
)
Discount rate (option-adjusted spread)
(30,071
)
 
(57,859
)
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 June 30, 2018
 

 
 

 
 

Servicing
$
70,796,834

 
$
—

 
$
70,796,834

Subservicing
1,600,289

 
—

 
1,600,289

NRZ (3)
94,729,891

 
—

 
94,729,891

 
$
167,127,014

 
$
—

 
$
167,127,014

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 June 30, 2017
 

 
 

 
 

Servicing
$
81,319,908

 
$
—

 
$
81,319,908

Subservicing
3,869,084

 
53,127

 
3,922,211

NRZ (3)
109,609,432

 
—

 
109,609,432

 
$
194,798,424

 
$
53,127

 
$
194,851,551

(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 June 30,
 
Six Months Ended June 30,
2018
 
2017
 
2018
 
2017
Loan servicing and subservicing fees
 
 
 
 
 
 
 
Servicing
$
55,783

 
$
66,018

 
$
114,779

 
$
134,640

Subservicing
871

 
1,964

 
1,786

 
4,118

NRZ
126,712

 
143,612

 
253,729

 
290,923

 
183,366

 
211,594

 
370,294

 
429,681

Late charges
15,315

 
15,610

 
29,904

 
32,394

Custodial accounts (float earnings)
8,461

 
6,014

 
15,724

 
10,833

Loan collection fees
4,767

 
5,936

 
9,785

 
12,255

Home Affordable Modification Program (HAMP) fees (1)
4,153

 
10,506

 
8,256

 
31,489

Other
6,165

 
6,141

 
10,402

 
11,651

 
$
222,227

 
$
255,801

 
$
444,365

 
$
528,303


(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.