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Mortgage Servicing (Tables)
 9 Months Ended
Sep. 30, 2018
Transfers and Servicing [Abstract]  
Schedule of Activity Related to MSRs - Amortization Method
Mortgage Servicing Rights – Amortization Method
Nine Months Ended September 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
—

 
1,658

Additions recognized on the sale of mortgage loans
—

 
18,604

Sales and other transfers
—

 
(814
)
 
(24,788
)
 
383,170

Amortization (1)
—

 
(38,560
)
Decrease in impairment valuation allowance (1) (2)
24,788

 
1,551

Ending balance
$
—

 
$
346,161

 
 
 
 
Estimated fair value at end of period
$
—

 
$
424,208


(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 nine months ended September 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
Nine Months Ended September 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
(5,950
)
 
(175
)
 
(6,125
)
 
—

 
(2,672
)
 
(2,672
)
Additions
8,809

 
—

 
8,809

 
—

 
—

 
—

Servicing transfers and adjustments
—

 
(2,594
)
 
(2,594
)
 
—

 
—

 
—

Changes in fair value (1):
 
 
 
 

 
 
 
 
 

Changes in valuation inputs or other assumptions
19,217

 
(424
)
 
18,793

 
(131
)
 
2,303

 
2,172

Realization of expected future cash flows and other changes
(43,545
)
 
(66,943
)
 
(110,488
)
 
(1,385
)
 
(79,224
)
 
(80,609
)
Ending balance
$
409,416

 
$
589,866

 
$
999,282

 
$
11,841

 
$
586,306

 
$
598,147

(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 September 30, 2018 given hypothetical shifts in lifetime prepayments and yield assumptions:
 
Adverse change in fair value
 
10%
 
20%
Weighted average prepayment speeds
$
(92,659
)
 
$
(178,462
)
Discount rate (option-adjusted spread)
(28,326
)
 
(54,351
)
Schedule of Composition of Servicing and Subservicing Portfolios by Type of Property Serviced
The following table presents the composition of our residential primary servicing and subservicing portfolios as measured by UPB, including foreclosed real estate and small-balance commercial loans. 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.
UPB at September 30, 2018
 

Servicing
$
68,076,254

Subservicing
1,387,641

NRZ (1)
91,532,579

 
$
160,996,474

UPB at December 31, 2017
 

Servicing
$
75,469,327

Subservicing
2,063,669

NRZ (1)
101,819,557

 
$
179,352,553

UPB at September 30, 2017
 

Servicing
$
78,254,463

Subservicing (2)
3,656,197

NRZ (1)
105,557,658

 
$
187,468,318

(1)
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.
(2)
Excludes $9.8 million of large-balance commercial foreclosed real estate. During 2017, we sold or transferred servicing on the remaining managed assets.
Schedule of Components of Servicing and Subservicing Fees
Servicing Revenue
Three Months Ended September 30,
 
Nine Months Ended September 30,
2018
 
2017
 
2018
 
2017
Loan servicing and subservicing fees
 
 
 
 
 
 
 
Servicing
$
52,610

 
$
63,071

 
$
167,389

 
$
197,712

Subservicing
658

 
1,760

 
2,443

 
5,877

NRZ
120,593

 
129,228

 
374,322

 
420,151

 
173,861

 
194,059

 
544,154

 
623,740

Late charges
14,839

 
14,958

 
44,743

 
47,352

Custodial accounts (float earnings)
10,241

 
7,489

 
25,965

 
18,322

Loan collection fees
4,916

 
5,663

 
14,700

 
17,918

Home Affordable Modification Program (HAMP) fees (1)
3,365

 
6,202

 
11,622

 
37,692

Other
6,508

 
4,849

 
16,911

 
16,499

 
$
213,730

 
$
233,220

 
$
658,095

 
$
761,523


(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. We continue to earn HAMP success fees for HAMP modifications that remain less than 90 days delinquent at the first, second and third year anniversary of the start of the trial modification.