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Mortgage Servicing (Tables)
9 Months Ended
Sep. 30, 2019
Transfers and Servicing [Abstract]  
Schedule of Activity Related to MSRs - Amortization Method
MSRs – Amortization Method
Nine Months Ended September 30, 2018
Beginning balance
$
336,882

Fair value election - transfer of MSRs carried at fair value (1)
(361,670
)
Decrease in impairment valuation allowance (1) (2)
24,788

Ending balance
$


(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 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.
Schedule of Activity Related to MSRs - Fair Value Measurement Method
MSRs – Fair Value Measurement Method
Three Months Ended September 30,
2019
 
2018
 
Agency
 
Non-Agency
 
Total
 
Agency
 
Non-Agency
 
Total
Beginning balance
$
745,735

 
$
566,898

 
$
1,312,633

 
$
427,597

 
$
616,398

 
$
1,043,995

Fair value election - transfer from MSRs carried at amortized cost

 

 

 

 

 

Cumulative effect of fair value election

 

 

 

 

 

Sales and other transfers

 
(15
)
 
(15
)
 
(5,950
)
 
(20
)
 
(5,970
)
Additions:
 
 
 
 
 
 
 
 
 
 
 
Recognized on the sale of residential mortgage loans
1,235

 

 
1,235

 
1,503

 

 
1,503

Purchase of MSRs
9,298

 
1,268

 
10,566

 
1,421

 

 
1,421

Servicing transfers and adjustments

 
(3,105
)
 
(3,105
)
 

 
(219
)
 
(219
)
Changes in fair value (1):
 
 
 
 
 
 
 
 
 
 
 
Changes in valuation inputs or other assumptions
(63,360
)
 
252,293

 
188,933

 
(1,243
)
 
(5,413
)
 
(6,656
)
Realization of expected future cash flows and other changes
(36,898
)
 
(17,796
)
 
(54,694
)
 
(13,912
)
 
(20,880
)
 
(34,792
)
Ending balance
$
656,010

 
$
799,543

 
$
1,455,553

 
$
409,416

 
$
589,866

 
$
999,282


MSRs – Fair Value Measurement Method
Nine Months Ended September 30,
2019
 
2018
 
Agency
 
Non-Agency
 
Total
 
Agency
 
Non-Agency
 
Total
Beginning balance
$
865,587

 
$
591,562

 
$
1,457,149

 
$
11,960

 
$
660,002

 
$
671,962

Fair value election - transfer from MSRs carried at amortized cost

 

 

 
336,882

 

 
336,882

Cumulative effect of fair value election

 

 

 
82,043

 

 
82,043

Sales and other transfers
(29
)
 
(556
)
 
(585
)
 
(5,950
)
 
(175
)
 
(6,125
)
Additions:
 
 
 
 

 
 
 
 
 

Recognized on the sale of residential mortgage loans
3,933

 

 
3,933

 
6,080

 

 
6,080

Purchase of MSRs
123,600

 
1,355

 
124,955

 
2,729

 

 
2,729

Servicing transfers and adjustments

 
(7,872
)
 
(7,872
)
 

 
(2,594
)
 
(2,594
)
Changes in fair value (1):
 
 
 
 

 
 
 
 
 

Changes in valuation inputs or other assumptions
(235,036
)
 
264,876

 
29,840

 
19,217

 
(424
)
 
18,793

Realization of expected future cash flows and other changes
(102,045
)
 
(49,822
)
 
(151,867
)
 
(43,545
)
 
(66,943
)
 
(110,488
)
Ending balance
$
656,010

 
$
799,543

 
$
1,455,553

 
$
409,416

 
$
589,866

 
$
999,282

(1)
Changes in fair value are recognized in MSR valuation adjustments, net in the unaudited consolidated statements of operations.
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 UPB amounts in the table below are not included on our unaudited consolidated balance sheets.
UPB at September 30, 2019
 

Servicing
$
76,523,660

Subservicing
23,175,607

NRZ
117,055,517

 
$
216,754,784

UPB at December 31, 2018
 

Servicing
$
72,378,693

Subservicing
53,104,560

NRZ
130,517,237

 
$
256,000,490

UPB at September 30, 2018
 

Servicing
$
68,076,254

Subservicing
1,387,641

NRZ
91,532,579

 
$
160,996,474

Schedule of Components of Servicing and Subservicing Fees
Servicing Revenue
Three Months Ended September 30,
 
Nine Months Ended September 30,
2019
 
2018
 
2019
 
2018
Loan servicing and subservicing fees
 
 
 
 
 
 
 
Servicing
$
60,682

 
$
52,610

 
$
167,720

 
$
167,389

Subservicing
1,365

 
658

 
11,775

 
2,443

NRZ
146,567

 
120,593

 
443,505

 
374,322

 
208,614

 
173,861

 
623,000

 
544,154

Late charges
14,105

 
14,839

 
42,786

 
44,743

Custodial accounts (float earnings)
13,464

 
10,241

 
38,739

 
25,965

Loan collection fees
3,862

 
4,916

 
11,613

 
14,700

Home Affordable Modification Program (HAMP) fees (1)
1,216

 
3,365

 
4,558

 
11,622

Other, net
6,453

 
6,508

 
22,063

 
16,911

 
$
247,714

 
$
213,730

 
$
742,759

 
$
658,095


(1)
The HAMP 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.