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v3.20.2

Mortgage Servicing | 9 Months Ended
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Sep. 30, 2020
Transfers and Servicing [Abstract] |
Mortgage Servicing |
Note 8 – Mortgage Servicing
During each period, we remeasure our MSR at fair value, which contemplates the receipt or nonreceipt of the servicing income for that period. The servicing income, including expectations of future servicing cash flows, are inputs for the measurement of the MSR fair value. The net result on the statement of operations is that we record the contractual cash received in each period as revenue within Servicing and subservicing fees, partially offset by the remeasurement of the MSR fair value within MSR valuation adjustments, net.
MSRs – Fair Value Measurement Method | Three Months Ended September 30,
2020 |  | 2019
| Agency |  | Non-Agency |  | Total |  | Agency |  | Non-Agency |  | Total
Beginning balance | $ | 305,085 |  |  | $ | 739,829 |  |  | $ | 1,044,914 |  |  | $ | 745,735 |  |  | $ | 566,898 |  |  | $ | 1,312,633 |
Sales and other transfers | — |  |  | (1) |  |  | (1) |  |  | — |  |  | (15) |  |  | (15) |
Additions: |  |  |  |  |  |  |  |  |  |  |
Recognized on the sale of residential mortgage loans | 22,096 |  |  | — |  |  | 22,096 |  |  | 1,235 |  |  | — |  |  | 1,235 |
Purchase of MSRs | 32,249 |  |  | — |  |  | 32,249 |  |  | 9,298 |  |  | 1,268 |  |  | 10,566 |
Servicing transfers and adjustments | 16 |  |  | — |  |  | 16 |  |  | — |  |  | (3,105) |  |  | (3,105) |
Changes in fair value (2): |  |  |  |  |  |  |  |  |  |  |
Changes in valuation inputs or other assumptions | 4,074 |  |  | 13,749 |  |  | 17,823 |  |  | (63,360) |  |  | 252,293 |  |  | 188,933 |
Realization of expected future cash flows and other changes | (23,856) |  |  | (24,228) |  |  | (48,084) |  |  | (36,898) |  |  | (17,796) |  |  | (54,694) |
Ending balance | $ | 339,664 |  |  | $ | 729,349 |  |  | $ | 1,069,013 |  |  | $ | 656,010 |  |  | $ | 799,543 |  |  | $ | 1,455,553 |
MSRs – Fair Value Measurement Method | For the Nine Months Ended September 30,
2020 |  | 2019
| Agency |  | Non-Agency |  | Total |  | Agency |  | Non-Agency |  | Total
Beginning balance | $ | 714,006 |  |  | $ | 772,389 |  |  | $ | 1,486,395 |  |  | $ | 865,587 |  |  | $ | 591,562 |  |  | $ | 1,457,149 |
Sales and other transfers | — |  |  | (108) |  |  | (108) |  |  | (29) |  |  | (556) |  |  | (585) |
Additions: |  |  |  |  |  |  |  |  |  |  |
Recognized on the sale of residential mortgage loans | 37,785 |  |  | — |  |  | 37,785 |  |  | 3,933 |  |  | — |  |  | 3,933 |
Purchase of MSRs | 78,994 |  |  | — |  |  | 78,994 |  |  | 123,600 |  |  | 1,355 |  |  | 124,955 |
Servicing transfers and adjustments (1) | (263,830) |  |  | 403 |  |  | (263,427) |  |  | — |  |  | (7,872) |  |  | (7,872) |
Changes in fair value (2): |  |  |  |  |  |  |  |  |  |  |
Changes in valuation inputs or other assumptions | (159,351) |  |  | 20,679 |  |  | (138,672) |  |  | (235,036) |  |  | 264,876 |  |  | 29,840 |
Realization of expected future cash flows and other changes | (67,940) |  |  | (64,014) |  |  | (131,954) |  |  | (102,045) |  |  | (49,822) |  |  | (151,867) |
Ending balance | $ | 339,664 |  |  | $ | 729,349 |  |  | $ | 1,069,013 |  |  | $ | 656,010 |  |  | $ | 799,543 |  |  | $ | 1,455,553 |
(1)Servicing transfers and adjustments include a $263.7 million derecognition of MSRs/Rights to MSRs effective with the February 20, 2020 notice of termination of the subservicing agreement between NRZ and PMC. See Note 9 — Rights to MSRs for further information. (2)Changes in fair value are recognized in MSR valuation adjustments, net in the unaudited consolidated statements of operations. MSR UPB
| UPB at
| September 30, 2020 |  | December 31, 2019 |  | September 30, 2019
Owned MSRs | $ | 71,301,427 |  |  | $ | 70,973,496 |  |  | $ | 71,372,447 |
NRZ pledged MSRs (1) | 66,782,351 |  |  | 108,837,877 |  |  | 113,441,618 |
Total recognized MSRs | $ | 138,083,778 |  |  | $ | 179,811,373 |  |  | $ | 184,814,065 |
(1)MSRs subject to sale agreements with NRZ that do not meet sale accounting criteria. See Note 9 — Rights to MSRs. We acquired MSRs with a UPB of $9.9 billion and $11.9 billion during the nine months ended September 30, 2020 and 2019, respectively. We sold MSRs with a UPB of $55.7 million during the nine months ended September 30, 2020, mostly to Freddie Mac under the Voluntary Partial Cancellation (VPC) program for delinquent loans. We sold non-Agency MSRs with a UPB of $116.1 million during the nine months ended September 30, 2019. A significant portion of the servicing agreements for our non-Agency servicing portfolio contain provisions where we could be terminated as servicer without compensation upon the failure of the serviced loans to meet certain portfolio delinquency or cumulative loss thresholds. We have not had any terminations as servicer as a result of a breach of any of these provisions in 2020 and 2019. At September 30, 2020, the S&P Global Ratings, Inc.’s (S&P’s) servicer ratings outlook for PMC is stable. On March 24, 2020, Fitch Ratings, Inc. (Fitch) placed all U.S Residential Mortgage Backed Securities (RMBS) servicer ratings on Outlook Negative, resulting from a rapidly evolving economic and operating environment due to the sudden impact of the COVID-19 virus. Downgrades in servicer ratings could adversely affect our ability to service loans, sell or finance servicing advances and could impair our ability to consummate future servicing transactions or adversely affect our dealings with lenders, other contractual counterparties, and regulators, including our ability to maintain our status as an approved servicer by Fannie Mae and Freddie Mac. The servicer rating requirements of Fannie Mae do not necessarily require or imply immediate action, as Fannie Mae has discretion with respect to whether we are in compliance with their requirements and what actions it deems appropriate under the circumstances in the event that we fall below their desired servicer ratings. Certain of our servicing agreements require that we maintain specified servicer ratings from rating agencies such as Moody’s and S&P. No termination rights have been triggered as result of our servicer ratings in 2020 and 2019.
Servicing Revenue | Three Months Ended September 30, |  | Nine Months Ended September 30,
2020 |  | 2019 |  | 2020 |  | 2019
Loan servicing and subservicing fees |  |  |  |  |  |  |
Servicing | $ | 53,410 |  |  | $ | 61,485 |  |  | $ | 161,154 |  |  | $ | 170,054 |
Subservicing | 10,324 |  |  | 1,365 |  |  | 26,143 |  |  | 11,775 |
NRZ | 91,015 |  |  | 146,567 |  |  | 299,089 |  |  | 443,505 |
| 154,749 |  |  | 209,417 |  |  | 486,386 |  |  | 625,334 |
Ancillary income |  |  |  |  |  |  |
Late charges | 11,012 |  |  | 14,105 |  |  | 38,323 |  |  | 42,786 |
Custodial accounts (float earnings) | 1,057 |  |  | 13,464 |  |  | 8,787 |  |  | 38,739 |
Loan collection fees | 3,047 |  |  | 3,862 |  |  | 10,048 |  |  | 11,613 |
Home Affordable Modification Program (HAMP) fees (1) | 104 |  |  | 1,216 |  |  | 532 |  |  | 4,558 |
Other, net | 11,753 |  |  | 6,453 |  |  | 24,369 |  |  | 22,063 |
| 26,973 |  |  | 39,100 |  |  | 82,059 |  |  | 119,759 |
| $ | 181,722 |  |  | $ | 248,517 |  |  | $ | 568,445 |  |  | $ | 745,093 |
(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. Float balances (balances in custodial accounts, which represent collections of principal and interest that we receive from borrowers) are held in escrow by unaffiliated banks and are excluded from our unaudited consolidated balance sheets. Float balances amounted to $2.0 billion, $1.7 billion and $2.1 billion at September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 30 -Section 50 -Paragraph 1A -Subparagraph (c)(3) -URI 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