XML 37 R15.htm IDEA: XBRL DOCUMENT v3.20.2
Mortgage Servicing
 9 Months Ended
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,
20202019
AgencyNon-AgencyTotalAgencyNon-AgencyTotal
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 adjustments16 — 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,
20202019
AgencyNon-AgencyTotalAgencyNon-AgencyTotal
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, 2020December 31, 2019September 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,
2020201920202019
Loan servicing and subservicing fees
Servicing$53,410 $61,485 $161,154 $170,054 
Subservicing10,324 1,365 26,143 11,775 
NRZ91,015 146,567 299,089 443,505 
154,749 209,417 486,386 625,334 
Ancillary income
Late charges11,012 14,105 38,323 42,786 
Custodial accounts (float earnings)1,057 13,464 8,787 38,739 
Loan collection fees3,047 3,862 10,048 11,613 
Home Affordable Modification Program (HAMP) fees (1)104 1,216 532 4,558 
Other, net11,753 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.