MSR Valuation Allowance, Net

9 Months Ended

Sep. 30, 2024

Note 9 – MSR Valuation Adjustments, Net

The table below presents the components of MSR valuation adjustments, net, that include four MSR related instruments which we account for at fair value with changes in fair value recorded in earnings:

(i) the fair value changes of the total MSR portfolio (Total MSRs) recorded on our consolidated balance sheets ($2,223.6 million fair value asset at September 30, 2024). Total MSRs include owned MSRs and MSRs that have been sold or transferred to third parties in transactions that do not achieve sale accounting criteria. Owned MSRs include MSRs subject to ESS financing transactions;

(ii) the fair value changes of the Pledged MSR liabilities recorded as liabilities on our consolidated balance sheets when MSR sale accounting criteria are not achieved ($577.7 million fair value liability at September 30, 2024);

(iii) the fair value changes of the ESS financing liabilities for which we elected the fair value option ($243.3 million fair value liability at September 30, 2024); and

(iv) the fair value changes of the derivative instruments economically hedging the MSR exposure.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Total MSRs (1)	$	(110.3)	$	77.0	$	(31.1)	$	13.7
Pledged MSR liabilities (2) (3)	17.2		(27.8)		(0.2)		(40.5)
ESS financing liabilities (2)	7.2		3.1		5.5		12.3

Derivative fair value gain (loss) (MSR economic hedges) (4)	54.3		(68.6)		(50.0)		(119.7)

MSR valuation adjustments, net	$	(31.5)	$	(16.4)	$	(75.8)	$	(134.2)

(1)Also refer to Note 7 – Mortgage Servicing.

(2)Also refer to Note 8 — Other Financing Liabilities, at Fair Value for additional information related to the ESS financing liability and Pledged MSR liability, including a tabular presentation of activity of the Pledged MSR liability for the reported years.

(3)MSR transfers that do not achieve sale accounting.

(4)Also refer to Note 15 – Derivative Financial Instruments and Hedging Activities.

MSR valuation adjustments, net exclude fair value changes of reverse mortgage loans net of HMBS related-borrowings which are included in our economic MSR interest rate risk hedge strategy (refer to Note 15 – Derivative Financial Instruments and Hedging Activities), and are separately presented as Gain on reverse loans held for investment and HMBS-related borrowings, net within our consolidated statement of operations (refer to Note 5 - Reverse Mortgages).