Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Fair Value of Financial Instruments

Schedule of estimated fair value of financial instruments included in consolidated financial statements

	September 30, 2018								December 31, 2017
	Carrying		Estimated Fair Value						Carrying		Estimated Fair Value
	Amount		Level 1		Level 2		Level 3		Amount		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	29,217	$	29,217	$	—	$	—	$	33,223	$	33,223	$	—	$	—
Restricted cash		4,440		4,440		—		—		5,876		5,876		—		—
Mortgage loans held-for-sale		344,681		—		344,681		—		568,781		—		568,781		—
Finance receivables		731		—		731		—		41,777		—		41,777		—
Mortgage servicing rights		181,005		—		—		181,005		154,405		—		—		154,405
Derivative assets, lending, net		4,352		—		534		3,818		4,777		—		420		4,357
Securitized mortgage collateral		3,302,192		—		—		3,302,192		3,662,008		—		—		3,662,008
Liabilities
Warehouse borrowings	$	315,152	$	—	$	315,152	$	—	$	575,363	$	—	$	575,363	$	—
MSR financings		62,000		—		—		62,000		35,133		—		—		35,133
Convertible notes		24,982		—		—		24,982		24,974		—		—		24,974
Contingent consideration		—		—		—		—		554		—		—		554
Long-term debt		46,738		—		—		46,738		44,982		—		—		44,982
Securitized mortgage borrowings		3,296,242		—		—		3,296,242		3,653,265		—		—		3,653,265

Schedule of assets and liabilities that are measured at estimated fair value on recurring basis

	Recurring Fair Value Measurements
	September 30, 2018						December 31, 2017
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Mortgage loans held-for-sale	$	—	$	344,681	$	—	$	—	$	568,781	$	—
Derivative assets, lending, net (1)		—		534		3,818		—		420		4,357
Mortgage servicing rights		—		—		181,005		—		—		154,405
Securitized mortgage collateral		—		—		3,302,192		—		—		3,662,008
Total assets at fair value	$	—	$	345,215	$	3,487,015	$	—	$	569,201	$	3,820,770
Liabilities
Securitized mortgage borrowings	$	—	$	—	$	3,296,242	$	—	$	—	$	3,653,265
Long-term debt		—		—		46,738		—		—		44,982
Contingent consideration		—		—		—		—		—		554
Total liabilities at fair value	$	—	$	—	$	3,342,980	$	—	$	—	$	3,698,801

(1) At September 30, 2018, derivative assets, lending, net included $3.8 million in IRLCs and $534 thousand in hedging instruments, respectively, and is included in other assets in the accompanying consolidated balance sheets. At December 31, 2017, derivative assets, lending, net included $4.4 million in IRLCs and $420 thousand in hedging instruments, respectively, and is included in other assets in the accompanying consolidated balance sheets.

Schedule of reconciliation for all assets and liabilities measured at estimated fair value on recurring basis using significant unobservable inputs (Level 3)

	Level 3 Recurring Fair Value Measurements
	For the Three Months Ended September 30, 2018
							Interest
	Securitized		Securitized		Mortgage		rate lock		Long-
	mortgage		mortgage		servicing		commitments,		term
	collateral		borrowings		rights		net		debt
Fair value, June 30, 2018	$	3,401,037	$	(3,393,721)	$	180,733	$	4,538	$	(45,787)
Total gains (losses) included in earnings:
Interest income (1)		7,097		—		—		—		—
Interest expense (1)		—		(13,487)		—		—		(191)
Change in fair value		59,727		(60,393)		(5,445)		(720)		(785)
Change in fair value of instrument specific credit risk		—		—		—		—		25	(2)
Total gains (losses) included in earnings		66,824		(73,880)		(5,445)		(720)		(951)
Transfers in and/or out of Level 3		—		—		—		—		—
Purchases, issuances and settlements:
Purchases		—		—		—		—		—
Issuances		—		—		5,717		—		—
Settlements		(165,669)		171,359		—		—		—
Fair value, September 30, 2018	$	3,302,192	$	(3,296,242)	$	181,005	$	3,818	$	(46,738)
Unrealized (losses) gains still held (3)	$	(403,516)	$	2,592,866	$	181,005	$	3,818	$	15,262

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $1.9 million for three months ended September 30, 2018. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations and comprehensive (loss) earnings is primarily from contractual interest on the securitized mortgage collateral and borrowings.

(2) Amount represents the change in instrument specific credit risk in other comprehensive earnings in the consolidated statements of operations and comprehensive (loss) earnings as required by the adoption of ASU 2016-01 on January 1, 2018.

(3) Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at September 30, 2018.

	Level 3 Recurring Fair Value Measurements
	For the Three Months Ended September 30, 2017
							Interest
	Securitized		Securitized		Mortgage		rate lock		Long-
	mortgage		mortgage		servicing		commitments,		term		Contingent
	collateral		borrowings		rights		net		debt		consideration
Fair value, June 30, 2017	$	3,776,184	$	(3,767,519)	$	152,273	$	9,546	$	(44,536)	$	(14,926)
Total gains (losses) included in earnings:
Interest income (1)		9,979		—		—		—		—		—
Interest expense (1)		—		(30,810)		—		—		(129)		—
Change in fair value		118,384		(122,863)		(11,177)		2,469		104		4,402
Total gains (losses) included in earnings		128,363		(153,673)		(11,177)		2,469		(25)		4,402
Transfers in and/or out of Level 3		—		—		—		—		—		—
Purchases, issuances and settlements:
Purchases		—		—		—		—		—		—
Issuances		—		—		17,854		—		—		—
Settlements		(146,407)		169,361		—		—		—		4,708
Fair value, September 30, 2017	$	3,758,140	$	(3,751,831)	$	158,950	$	12,015	$	(44,561)	$	(5,816)
Unrealized (losses) gains still held (2)	$	(580,845)	$	2,734,962	$	158,950	$	12,015	$	(17,439)	$	(5,816)

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $2.0 million for the three months ended September 30, 2017.  The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations and comprehensive (loss) earnings is primarily from contractual interest on the securitized mortgage collateral and borrowings.

(2) Represents the amount of unrealized gains (losses) relating to assets and liabilities classified as Level 3 that are still held and reflected in the fair values at September 30, 2017.

The following tables present reconciliations for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30, 2018 and 2017:

	Level 3 Recurring Fair Value Measurements
	For the Nine Months Ended September 30, 2018
							Interest
	Securitized		Securitized		Mortgage		rate lock		Long-
	mortgage		mortgage		servicing		commitments,		term			Contingent
	collateral		borrowings		rights		net		debt			consideration
Fair value, December 31, 2017	$	3,662,008	$	(3,653,265)	$	154,405	$	4,357	$	(44,982)		$	(554)
Total gains (losses) included in earnings:
Interest income (1)		24,071		—		—		—		—			—
Interest expense (1)		—		(50,684)		—		—		(513)			—
Change in fair value		39,658		(42,848)		4,127		(539)		697			—
Change in fair value of instrument specific credit risk		—		—		—		—		(1,940)	(2)		—
Total gains (losses) included in earnings		63,729		(93,532)		4,127		(539)		(1,756)			—
Transfers in and/or out of Level 3		—		—		—		—		—			—
Purchases, issuances and settlements:
Purchases		—		—		—		—		—			—
Issuances		—		—		22,473		—		—			—
Settlements		(423,545)		450,555		—		—		—			554
Fair value, September 30, 2018	$	3,302,192	$	(3,296,242)	$	181,005	$	3,818	$	(46,738)		$	—

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $5.9 million for nine months ended September 30, 2018. The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations and comprehensive (loss) earnings is primarily from contractual interest on the securitized mortgage collateral and borrowings.

(2) Amount represents the change in instrument specific credit risk in other comprehensive earnings in the consolidated statements of operations and comprehensive (loss) earnings as required by the adoption of ASU 2016-01 on January 1, 2018.

	Level 3 Recurring Fair Value Measurements
	For the Nine Months Ended September 30, 2017
							Interest
	Securitized		Securitized		Mortgage		rate lock		Long-
	mortgage		mortgage		servicing		commitments,		term		Contingent
	collateral		borrowings		rights		net		debt		consideration
Fair value, December 31, 2016	$	4,021,891	$	(4,017,603)	$	131,537	$	11,169	$	(47,207)	$	(31,072)
Total gains (losses) included in earnings:
Interest income (1)		39,564		—		—		—		—		—
Interest expense (1)		—		(108,010)		—		—		(631)		—
Change in fair value		219,604		(221,510)		(20,038)		846		(2,657)		9,104
Total gains (losses) included in earnings		259,168		(329,520)		(20,038)		846		(3,288)		9,104
Transfers in and/or out of Level 3		—		—		—		—		—		—
Purchases, issuances and settlements:
Purchases		—		—		5,618		—		—		—
Issuances		—		—		42,728		—		—		—
Settlements		(522,919)		595,292		(895)		—		5,934		16,152
Fair value, September 30, 2017	$	3,758,140	$	(3,751,831)	$	158,950	$	12,015	$	(44,561)	$	(5,816)

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities. Net interest income, including cash received and paid, was $6.1 million for the nine months ended September 30, 2017.  The difference between accretion of interest income and expense and the amounts of interest income and expense recognized in the consolidated statements of operations and comprehensive (loss) earnings is primarily from contractual interest on the securitized mortgage collateral and borrowings.

Schedule of quantitative information about the valuation techniques and unobservable inputs applied to Level 3 fair value measurements for financial instruments measured at fair value on a recurring and non-recurring basis

	Estimated		Valuation	Unobservable	Range of		Weighted
Financial Instrument	Fair Value		Technique	Input	Inputs		Average
Assets and liabilities backed by real estate
Securitized mortgage collateral, and	$	3,302,192	DCF	Prepayment rates	2.3 - 21.0	%	6.9	%
Securitized mortgage borrowings		(3,296,242)		Default rates	0.01 - 4.0	%	1.5	%
				Loss severities	6.6 - 86.7	%	41.4	%
				Discount rates	3.0 - 25.0	%	4.2	%
Other assets and liabilities
Mortgage servicing rights	$	181,005	DCF	Discount rate	9.0 - 15.2	%	10.2	%
				Prepayment rates	6.7 - 88.8	%	9.3	%
Derivative assets - IRLCs, net		3,818	Market pricing	Pull-through rate	8.6 - 99.9	%	74.6	%
Long-term debt		(46,738)	DCF	Discount rate	10.0	%	10.0	%

DCF = Discounted Cash Flow

Schedule of changes in recurring fair value measurements included in net earnings

	Recurring Fair Value Measurements
	Changes in Fair Value Included in Net Earnings
	For the Three Months Ended September 30, 2018
					Change in Fair Value of
	Interest		Interest		Net Trust		Long-term		Other Revenue		Gain on Sale
	Income (1)		Expense (1)		Assets		Debt		and Expense		of Loans, net		Total
Securitized mortgage collateral	$	7,097	$	—	$	59,727	$	—	$	—	$	—	$	66,824
Securitized mortgage borrowings		—		(13,487)		(60,393)		—		—		—		(73,880)
Long-term debt		—		(191)		—		(785)		—		—		(976)
Mortgage servicing rights (2)		—		—		—		—		(5,445)		—		(5,445)
Mortgage loans held-for-sale		—		—		—		—		—		(6,901)		(6,901)
Derivative assets — IRLCs		—		—		—		—		—		(720)		(720)
Derivative liabilities — Hedging Instruments		—		—		—		—		(331)		1,044		713
Total	$	7,097	$	(13,678)	$	(666)	$	(785)	$	(5,776)	$	(6,577)	$	(20,385)

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities.

(2) Included in loss on MSRs, net in the consolidated statements of operations and comprehensive (loss) earnings.

	Recurring Fair Value Measurements
	Changes in Fair Value Included in Net Earnings
	For the Three Months Ended September 30, 2017
					Change in Fair Value of
	Interest		Interest		Net Trust		Long-term		Other		Gain on Sale
	Income (1)		Expense (1)		Assets		Debt		Revenue		of Loans, net		Total
Securitized mortgage collateral	$	9,979	$	—	$	118,384	$	—	$	—	$	—	$	128,363
Securitized mortgage borrowings		—		(30,810)		(122,863)		—		—		—		(153,673)
Long-term debt		—		(129)		—		104		—		—		(25)
Mortgage servicing rights (2)		—		—		—		—		(11,177)		—		(11,177)
Contingent consideration		—		—		—		—		4,402		—		4,402
Mortgage loans held-for-sale		—		—		—		—		—		(1,336)		(1,336)
Derivative assets — IRLCs		—		—		—		—		—		2,469		2,469
Derivative liabilities — Hedging Instruments		—		—		—		—		(214)		(758)		(972)
Total	$	9,979	$	(30,939)	$	(4,479)	$	104	$	(6,989)	$	375	$	(31,949)

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities.

(2) Included in loss on MSRs, net in the consolidated statements of operations and comprehensive (loss) earnings.

The following tables present the changes in recurring fair value measurements included in net earnings for the nine months ended September 30, 2018 and 2017:

	Recurring Fair Value Measurements
	Changes in Fair Value Included in Net Earnings
	For the Nine Months Ended September 30, 2018
					Change in Fair Value of
	Interest		Interest		Net Trust			Long-term		Other Revenue		Gain on Sale
	Income (1)		Expense (1)		Assets			Debt		and Expense		of Loans, net		Total
Securitized mortgage collateral	$	24,071	$	—	$	39,658		$	—	$	—	$	—	$	63,729
Securitized mortgage borrowings		—		(50,684)		(42,848)			—		—		—		(93,532)
Long-term debt		—		(513)		—			697		—		—		184
Mortgage servicing rights (2)		—		—		—			—		4,127		—		4,127
Mortgage loans held-for-sale		—		—		—			—		—		(12,182)		(12,182)
Derivative assets — IRLCs		—		—		—			—		—		(539)		(539)
Derivative liabilities — Hedging Instruments		—		—		—			—		(85)		198		113
Total	$	24,071	$	(51,197)	$	(3,190)	(3)	$	697	$	4,042	$	(12,523)	$	(38,100)

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities.

(2) Included in loss on MSRs, net in the consolidated statements of operations and comprehensive (loss) earnings.

(3) For the nine months ended September 30, 2018, change in the fair value of net trust assets, excluding REO was $3.2 million.

	Recurring Fair Value Measurements
	Changes in Fair Value Included in Net Earnings
	For the Nine Months Ended September 30, 2017
					Change in Fair Value of
	Interest		Interest		Net Trust			Long-term		Other Revenue		Gain on Sale
	Income (1)		Expense (1)		Assets			Debt		and Expense		of Loans, net		Total
Securitized mortgage collateral	$	39,564	$	—	$	219,604		$	—	$	—	$	—	$	259,168
Securitized mortgage borrowings		—		(108,010)		(221,510)			—		—		—		(329,520)
Long-term debt		—		(631)		—			(2,657)		—		—		(3,288)
Mortgage servicing rights (2)		—		—		—			—		(20,038)		—		(20,038)
Contingent consideration		—		—		—			—		9,104		—		9,104
Mortgage loans held-for-sale		—		—		—			—		—		8,262		8,262
Derivative assets — IRLCs		—		—		—			—		—		846		846
Derivative liabilities — Hedging Instruments		—		—		—			—		(296)		1,616		1,320
Total	$	39,564	$	(108,641)	$	(1,906)	(3)	$	(2,657)	$	(11,230)	$	10,724	$	(74,146)

(1) Amounts primarily represent accretion to recognize interest income and interest expense using effective yields based on estimated fair values for trust assets and trust liabilities.

(2) Included in loss on MSRs, net in the consolidated statements of operations and comprehensive (loss) earnings.

(3) For the nine months ended September 30, 2017, change in the fair value of net trust assets, excluding REO was $1.9 million.

Schedule of information for derivative assets and liabilities - lending

					Total Gains (Losses)				Total Gains (Losses)
	Notional Amount				For the Three Months Ended				For the Nine Months Ended
	September 30,		December 31,		September 30,				September 30,
	2018		2017		2018		2017		2018		2017
Derivative – IRLC's (1)	$	236,115	$	398,225	$	(720)	$	2,469	$	(539)	$	846
Derivative – TBA MBS (2)		155,205		687,500		759		(2,570)		10,034		(3,941)

(1) Amounts included in gain on sale of loans, net within the accompanying consolidated statements of operations and comprehensive (loss) earnings.

(2) Amounts included in gain on sale of loans, net and gain (loss) on mortgage servicing rights, net within the accompanying consolidated statements of operations and comprehensive (loss) earnings.

Schedule of financial and non-financial assets and liabilities measured using nonrecurring fair value measurements

	Nonrecurring Fair Value Measurements						Total Losses (1)		Total Losses (1)
	September 30, 2018						For the Three Months Ended		For the Nine Months Ended
	Level 1		Level 2		Level 3		September 30, 2018		September 30, 2018
REO (2)	$	—	$	1,982	$	—	$	(649)	$	(46)
Deferred charge (3)		—		—		—		—		—
Intangible assets		—		—		380		(4,897)		(18,347)
Goodwill		—		—		—		(29,925)		(104,587)

(1) Total losses reflect losses from all nonrecurring measurements during the period.

(2) Balance represents REO at September 30, 2018, which have been impaired subsequent to foreclosure. For the three and nine months ended September 30, 2018, the Company recorded $649 thousand and $46 thousand, respectively, in losses related to changes in net realizable value (NRV) of properties.  Losses represent impairment of the NRV attributable to an increase in state specific loss severities on properties held during the period, which resulted in a decrease to NRV. 

(3) With the adoption of ASU 2016-16 on January 1, 2018, $7.8 million in deferred charge was eliminated with a cumulative effect adjustment to opening retained earnings.  

	Nonrecurring Fair Value Measurements						Total Gains (Losses) (1)		Total Gains (Losses) (1)
	September 30, 2017						For the Three Months Ended		For the Nine Months Ended
	Level 1		Level 2		Level 3		September 30, 2017		September 30, 2017
REO (2)	$	—	$	2,870	$	—	$	2,734	$	8,484
Deferred charge (3)		—		—		8,094		(71)		(591)

(1) Total gains (losses) reflect losses from all nonrecurring measurements during the period.

(2) Balance represents REO at September 30, 2017 which has been impaired subsequent to foreclosure. For the three and nine months ended September 30,  2017, the Company recorded $2.7 million and $8.5 million, respectively, in gains which represent recovery of the NRV attributable to an improvement in state specific loss severities on properties held during the period which resulted in an increase to NRV.

(3) For the three and nine months ended September 30, 2017, the Company recorded $71 thousand and $591 thousand in income tax expense resulting from impairment write-downs of deferred charge based on changes in estimated cash flows and lives of the related mortgages retained in the securitized mortgage collateral.