Fair Value (Tables)

12 Months Ended

Dec. 31, 2016

Summary of Assets and Liabilities in Each Level of Fair Value Hierarchy

The following table summarizes the assets and liabilities in each level of the fair value hierarchy (in thousands). There were an insignificant amount of assets or liabilities measured at fair value on a recurring basis utilizing Level 1 assumptions.



	December 31,
	2016		2015
Level 2
Assets
Mortgage loans held for sale	$	1,176,280	$	1,334,300
Servicing rights carried at fair value	13,170		—
Freestanding derivative instruments	34,543		6,993
Level 2 assets	$	1,223,993	$	1,341,293
Liabilities
Freestanding derivative instruments	7,611		5,405
Servicing rights related liabilities	1,902		—
Level 2 liabilities	$	9,513	$	5,405

Level 3
Assets
Reverse loans	$	10,742,922	$	10,763,816
Mortgage loans related to Non-Residual Trusts	450,377		526,016
Charged-off loans	46,963		49,307
Receivables related to Non-Residual Trusts	15,033		16,542
Servicing rights carried at fair value	936,423		1,682,016
Freestanding derivative instruments (IRLCs)	53,394		51,519
Level 3 assets	$	12,245,112	$	13,089,216
Liabilities
Freestanding derivative instruments (IRLCs)	$	4,193	$	1,070
Servicing rights related liabilities	—		117,000
Mortgage-backed debt related to Non-Residual Trusts	514,025		582,340
HMBS related obligations	10,509,449		10,647,382
Level 3 liabilities	$	11,027,667	$	11,347,792

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis Utilizing Significant Unobservable Inputs Reconciliation

The following assets and liabilities are measured on the consolidated balance sheets at fair value on a recurring basis utilizing significant unobservable inputs or Level 3 assumptions in their valuation. The following tables provide a reconciliation of the beginning and ending balances of these assets and liabilities (in thousands):



	For the Year Ended December 31, 2016
	Fair Value January 1, 2016			Total Gains (Losses) Included in Comprehensive Loss			Purchases and Other		Sales			Originations / Issuances			Settlements			Transfers Out of Level 3			Fair Value December 31, 2016
Assets
Reverse loans	$	10,763,816		$	338,321		$	437,540	$	—		$	459,280		$	(1,256,035	)	$	—		$	10,742,922
Mortgage loans related to Non-Residual Trusts	526,016			19,464			—		—			—			(95,103		)	—			450,377
Charged-off loans ⁽¹⁾	49,307			41,391			—		—			—			(43,735		)	—			46,963
Receivables related to Non-Residual Trusts	16,542			6,601			—		—			—			(8,110		)	—			15,033
Servicing rights carried at fair value ⁽²⁾	1,682,016			(478,558		)	7,729		(247,829		)	185,695			—			(212,630		)	936,423
Freestanding derivative instruments (IRLCs)	51,519			2,549			—		—			—			(674		)	—			53,394
Total assets	$	13,089,216		$	(70,232	)	$	445,269	$	(247,829	)	$	644,975		$	(1,403,657	)	$	(212,630	)	$	12,245,112

Liabilities
Freestanding derivative instruments (IRLCs)	$	(1,070	)	$	(3,123	)	$	—	$	—		$	—		$	—		$	—		$	(4,193	)
Servicing rights related liabilities ^{(3) (4)}	(117,000		)	(3,921		)	—		108,887			(27,886		)	39,920			—			—
Mortgage-backed debt related to Non-Residual Trusts	(582,340		)	(29,355		)	—		—			—			97,670			—			(514,025		)
HMBS related obligations	(10,647,382		)	(279,299		)	—		—			(960,156		)	1,377,388			—			(10,509,449		)
Total liabilities	$	(11,347,792	)	$	(315,698	)	$	—	$	108,887		$	(988,042	)	$	1,514,978		$	—		$	(11,027,667	)

__________


(1)	Included in gains on charged-off loans are gains from instrument-specific credit risk, which primarily result from changes in assumptions related to collection rates and discount rates, of $20.7 million during the year ended December 31, 2016.


(2)	Amounts transferred out of Level 3 consisted of servicing rights that were transferred to Level 2 during the third quarter of 2016. These transfers resulted from an agreement with NRM to sell such servicing rights, which were subsequently sold during the fourth quarter of 2016. In total, the Company sold $458.5 million of servicing rights during the year ended December 31, 2016.


(3)	Included in losses on servicing rights related liabilities are losses from instrument-specific credit risk, which primarily result from changes in assumptions related to discount rates, conditional prepayment rates and conditional default rates, of $15.8 million during the year ended December 31, 2016.


(4)	Sales of servicing rights related liabilities represents the derecognition of excess servicing spread liabilities and servicing rights financing in connection with the sale of related servicing rights and excess spread by the Company and WCO to NRM. Refer to Note 4 for additional information regarding transactions with NRM.



	For the Year Ended December 31, 2015
	Fair Value January 1, 2015			Total Gains (Losses) Included in Comprehensive Loss			Purchases and Other		Sales			Originations / Issuances			Settlements			Fair Value December 31, 2015
Assets
Reverse loans ⁽¹⁾	$	10,064,365		$	202,494		$	762,657	$	(16,592	)	$	708,948		$	(958,056	)	$	10,763,816
Mortgage loans related to Non-Residual Trusts	586,433			41,643			—		—			—			(102,060		)	526,016
Charged-off loans ⁽²⁾	57,217			41,803			—		—			—			(49,713		)	49,307
Receivables related to Non-Residual Trusts	25,201			(1,178		)	—		—			—			(7,481		)	16,542
Servicing rights carried at fair value	1,599,541			(401,992		)	237,820		(60,094		)	306,741			—			1,682,016
Freestanding derivative instruments (IRLCs)	60,400			(8,281		)	—		—			—			(600		)	51,519
Total assets	$	12,393,157		$	(125,511	)	$	1,000,477	$	(76,686	)	$	1,015,689		$	(1,117,910	)	$	13,089,216

Liabilities
Freestanding derivative instruments (IRLCs)	$	(263	)	$	(807	)	$	—	$	—		$	—		$	—		$	(1,070	)
Servicing rights related liabilities	(66,311		)	(7,741		)	—		—			(64,593		)	21,645			(117,000		)
Mortgage-backed debt related to Non-Residual Trusts	(653,167		)	(33,142		)	—		—			—			103,969			(582,340		)
HMBS related obligations	(9,951,895		)	(104,327		)	—		—			(1,622,481		)	1,031,321			(10,647,382		)
Total liabilities	$	(10,671,636	)	$	(146,017	)	$	—	$	—		$	(1,687,074	)	$	1,156,935		$	(11,347,792	)

__________


(1)	During the year ended December 31, 2015, the Company sold $16.6 million in reverse loans and recognized $0.1 million in net losses on sales of loans.


(2)	Included in gains on charged-off loans are gains from instrument-specific credit risk of $18.5 million, which primarily result from changes in assumptions related to collection rates and discount rates during the year ended December 31, 2015.

Schedule of Significant Unobservable Inputs Used in Fair Value Measurement of Assets and Liabilities on Recurring Basis

The following tables present the significant unobservable inputs used in the fair value measurement of the assets and liabilities described above. The Company utilizes a discounted cash flow model to estimate the fair value of all Level 3 assets and liabilities included on the consolidated financial statements at fair value on a recurring basis, with the exception of IRLCs for which the Company utilizes a market approach. Significant increases or decreases in any of the inputs disclosed below could result in a significantly lower or higher fair value measurement.



		December 31, 2016			December 31, 2015
	Significant Unobservable Input ^{(1) (2)}	Range of Input ⁽³⁾	Weighted Average of Input ⁽³⁾		Range of Input ⁽³⁾	Weighted Average of Input ⁽³⁾
Assets
Reverse loans	Weighted-average remaining life in years ⁽⁴⁾	0.6 - 10.2	3.8		1.1 - 10.0	4.1
	Conditional repayment rate	13.23% - 55.32%	28.48	%	13.53% - 52.94%	25.59	%
	Discount rate	1.93% - 3.69%	2.93	%	2.08% - 3.56%	2.84	%
Mortgage loans related to Non-Residual Trusts	Conditional prepayment rate	1.98% - 2.67%	2.27	%	2.67% - 4.66%	3.52	%
	Conditional default rate	1.02% - 4.25%	2.61	%	1.47% - 2.74%	2.05	%
	Loss severity	79.98% - 100.00%	96.61	%	73.07% - 95.88%	88.72	%
	Discount rate	8.00%	8.00	%	8.00%	8.00	%
Charged-off loans	Collection rate	2.69% - 3.55%	2.74	%	2.15% - 3.54%	2.23	%
	Discount rate	28.00%	28.00	%	28.00%	28.00	%
Receivables related to Non-Residual Trusts	Conditional prepayment rate	2.22% - 3.17%	2.65	%	1.93% - 3.62%	2.90	%
	Conditional default rate	2.32% - 4.66%	3.34	%	1.66% - 2.98%	2.30	%
	Loss severity	77.88% - 100.00%	94.51	%	70.33% - 93.46%	85.63	%
	Discount rate	0.50%	0.50	%	0.50%	0.50	%
Servicing rights carried at fair value	Weighted-average remaining life in years ⁽⁴⁾	2.6 - 7.4	6.0		5.2 - 9.0	6.3
	Discount rate	10.68% - 14.61%	11.56	%	10.00% - 14.34%	10.88	%
	Conditional prepayment rate	5.76% - 21.67%	9.09	%	6.07% - 13.15%	9.94	%
	Conditional default rate	0.04% - 2.97%	0.88	%	0.05% - 2.49%	1.06	%
	Cost to service	$62 - $1,260	$128		$70 - $455	$97
Interest rate lock commitments	Loan funding probability	16.00% - 100.00%	75.86	%	2.34% - 100.00%	79.42	%
	Fair value of initial servicing rights multiple ⁽⁵⁾	0.01 - 5.98	3.06		0.05 - 7.06	3.71



		December 31, 2016			December 31, 2015
	Significant Unobservable Input ^{(1) (2)}	Range of Input ⁽³⁾	Weighted Average of Input ⁽³⁾		Range of Input ⁽³⁾	Weighted Average of Input ⁽³⁾
Liabilities
Interest rate lock commitments	Loan funding probability	34.40% - 100.00%	83.36	%	38.00% - 100.00%	83.28	%
	Fair value of initial servicing rights multiple⁽⁵⁾	0.04 - 6.04	3.69		0.11 - 5.88	4.00
Servicing rights related liabilities	Weighted-average remaining life in years ⁽⁴⁾	—	—		6.3 - 7.4	6.6
	Discount rate	—	—		11.67% - 13.85%	13.24	%
	Conditional prepayment rate	—	—		8.32% - 11.28%	9.98	%
	Conditional default rate	—	—		0.11% - 1.06%	0.58	%
Mortgage-backed debt related to Non-Residual Trusts	Conditional prepayment rate	2.22% - 3.17%	2.65	%	1.93% - 3.62%	2.90	%
	Conditional default rate	2.32% - 4.66%	3.34	%	1.66% - 2.98%	2.30	%
	Loss severity	77.88% - 100.00%	94.51	%	70.33% - 93.46%	85.63	%
	Discount rate	6.00%	6.00	%	6.00%	6.00	%
HMBS related obligations	Weighted-average remaining life in years ⁽⁴⁾	0.4 - 7.2	3.2		0.9 - 6.6	3.5
	Conditional repayment rate	11.49% - 57.76%	27.74	%	12.06% - 55.49%	24.70	%
	Discount rate	1.50% - 3.17%	2.56	%	1.73% - 3.08%	2.39	%

__________


(1)	Conditional repayment rate includes assumptions for both voluntary and involuntary rates as well as assumptions for the assignment of HECMs to HUD, in accordance with obligations as servicer.


(2)	Voluntary and involuntary prepayment rates have been presented as conditional prepayment rate and conditional default rate, respectively.

(3)

With the exception of loss severity, fair value of initial servicing rights embedded in IRLCs and discount rate on charged-off loans, all significant unobservable inputs above are based on the related unpaid principal balance of the underlying collateral, or in the case of HMBS related obligations, the balance outstanding. Loss severity is based on projected liquidations. Fair value of servicing rights embedded in IRLCs represents a multiple of the annual servicing fee. The discount rate on charged-off loans is based on the loan balance at fair value.


(4)	Represents the remaining weighted-average life of the related unpaid principal balance or balance outstanding of the underlying collateral adjusted for assumptions for conditional repayment rate, conditional prepayment rate and conditional default rate, as applicable.


(5)	Fair value of servicing rights embedded in IRLCs, which represents a multiple of the annual servicing fee, excludes the impact of certain IRLCs identified as servicing released for which the Company does not ultimately realize the benefits.

Schedule of Estimated Fair Value and Unpaid Principal Balance, Fair Value Option

Presented in the table below is the estimated fair value and unpaid principal balance of loans and debt instruments that have contractual principal amounts and for which the Company has elected the fair value option (in thousands):



	December 31, 2016				December 31, 2015
	Estimated Fair Value		Unpaid Principal Balance		Estimated Fair Value		Unpaid Principal Balance
Loans at fair value under the fair value option
Reverse loans ⁽¹⁾	$	10,742,922	$	10,218,007	$	10,763,816	$	10,187,521
Mortgage loans held for sale ⁽¹⁾	1,176,280		1,148,897		1,334,300		1,285,582
Mortgage loans related to Non-Residual Trusts	450,377		513,545		526,016		580,695
Charged-off loans	46,963		2,439,318		49,307		2,887,367
Total	$	12,416,542	$	14,319,767	$	12,673,439	$	14,941,165

Debt instruments at fair value under the fair value option
Mortgage-backed debt related to Non-Residual Trusts	$	514,025	$	518,317	$	582,340	$	585,839
HMBS related obligations ⁽²⁾	10,509,449		9,916,383		10,647,382		10,012,283
Total	$	11,023,474	$	10,434,700	$	11,229,722	$	10,598,122

__________


(1)	Includes loans that collateralize master repurchase agreements. Refer to Note 20 for additional information.


(2)	For HMBS related obligations, the unpaid principal balance represents the balance outstanding.

Schedule of Significant Unobservable Inputs Used in Fair Value Measurement of Real Estate Owned

The following table presents the significant unobservable input used in the fair value measurement of real estate owned, net:



		December 31, 2016			December 31, 2015
	Significant Unobservable Input	Range of Input	Weighted Average of Input		Range of Input	Weighted Average of Input
Real estate owned, net	Loss severity ⁽¹⁾	0.00% - 61.61%	7.30	%	0.00% - 72.58%	8.25	%

__________


(1)	Loss severity is based on the unpaid principal balance of the related loan at the time of foreclosure.

Schedule of Carrying Amounts and Estimated Fair Values of Financial Assets and Liabilities Not Recorded at Fair Value

The following table presents the carrying amounts and estimated fair values of financial assets and liabilities that are not recorded at fair value on a recurring or non-recurring basis and their respective levels within the fair value hierarchy (in thousands). This table excludes cash and cash equivalents, restricted cash and cash equivalents, servicer payables and warehouse borrowings as these financial instruments are highly liquid or short-term in nature and as a result, their carrying amounts approximate fair value.



		December 31, 2016				December 31, 2015
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets
Residential loans at amortized cost, net ⁽¹⁾	Level 3	$	665,209	$	674,851	$	541,406	$	554,664
Servicer and protective advances, net	Level 3	1,195,380		1,147,155		1,631,065		1,546,958

Financial liabilities
Servicing advance liabilities⁽²⁾	Level 3	781,734		782,570		1,226,898		1,232,147
Corporate debt ⁽³⁾	Level 2	2,126,176		1,967,518		2,152,031		1,904,467
Mortgage-backed debt carried at amortized cost	Level 3	429,931		435,679		469,339		475,347

__________


(1)	Includes loans subject to repurchase from Ginnie Mae. Refer to Note 9 for additional information regarding Ginnie Mae securitizations.


(2)	The carrying amounts of servicing advance liabilities are net of deferred issuance costs, including those relating to line-of-credit arrangements, which are recorded in other assets.


(3)	The carrying amounts of corporate debt are net of the 2013 Revolver deferred issuance costs, which are recorded in other assets on the consolidated balance sheets.

Schedule of Net Gains on Sales of Loans

Provided in the table below is a summary of the components of net gains on sales of loans (in thousands):



	For the Years Ended December 31,
	2016			2015			2014
Realized gains on sales of loans	$	233,447		$	171,128		$	367,314
Change in unrealized gains on loans held for sale	(14,803		)	(7,345		)	1,412
Gains (losses) on interest rate lock commitments	(574		)	(9,088		)	21,061
Losses on forward sales commitments	(12,335		)	(19,747		)	(156,201		)
Losses on MBS purchase commitments	(20,317		)	(24,250		)	(18,009		)
Capitalized servicing rights	196,963			306,741			214,285
Provision for repurchases	(15,331		)	(16,008		)	(7,741		)
Interest income	41,824			52,227			40,051
Other	574			182			—
Net gains on sales of loans	$	409,448		$	453,840		$	462,172

Schedule of Net Fair Value Gains on Reverse Loans and Related HMBS Obligations

Provided in the table below is a summary of the components of net fair value gains on reverse loans and related HMBS obligations (in thousands):



	For the Years Ended December 31,
	2016			2015			2014
Interest income on reverse loans	$	450,008		$	435,585		$	398,925
Change in fair value of reverse loans	(111,687		)	(232,993		)	35,272
Net fair value gains on reverse loans	338,321			202,592			434,197

Interest expense on HMBS related obligations	(412,090		)	(403,817		)	(372,346		)
Change in fair value of HMBS related obligations	132,791			299,490			48,121
Net fair value losses on HMBS related obligations	(279,299		)	(104,327		)	(324,225		)
Net fair value gains on reverse loans and related HMBS obligations	$	59,022		$	98,265		$	109,972

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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