Transfers of Residential Loans

Sales of Mortgage Loans

As part of its originations activities, the Company sells substantially all of its originated or purchased mortgage loans into the secondary market for securitization or to private investors as whole loans. The Company sells conventional-conforming and government-backed mortgage loans through GSE and agency-sponsored securitizations in which mortgage-backed securities are created and sold to third-party investors. The Company also sells non-conforming mortgage loans to private investors. The Company accounts for these transfers as sales. Historically, the Company has generally retained the rights to subservice the MSR on the sold loans. If the servicing rights are retained, the Company receives a servicing fee for servicing the sold loans, which represents continuing involvement.

Certain guarantees arise from agreements associated with the sale of the Company's residential loans. Under these agreements, the Company may be obligated to repurchase loans, or otherwise indemnify or reimburse the credit owner or insurer for losses incurred, due to a breach of contractual representations and warranties. Refer to Note 13 for additional information.

The following table presents the carrying amounts of the Company’s net assets that relate to its continuing involvement with mortgage loans that have been sold with servicing rights retained and the unpaid principal balance of these sold loans (in thousands):



	Carrying Value of Net Assets Recorded on the Consolidated Balance Sheets									Unpaid Principal Balance of Sold Loans
	Servicing Rights, Net ⁽¹⁾		Servicer and Protective Advances, Net		Payables and Accrued Liabilities			Total		Unpaid Principal Balance of Sold Loans
March 31, 2017	$	451,192	$	18,341	$	(3,537	)	$	465,996	$	38,237,665
December 31, 2016	439,062		21,825		(1,983		)	458,904		36,116,570

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(1)

During the three months ended March 31, 2017, the Company revised the December 31, 2016 disclosed amount of net servicing rights and payables and accrued liabilities balances for which the Company has continuing involvement. The total net servicing rights and payables and accrued liabilities balances reported in the consolidated balance sheets as of December 31, 2016 was not impacted by this disclosure revision.

At March 31, 2017 and December 31, 2016, 1.2% and 1.3%, respectively, of mortgage loans sold and serviced by the Company were 60 days or more past due.

The following table presents a summary of cash flows related to sales of mortgage loans (in thousands):



	For the Three Months Ended March 31,
	2017		2016
Cash proceeds received from sales, net of fees	$	5,252,552	$	5,464,865
Servicing fees collected ⁽¹⁾	30,803		34,772
Repurchases of previously sold loans	17,503		5,932

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(1)	Represents servicing fees collected on all loans sold whereby the Company has continuing involvement with mortgage loans that have been sold with servicing rights retained.

In connection with these sales, the Company recorded servicing rights using either a fair value model that utilizes Level 3 unobservable inputs or using an agreed upon sales price considered level 2. Refer to Note 8 for information relating to servicing of residential loans.

Transfers of Reverse Loans

The Company, through RMS, is an approved issuer of Ginnie Mae HMBS. The HMBS are guaranteed by Ginnie Mae and collateralized by participation interests in HECMs insured by the FHA. The Company both originated and purchased HECMs that are pooled and securitized into HMBS that the Company sells into the secondary market with servicing rights retained. Effective January 2017, the Company exited the reverse mortgage originations business, although the Company intends to fulfill reverse loans in its originations pipeline consistent with its underwriting practices and to fund undrawn amounts available to borrowers.

Based upon the structure of the Ginnie Mae securitization program, the Company has determined that it has not met all of the requirements for sale accounting and accounts for these transfers as secured borrowings. Under this accounting treatment, the reverse loans remain on the consolidated balance sheets as residential loans. The proceeds from the transfer of reverse loans are recorded as HMBS related obligations with no gain or loss recognized on the transfer. Ginnie Mae, as guarantor of the HMBS, is obligated to the holders of the HMBS in an instance of RMS default on its servicing obligations, or when the proceeds realized on HECMs are insufficient to repay all outstanding HMBS related obligations. Ginnie Mae has recourse to RMS to the extent of the participation interests in HECMs serving as collateral to the HMBS, but does not have recourse to the general assets of the Company, except that Ginnie Mae has recourse to RMS in connection with certain claims relating to the performance and obligations of RMS as both an issuer of HMBS and a servicer of HECMs underlying HMBS.

At March 31, 2017, the unpaid principal balance and the carrying value associated with both the reverse loans and the real estate owned pledged as collateral to the securitization pools were $9.7 billion and $10.2 billion, respectively.