Fair Value (Tables)

12 Months Ended

Dec. 31, 2017

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,
	2017		2016
Level 2
Assets
Mortgage loans held for sale	$	588,485	$	1,176,280
Servicing rights carried at fair value	—		13,170
Freestanding derivative instruments	2,757		34,543
Level 2 assets	$	591,242	$	1,223,993
Liabilities
Freestanding derivative instruments	$	981	$	7,611
Servicing rights related liabilities	32		1,902
Level 2 liabilities	$	1,013	$	9,513

Level 3
Assets
Reverse loans	$	9,789,444	$	10,742,922
Mortgage loans related to Non-Residual Trusts	301,435		450,377
Mortgage loans held for sale	68		—
Charged-off loans	45,800		46,963
Receivables related to Non-Residual Trusts	5,608		15,033
Servicing rights carried at fair value	714,774		936,423
Freestanding derivative instruments (IRLCs)	26,637		53,394
Level 3 assets	$	10,883,766	$	12,245,112
Liabilities
Freestanding derivative instruments (IRLCs)	$	269	$	4,193
Mortgage-backed debt related to Non-Residual Trusts	348,682		514,025
HMBS related obligations	9,175,128		10,509,449
Level 3 liabilities	$	9,524,079	$	11,027,667

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, 2017
	Fair Value January 1, 2017			Total Gains (Losses) Included in Comprehensive Loss			Purchases		Sales and Other			Originations / Issuances			Settlements			Transfers Out of Level 3			Fair Value December 31, 2017
Assets
Reverse loans	$	10,742,922		$	242,288		$	44,769	$	—		$	337,378		$	(1,577,913	)	$	—		$	9,789,444
Mortgage loans related to Non-Residual Trusts ⁽¹⁾	450,377			25,214			—		(88,842		)	—			(85,314		)	—			301,435
Mortgage loans held for sale ⁽¹⁾	—			(131		)	—		1,671			—			(1,472		)	—			68
Charged-off loans ⁽²⁾	46,963			39,072			—		—			—			(40,235		)	—			45,800
Receivables related to Non-Residual Trusts	15,033			5,224			—		—			—			(14,649		)	—			5,608
Servicing rights carried at fair value ⁽³⁾	936,423			(263,629		)	670		5,356			70,801			—			(34,847		)	714,774
Freestanding derivative instruments (IRLCs)	53,394			(26,556		)	—		—			—			(201		)	—			26,637
Total assets	$	12,245,112		$	21,482		$	45,439	$	(81,815	)	$	408,179		$	(1,719,784	)	$	(34,847	)	$	10,883,766

Liabilities
Freestanding derivative instruments (IRLCs)	$	(4,193	)	$	3,924		$	—	$	—		$	—		$	—		$	—		$	(269	)
Mortgage-backed debt related to Non-Residual Trusts	(514,025		)	(26,519		)	—		—			—			191,862			—			(348,682		)
HMBS related obligations	(10,509,449		)	(199,869		)	—		—			(464,192		)	1,998,382			—			(9,175,128		)
Total liabilities	$	(11,027,667	)	$	(222,464	)	$	—	$	—		$	(464,192	)	$	2,190,244		$	—		$	(9,524,079	)

__________

(1)

During the year ended December 31, 2017, $25.1 million of loans transferred from mortgage loans related to Non-Residual Trusts to mortgage loans held for sale upon exercising mandatory call obligations reflected within "Sales and Other" in the above table. See Note 30 for additional information on the mandatory call obligations. In December 2017, a majority of these loans were sold to NRM for $23.4 million.


(2)	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 $15.8 million during the year ended December 31, 2017.

(3)

Amounts transferred out of Level 3 consisted of servicing rights that were transferred to Level 2 during the third quarter of 2017. These transfers resulted from an agreement with a third-party to sell such servicing rights, which were subsequently sold during the fourth quarter of 2017. In total, the Company sold $117.5 million of servicing rights during the year ended December 31, 2017. See Note 14 for additional information on total servicing rights sold during the year.



	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 of $20.7 million, which primarily result from changes in assumptions related to collection rates and discount rates 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 5 for additional information regarding transactions with NRM.

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, 2017			December 31, 2016
	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⁾	0.3 - 10.2	3.8		0.6 - 10.2	3.8
	Conditional repayment rate	12.61% - 71.68%	30.23	%	13.23% - 55.32%	28.48	%
	Discount rate	3.05% - 4.17%	3.60	%	1.93% - 3.69%	2.93	%
Mortgage loans related to Non-Residual Trusts	Conditional prepayment rate	2.08% - 2.53%	2.34	%	1.98% - 2.67%	2.27	%
	Conditional default rate	1.01% - 4.97%	2.61	%	1.02% - 4.25%	2.61	%
	Loss severity	90.60% - 100.00%	99.46	%	79.98% - 100.00%	96.61	%
	Discount rate	8.32%	8.32	%	8.00%	8.00	%
Mortgage loans held for sale	Conditional prepayment rate	4.81%	4.81	%	—	—
	Conditional default rate	2.46%	2.46	%	—	—
	Loss severity	99.40%	99.40	%	—	—
	Discount rate	9.80%	9.80	%	—	—
Charged-off loans	Collection rate	2.84% - 4.47%	2.92	%	2.69% - 3.55%	2.74	%
	Discount rate	28.00%	28.00	%	28.00%	28.00	%
Receivables related to Non-Residual Trusts	Conditional prepayment rate	2.49% - 3.01%	2.79	%	2.22% - 3.17%	2.65	%
	Conditional default rate	1.72% - 6.02%	3.61	%	2.32% - 4.66%	3.34	%
	Loss severity	88.88% - 100.00%	97.71	%	77.88% - 100.00%	94.51	%
	Discount rate	0.50%	0.50	%	0.50%	0.50	%
Servicing rights carried at fair value	Weighted-average remaining life in years ⁽⁴⁾	2.4 - 7.1	5.6		2.6 - 7.4	6.0
	Discount rate	9.91% - 14.97%	11.92	%	10.68% - 14.61%	11.56	%
	Conditional prepayment rate	6.80% - 25.85%	11.10	%	5.76% - 21.67%	9.09	%
	Conditional default rate	0.06% - 3.20%	0.91	%	0.04% - 2.97%	0.88	%
	Cost to service	$62 - $1,260	$136		$62 - $1,260	$128
Interest rate lock commitments	Loan funding probability	1.00% - 100.00%	62.97	%	16.00% - 100.00%	75.86	%
	Fair value of initial servicing rights multiple ⁽⁵⁾	0.01 - 5.24	2.74		0.01 - 5.98	3.06



		December 31, 2017			December 31, 2016
	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	33.64% - 100.00%	84.76	%	34.40% - 100.00%	83.36	%
	Fair value of initial servicing rights multiple⁽⁵⁾	0.24 - 4.92	3.32		0.04 - 6.04	3.69
Mortgage-backed debt related to Non-Residual Trusts	Conditional prepayment rate	2.49% - 3.01%	2.79	%	2.22% - 3.17%	2.65	%
	Conditional default rate	1.72% - 6.02%	3.61	%	2.32% - 4.66%	3.34	%
	Loss severity	88.88% - 100.00%	97.71	%	77.88% - 100.00%	94.51	%
	Discount rate	6.00%	6.00	%	6.00%	6.00	%
HMBS related obligations	Weighted-average remaining life in years ⁽⁴⁾	0.4 - 7.8	3.7		0.4 - 7.2	3.2
	Conditional repayment rate	12.90% - 86.87%	32.07	%	11.49% - 57.76%	27.74	%
	Discount rate	3.02% - 3.98%	3.45	%	1.50% - 3.17%	2.56	%

__________


(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 of Loans and Debt Instruments Under the 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, 2017				December 31, 2016
	Estimated Fair Value		Unpaid Principal Balance		Estimated Fair Value		Unpaid Principal Balance
Loans at fair value under the fair value option
Reverse loans ⁽¹⁾	$	9,789,444	$	9,460,616	$	10,742,922	$	10,218,007
Mortgage loans held for sale ⁽¹⁾	588,553		567,492		1,176,280		1,148,897
Mortgage loans related to Non-Residual Trusts	301,435		344,421		450,377		513,545
Charged-off loans	45,800		2,333,820		46,963		2,439,318
Total	$	10,725,232	$	12,706,349	$	12,416,542	$	14,319,767

Debt instruments at fair value under the fair value option
Mortgage-backed debt related to Non-Residual Trusts	$	348,682	$	353,262	$	514,025	$	518,317
HMBS related obligations ⁽²⁾	9,175,128		8,743,700		10,509,449		9,916,383
Total	$	9,523,810	$	9,096,962	$	11,023,474	$	10,434,700

__________


(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, 2017			December 31, 2016
	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% - 78.76%	6.16	%	0.00% - 61.61%	7.30	%

__________


(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, 2017				December 31, 2016
	Fair Value Hierarchy	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets
Residential loans at amortized cost, net ⁽¹⁾	Level 3	$	443,056	$	432,518	$	480,920	$	490,562
Servicer and protective advances, net	Level 3	813,433		778,007		1,195,380		1,147,155

Financial liabilities ⁽¹⁾
Servicing advance liabilities⁽²⁾	Level 3	478,838		483,462		781,734		782,570
Corporate debt ⁽³⁾⁽⁴⁾	Level 2	1,994,411		1,553,076		2,126,176		1,967,518
Mortgage-backed debt carried at amortized cost	Level 3	387,200		391,539		429,931		435,679

__________


(1)	Excludes loans subject to repurchase from Ginnie Mae and the related liability. The December 31, 2016 amounts disclosed above have been revised to reflect this exclusion.


(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.


(4)	Includes liabilities subject to compromise with a carrying value of $781.1 million and an estimated fair value of $358.8 million at December 31, 2017.

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,
	2017			2016
Realized gains on sales of loans	$	171,537		$	233,447
Change in unrealized gains on loans held for sale	10,309			(14,803		)
Losses on interest rate lock commitments	(22,632		)	(574		)
Losses on forward sales commitments	(31,662		)	(12,335		)
Losses on MBS purchase commitments	(2,749		)	(20,317		)
Capitalized servicing rights	132,581			196,963
Provision for repurchases	(6,991		)	(15,331		)
Interest income	34,126			41,824
Other	(128		)	574
Net gains on sales of loans	$	284,391		$	409,448

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,
	2017			2016
Interest income on reverse loans	$	450,628		$	450,008
Change in fair value of reverse loans	(208,340		)	(111,687		)
Net fair value gains on reverse loans	242,288			338,321

Interest expense on HMBS related obligations ⁽¹⁾	(398,241		)	(412,090		)
Change in fair value of HMBS related obligations	198,372			132,791
Net fair value losses on HMBS related obligations	(199,869		)	(279,299		)
Net fair value gains on reverse loans and related HMBS obligations	$	42,419		$	59,022

__________


(1)	Excludes interest expense related to the warehouse facilities used to fund Ginnie Mae buyouts.

- 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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