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Fair Value (Tables)
 12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
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.
 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
December 31, 2017
Level 2
 
 
 
 
 
Assets
 
 
 
 
 
Mortgage loans held for sale
 
$
777,226

 
 
$
588,485

Servicing rights carried at fair value
 
14,565

 
 
—

Freestanding derivative instruments
 
1,770

 
 
2,757

Level 2 assets
 
$
793,561

 
 
$
591,242

Liabilities
 
 
 
 
 
Freestanding derivative instruments
 
$
13,410

 
 
$
981

Servicing rights related liabilities
 
—

 
 
32

Level 2 liabilities
 
$
13,410

 
 
$
1,013

 
 
 
 
 
 
Level 3
 
 
 
 
 
Assets
 
 
 
 
 
Reverse loans
 
$
8,202,775

 
 
$
9,789,444

Mortgage loans related to Non-Residual Trusts
 
117,410

 
 
301,435

Mortgage loans related to Residual Trusts and other loans held for investment (1)
 
1,044

 
 
—

Mortgage loans held for sale
 
61

 
 
68

Charged-off loans
 
48,440

 
 
45,800

Receivables related to Non-Residual Trusts
 
1,945

 
 
5,608

Servicing rights carried at fair value
 
548,579

 
 
714,774

Freestanding derivative instruments (IRLCs)
 
16,617

 
 
26,637

Level 3 assets
 
$
8,936,871

 
 
$
10,883,766

Liabilities
 
 
 
 
 
Freestanding derivative instruments (IRLCs)
 
$
327

 
 
$
269

Mortgage-backed debt related to Non-Residual Trusts
 
131,313

 
 
348,682

HMBS related obligations
 
7,264,821

 
 
9,175,128

Level 3 liabilities
 
$
7,396,461

 
 
$
9,524,079


__________
(1)
In connection with the adoption of fresh start accounting effective February 10, 2018, the Company elected to change its method of accounting for mortgage loans related to Residual Trusts and other loans held for investment as well as mortgage-backed debt related to Residual Trusts from amortized cost to fair value.
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):
 
Successor
 
For the Period From February 10, 2018 Through December 31, 2018
 
Fair Value
February 10, 2018
 
Total
Gains (Losses)
Included in
Comprehensive
Loss
 
Purchases and Other
 
Sales and other
 
Originations / Issuances
 
Settlements
 
Transfers Out of Level 3
 
Fair Value December 31, 2018
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse loans
$
9,702,263

 
$
202,844

 
$
—

 
$
(210,172
)
 
$
224,001

 
$
(1,716,161
)
 
$
—

 
$
8,202,775

Mortgage loans related to Non-Residual Trusts (1)
299,790

 
15,728

 
—

 
(159,344
)
 
—

 
(38,764
)
 
—

 
117,410

Mortgage loans related to Residual Trusts and other loans held for investment
304,051

 
(830
)
 
—

 
(287,068
)
 
—

 
(15,109
)
 
—

 
1,044

Mortgage loans held for sale
67

 
24

 
—

 
—

 
—

 
(30
)
 
—

 
61

Charged-off loans (2)
50,299

 
32,411

 
—

 
—

 
—

 
(34,270
)
 
—

 
48,440

Receivables related to Non-Residual Trusts
4,730

 
48

 
—

 
—

 
—

 
(2,833
)
 
—

 
1,945

Servicing rights carried at fair value
688,466

 
(96,873
)
 
55

 
(140,434
)
 
111,930

 
—

 
(14,565
)
 
548,579

Freestanding derivative instruments (IRLCs)
24,460

 
(7,786
)
 
—

 
—

 
—

 
(57
)
 
—

 
16,617

Total assets
$
11,074,126

 
$
145,566

 
$
55

 
$
(797,018
)
 
$
335,931

 
$
(1,807,224
)
 
$
(14,565
)
 
$
8,936,871

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freestanding derivative instruments (IRLCs)
$
(3,023
)
 
$
2,696

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(327
)
Mortgage-backed debt related to Non-Residual Trusts
(344,002
)
 
(7,784
)
 
—

 
—

 
—

 
220,473

 
—

 
(131,313
)
Mortgage-backed debt related to Residual Trusts
(390,152
)
 
1,331

 
—

 
356,621

 
—

 
32,200

 
—

 
—

HMBS related obligations
(8,913,052
)
 
(156,011
)
 
—

 
—

 
(251,946
)
 
2,056,188

 
—

 
(7,264,821
)
Total liabilities
$
(9,650,229
)
 
$
(159,768
)
 
$
—

 
$
356,621

 
$
(251,946
)
 
$
2,308,861

 
$
—

 
$
(7,396,461
)
__________
(1)
Sales and other for mortgage loans related to Non-Residual Trusts represents loans transferred to the counterparty under the Clean-up Call Agreement upon the counterparty's exercise of the mandatory clean-up call on the remaining trusts. Refer to Notes 5 and 29 for further information.
(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, of $11.6 million during the period from February 10, 2018 through December 31, 2018.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Predecessor
 
For the Period From January 1, 2018 Through February 9, 2018
 
Fair Value
January 1, 2018
 
Total
Gains (Losses)
Included in
Comprehensive Income
 
Purchases and Other
 
Sales
 
Originations / Issuances
 
Settlements
 
Fresh Start Accounting Adjustment
 
Fair Value
February 9, 2018
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse loans
$
9,789,444

 
$
31,476

 
$
—

 
$
—

 
$
33,300

 
$
(151,957
)
 
$
—

 
$
9,702,263

Mortgage loans related to Non-Residual Trusts
301,435

 
5,690

 
—

 
—

 
—

 
(7,335
)
 
—

 
299,790

Mortgage loans related to Residual Trusts and other loans held for investment
—

 
—

 
—

 
—

 
—

 
—

 
304,051

 
304,051

Mortgage loans held for sale
68

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
67

Charged-off loans (1)
45,800

 
8,843

 
—

 
—

 
—

 
(4,344
)
 
—

 
50,299

Receivables related to Non-Residual Trusts
5,608

 
848

 
—

 
—

 
—

 
(1,726
)
 
—

 
4,730

Servicing rights carried at fair value
714,774

 
64,663

 
(7
)
 
(100,399
)
 
9,435

 
—

 
—

 
688,466

Freestanding derivative instruments (IRLCs)
26,637

 
(2,171
)
 
—

 
—

 
—

 
(6
)
 
—

 
24,460

Total assets
$
10,883,766

 
$
109,349

 
$
(7
)
 
$
(100,399
)
 
$
42,735

 
$
(165,369
)
 
$
304,051

 
$
11,074,126

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Freestanding derivative instruments (IRLCs)
$
(269
)
 
$
(2,754
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(3,023
)
Mortgage-backed debt related to Non-Residual Trusts
(348,682
)
 
(2,956
)
 
—

 
—

 
—

 
7,636

 
—

 
(344,002
)
Mortgage-backed debt related to Residual Trusts
—

 
—

 
—

 
—

 
—

 
—

 
(390,152
)
 
(390,152
)
HMBS related obligations
(9,175,128
)
 
(20,900
)
 
—

 
—

 
(27,881
)
 
310,857

 
—

 
(8,913,052
)
Total liabilities
$
(9,524,079
)
 
$
(26,610
)
 
$
—

 
$
—

 
$
(27,881
)
 
$
318,493

 
$
(390,152
)
 
$
(9,650,229
)
__________
(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, of $5.7 million during the period from January 1, 2018 through February 9, 2018.
 
Predecessor
 
For the Year Ended December 31, 2017
 
Fair Value
January 1,
2017
 
Total
Gains (Losses)
Included in
Comprehensive Loss
 
Purchases and Other
 
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. Refer to Note 29 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, 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. Refer to Note 13 for additional information on servicing rights sold during the year.
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.
 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
February 9, 2018
 
December 31, 2017
Significant
Unobservable Input
 
Range of Input (1)
 
Weighted
Average of Input (1)
 
 
Range of Input (1)
 
Weighted
Average of Input (1)
 
Range of Input (1)
 
Weighted
Average of Input (1)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Reverse loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average remaining life in years (2)
 
0.0 - 9.4
 
2.8

 
 
0.3 - 10.2
 
3.5
 
0.3 - 10.2
 
3.8

Conditional repayment rate (3)
 
12.71% - 65.89%
 
32.25
%
 
 
12.61% - 71.68%
 
34.43%
 
12.61% - 71.68%
 
30.23
%
Discount rate
 
1.82% - 4.36%
 
3.84
%
 
 
2.79% - 4.17%
 
3.59%
 
3.05% - 4.17%
 
3.60
%
Mortgage loans related to Non-Residual Trusts
 
 
 
 
 
 
 
 
 
 
 
 
 
Conditional prepayment rate (4)
 
2.09% - 2.41%
 
2.23
%
 
 
1.99% - 2.51%
 
2.30%
 
2.08% - 2.53%
 
2.34
%
Conditional default rate (4)
 
1.21% - 4.14%
 
2.06
%
 
 
1.05% - 4.70%
 
2.55%
 
1.01% - 4.97%
 
2.61
%
Loss severity
 
78.97% - 99.96%
 
93.55
%
 
 
96.30% - 100.00%
 
99.79%
 
90.60% - 100.00%
 
99.46
%
Discount rate
 
8.32%
 
8.32
%
 
 
8.32%
 
8.32%
 
8.32%
 
8.32
%
Mortgage loans related to Residual Trusts and other loans held for investment
 
 
 
 
 
 
 
 
 
 
 
 
 
Conditional prepayment rate (4)(5)
 
—
 
—

 
 
2.66% - 3.57%
 
3.06%
 
—
 
—

Conditional default rate (4)(5)
 
—
 
—

 
 
4.13% - 5.32%
 
4.53%
 
—
 
—

Loss severity (5)
 
—
 
—

 
 
27.00% - 30.00%
 
28.25%
 
—
 
—

Discount rate (5)
 
—
 
—

 
 
8.25%
 
8.25%
 
—
 
—

Mortgage loans held for sale
 
 
 
 
 
 
 
 
 
 
 
 
 
Conditional prepayment rate (4)
 
4.81%
 
4.81
%
 
 
4.81%
 
4.81%
 
4.81%
 
4.81
%
Conditional default rate (4)
 
2.46%
 
2.46
%
 
 
2.46%
 
2.46%
 
2.46%
 
2.46
%
Loss severity
 
99.40%
 
99.40
%
 
 
99.40%
 
99.40%
 
99.40%
 
99.40
%
Discount rate
 
9.80%
 
9.80
%
 
 
9.80%
 
9.80%
 
9.80%
 
9.80
%
Charged-off loans
 
 
 
 
 
 
 
 
 
 
 
 
 
Collection rate
 
3.71% - 5.69%
 
3.80
%
 
 
3.42% - 6.05%
 
3.55%
 
2.84% - 4.47%
 
2.92
%
Discount rate
 
28.00%
 
28.00
%
 
 
28.00%
 
28.00%
 
28.00%
 
28.00
%
Receivables related to Non-Residual Trusts
 
 
 
 
 
 
 
 
 
 
 
 
 
Conditional prepayment rate (4)
 
2.42% - 2.57%
 
2.37
%
 
 
2.46% - 3.29%
 
3.02%
 
2.49% - 3.01%
 
2.79
%
Conditional default rate (4)
 
1.41% - 4.14%
 
3.07
%
 
 
1.99% - 5.32%
 
3.50%
 
1.72% - 6.02%
 
3.61
%
Loss severity
 
77.03% - 99.96%
 
94.33
%
 
 
94.86% - 100.00%
 
98.89%
 
88.88% - 100.00%
 
97.71
%
Discount rate
 
0.50%
 
0.50
%
 
 
0.50%
 
0.50%
 
0.50%
 
0.50
%
Servicing rights carried at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average remaining life in years (2)
 
2.1 - 7.5
 
5.4

 
 
2.4 - 7.5
 
5.9
 
2.4 - 7.1
 
5.6

Discount rate
 
9.63% - 13.11%
 
10.78
%
 
 
9.63% - 14.62%
 
11.70%
 
9.91% - 14.97%
 
11.92
%
Conditional prepayment rate (4)
 
5.12% - 24.87%
 
10.79
%
 
 
6.07% - 27.00%
 
9.70%
 
6.80% - 25.85%
 
11.10
%
Conditional default rate (4)
 
0.03% - 6.42%
 
0.77
%
 
 
0.09% - 10.22%
 
0.90%
 
0.06% - 3.20%
 
0.91
%
Cost to service
 
$62 - $1,260
 
$121
 
 
$62 - $1,260
 
$137
 
$62 - $1,260
 
$136
Interest rate lock commitments
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan funding probability
 
4.20% - 100.00%
 
69.44
%
 
 
1.00% - 100.00%
 
62.49%
 
1.00% - 100.00%
 
62.97
%
Fair value of initial servicing rights multiple (6)
 
0.01 - 6.50
 
3.60

 
 
0.02 - 5.64
 
2.79
 
0.01 - 5.24
 
2.74

 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
February 9, 2018
 
December 31, 2017
Significant
Unobservable Input
 
Range of Input (1)
 
Weighted
Average of Input (1)
 
 
Range of Input (1)
 
Weighted
Average of Input (1)
 
Range of Input (1)
 
Weighted
Average of Input (1)
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate lock commitments
 
 
 
 
 
 
 
 
 
 
 
 
 
Loan funding probability
 
43.00% - 100.00%
 
88.46
%
 
 
14.19% - 100.00%
 
82.62%
 
33.64% - 100.00%
 
84.76
%
Fair value of initial servicing rights multiple (6)
 
0.50 - 5.90
 
3.60

 
 
0.08 - 5.86
 
3.39
 
0.24 - 4.92
 
3.32

Mortgage-backed debt related to Non-Residual Trusts
 
 
 
 
 
 
 
 
 
 
 
 
 
Conditional prepayment rate (4)
 
2.24% - 2.57%
 
2.37
%
 
 
2.46% - 3.29%
 
3.02%
 
2.49% - 3.01%
 
2.79
%
Conditional default rate (4)
 
1.41% - 4.14%
 
3.07
%
 
 
1.99% - 5.32%
 
3.50%
 
1.72% - 6.02%
 
3.61
%
Loss severity
 
77.03% - 99.96%
 
94.33
%
 
 
94.86% - 100.00%
 
98.89%
 
88.88% - 100.00%
 
97.71
%
Discount rate
 
6.00%
 
6.00
%
 
 
6.00%
 
6.00%
 
6.00%
 
6.00
%
Mortgage-backed debt related to Residual Trusts
 
 
 
 
 
 
 
 
 
 
 
 
 
Conditional prepayment rate (4)(5)
 
—
 
—

 
 
2.66% - 3.57%
 
3.06%
 
—
 
—

Conditional default rate (4)(5)
 
—
 
—

 
 
4.13% - 5.32%
 
4.53%
 
—
 
—

Loss severity (5)
 
—
 
—

 
 
27.00% - 30.00%
 
28.25%
 
—
 
—

Discount rate (5)
 
—
 
—

 
 
6.00%
 
6.00%
 
—
 
—

HMBS related obligations
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average remaining life in years (2)(7)
 
0.0 - 7.0
 
3.0

 
 
0.3 - 7.7
 
3.2
 
0.4 - 7.8
 
3.7

Conditional repayment rate (3)(7)
 
13.00% - 77.52%
 
34.60
%
 
 
12.90% - 79.57%
 
37.32%
 
12.90% - 86.87%
 
32.07
%
Discount rate (7)
 
1.75% - 4.02%
 
3.64
%
 
 
2.81% - 3.91%
 
3.39%
 
3.02% - 3.98%
 
3.45
%
__________
(1)
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.
(2)
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.
(3)
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.
(4)
Voluntary and involuntary prepayment rates have been presented as conditional prepayment rate and conditional default rate, respectively.
(5)
Significant observable inputs used in the fair value measurement of mortgage loans related to Residual Trusts and other loans held for investment and mortgage-backed debt related to Residual Trusts was omitted at December 31, 2018 as the Residual Trusts were deconsolidated in November 2018 and the remaining loans held for investment are insignificant.
(6)
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):
 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
December 31, 2017
 
 
Estimated
Fair Value
 
Unpaid Principal
Balance
 
 
Estimated
Fair Value
 
Unpaid Principal
Balance
Loans at fair value under the fair value option
 
 
 
 
 
 
 
 
 
Reverse loans (1)
 
$
8,202,775

 
$
8,030,431

 
 
$
9,789,444

 
$
9,460,616

Mortgage loans held for sale (1)
 
777,287

 
746,229

 
 
588,553

 
567,492

Mortgage loans related to Non-Residual Trusts
 
117,410

 
130,840

 
 
301,435

 
344,421

Mortgage loans related to Residual Trusts and other loans held for investment (2)
 
1,044

 
1,052

 
 
—

 
—

Charged-off loans
 
48,440

 
2,202,491

 
 
45,800

 
2,333,820

Total
 
$
9,146,956

 
$
11,111,043

 
 
$
10,725,232

 
$
12,706,349

 
 
 
 
 
 
 
 
 
 
Debt instruments at fair value under the fair value option
 
 
 
 
 
 
 
 
 
Mortgage-backed debt related to Non-Residual Trusts
 
$
131,313

 
$
139,064

 
 
$
348,682

 
$
353,262

HMBS related obligations (3)
 
7,264,821

 
6,987,306

 
 
9,175,128

 
8,743,700

Total
 
$
7,396,134

 
$
7,126,370

 
 
$
9,523,810

 
$
9,096,962

__________
(1)
Includes loans that collateralize master repurchase agreements. Refer to Note 19 for additional information.
(2)
In connection with the adoption of fresh start accounting effective February 10, 2018, the Company changed its method of accounting for the residential loans and mortgage-backed debt of the Residual Trusts from amortized cost to fair value.
(3)
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:
 
 
Successor
 
 
Predecessor
 
 
December 31, 2018
 
 
February 9, 2018
 
December 31, 2017
Significant
Unobservable Input
 
Range of Input
 
Weighted
Average of Input
 
 
Range of Input
 
Weighted
Average of Input
 
Range of Input
 
Weighted
Average of Input
Real estate owned, net
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss severity (1)
 
0.00% - 49.70%
 
4.99
%
 
 
0.00% - 68.66%
 
7.54%
 
0.00% - 78.76%
 
6.16
%
__________
(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.
 
 
 
 
Successor
 
 
Predecessor
 
 
 
 
December 31, 2018
 
 
December 31, 2017
 
 
Fair Value
Hierarchy
 
Carrying
Amount
 
Estimated
Fair Value
 
 
Carrying
Amount
 
Estimated
Fair Value
Financial assets
 
 
 
 
 
 
 
 
 
 
 
Residential loans at amortized cost, net (1)(2)
 
Level 3
 
$
7,428

 
$
7,186

 
 
$
443,056

 
$
432,518

Servicer and protective advances, net
 
Level 3
 
440,497

 
438,032

 
 
813,433

 
778,007

 
 
 
 
 
 
 
 
 
 
 
 
Financial liabilities (1)
 
 
 
 
 
 
 
 
 
 
 
Servicing advance liabilities (3)
 
Level 3
 
217,991

 
218,291

 
 
478,838

 
483,462

Corporate debt (4)(5)
 
Level 2
 
1,133,218

 
850,647

 
 
1,994,411

 
1,553,076

Mortgage-backed debt carried at amortized cost (2)
 
Level 3
 
—

 
—

 
 
387,200

 
391,539

__________
(1)
Excludes loans subject to repurchase from Ginnie Mae and the related liability.
(2)
In connection with the adoption of fresh start accounting effective February 10, 2018, the Company changed its method of accounting for the residential loans and mortgage-backed debt of the Residual Trusts from amortized cost to fair value.
(3)
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.
(4)
At December 31, 2017, 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.
(5)
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):
 
 
Successor
 
 
Predecessor
 
 
For the Period From February 10, 2018 Through December 31, 2018
 
 
For the Period From January 1, 2018 Through February 9, 2018
 
For the Year Ended 
 December 31, 2017
Realized gains (losses) on sales of loans
 
$
(5,602
)
 
 
$
3,582

 
$
171,537

Change in unrealized gains (losses) on loans held for sale
 
7,425

 
 
(9,343
)
 
10,309

Losses on interest rate lock commitments
 
(5,089
)
 
 
(4,926
)
 
(22,632
)
Gains (losses) on forward sales commitments
 
(22,948
)
 
 
24,570

 
(31,662
)
Gains (losses) on MBS purchase commitments
 
13,807

 
 
(872
)
 
(2,749
)
Capitalized servicing rights
 
155,989

 
 
13,227

 
132,581

Provision for repurchases
 
(5,522
)
 
 
(729
)
 
(6,991
)
Interest income
 
23,790

 
 
2,298

 
34,126

Other
 
(140
)
 
 
156

 
(128
)
Net gains on sales of loans
 
$
161,710



$
27,963

 
$
284,391
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):
 
 
Successor
 
 
Predecessor
 
 
For the Period From February 10, 2018 Through December 31, 2018
 
 
For the Period From January 1, 2018 Through February 9, 2018
 
For the Year Ended 
 December 31, 2017
Interest income on reverse loans
 
$
379,215

 
 
$
47,116

 
$
450,628

Change in fair value of reverse loans
 
(176,371
)
 
 
(15,640
)
 
(208,340
)
Net fair value gains on reverse loans
 
202,844



31,476


242,288

 
 
 
 
 
 
 
 
Interest expense on HMBS related obligations (1)
 
(310,721
)
 
 
(40,427
)
 
(398,241
)
Change in fair value of HMBS related obligations
 
154,710

 
 
19,527

 
198,372

Net fair value losses on HMBS related obligations
 
(156,011
)


(20,900
)

(199,869
)
Net fair value gains on reverse loans and related HMBS obligations
 
$
46,833



$
10,576


$
42,419

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