XML 49 R41.htm IDEA: XBRL DOCUMENT v3.24.3
Fair Value (Tables)
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Summary of Financial Statement Items Measured at Fair Value on Recurring Basis

Following is a summary of financial statement items that are measured at fair value on a recurring basis:

 

 

September 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

102,787

 

 

$

—

 

 

$

—

 

 

$

102,787

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

4,101,126

 

 

 

81,256

 

 

 

4,182,382

 

Loans acquired for sale at fair value

 

 

—

 

 

 

1,659,727

 

 

 

6,069

 

 

 

1,665,796

 

Loans at fair value

 

 

—

 

 

 

1,427,575

 

 

 

1,950

 

 

 

1,429,525

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase contracts

 

 

12,844

 

 

 

—

 

 

 

—

 

 

 

12,844

 

Put options on interest rate futures purchase contracts

 

 

1,953

 

 

 

—

 

 

 

—

 

 

 

1,953

 

Forward purchase contracts

 

 

—

 

 

 

635

 

 

 

—

 

 

 

635

 

Forward sale contracts

 

 

—

 

 

 

11,997

 

 

 

—

 

 

 

11,997

 

MBS put options

 

 

—

 

 

 

1,508

 

 

 

—

 

 

 

1,508

 

CRT derivatives

 

 

—

 

 

 

—

 

 

 

29,690

 

 

 

29,690

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

7,476

 

 

 

7,476

 

Total derivative assets before netting

 

 

14,797

 

 

 

14,140

 

 

 

37,166

 

 

 

66,103

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

15,741

 

Total derivative assets after netting

 

 

14,797

 

 

 

14,140

 

 

 

37,166

 

 

 

81,844

 

Mortgage servicing rights at fair value

 

 

—

 

 

 

—

 

 

 

3,809,047

 

 

 

3,809,047

 

 

$

117,584

 

 

$

7,202,568

 

 

$

3,935,488

 

 

$

11,271,381

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed financings of the variable interest entities
   at fair value

 

$

—

 

 

$

1,334,797

 

 

$

—

 

 

$

1,334,797

 

Interest-only security payable at fair value

 

 

—

 

 

 

—

 

 

 

35,098

 

 

 

35,098

 

Derivative and credit risk transfer strip liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Forward purchase contracts

 

 

—

 

 

 

7,452

 

 

 

—

 

 

 

7,452

 

Forward sales contracts

 

 

—

 

 

 

11,530

 

 

 

—

 

 

 

11,530

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

1,574

 

 

 

1,574

 

Total derivative liabilities before netting

 

 

—

 

 

 

18,982

 

 

 

1,574

 

 

 

20,556

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(17,880

)

Total derivative liabilities after netting

 

 

—

 

 

 

18,982

 

 

 

1,574

 

 

 

2,676

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

13,475

 

 

 

13,475

 

Total derivative and credit risk transfer strip liabilities

 

 

—

 

 

 

18,982

 

 

 

15,049

 

 

 

16,151

 

 

$

—

 

 

$

1,353,779

 

 

$

50,147

 

 

$

1,386,046

 

 

 

 

 

December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

128,338

 

 

$

—

 

 

$

—

 

 

$

128,338

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

4,742,061

 

 

 

94,231

 

 

 

4,836,292

 

Loans acquired for sale at fair value

 

 

—

 

 

 

662,700

 

 

 

6,318

 

 

 

669,018

 

Loans at fair value

 

 

—

 

 

 

1,431,689

 

 

 

2,131

 

 

 

1,433,820

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase contracts

 

 

41,712

 

 

 

—

 

 

 

—

 

 

 

41,712

 

Put options on interest rate futures purchase contracts

 

 

4,324

 

 

 

—

 

 

 

—

 

 

 

4,324

 

Forward purchase contracts

 

 

—

 

 

 

15,905

 

 

 

—

 

 

 

15,905

 

Forward sale contracts

 

 

—

 

 

 

671

 

 

 

—

 

 

 

671

 

MBS call options

 

 

—

 

 

 

3,218

 

 

 

—

 

 

 

3,218

 

MBS put options

 

 

—

 

 

 

5

 

 

 

—

 

 

 

5

 

CRT derivatives

 

 

—

 

 

 

—

 

 

 

16,160

 

 

 

16,160

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

7,596

 

 

 

7,596

 

Total derivative assets before netting

 

 

46,036

 

 

 

19,799

 

 

 

23,756

 

 

 

89,591

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

88,393

 

Total derivative assets after netting

 

 

46,036

 

 

 

19,799

 

 

 

23,756

 

 

 

177,984

 

Mortgage servicing rights at fair value

 

 

—

 

 

 

—

 

 

 

3,919,107

 

 

 

3,919,107

 

 

$

174,374

 

 

$

6,856,249

 

 

$

4,045,543

 

 

$

11,164,559

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed financings of the variable interest entities
   at fair value

 

$

—

 

 

$

1,336,731

 

 

$

—

 

 

$

1,336,731

 

Interest-only security payable at fair value

 

 

—

 

 

 

—

 

 

 

32,667

 

 

 

32,667

 

Derivative liabilities and credit risk transfer strips:

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase contracts

 

 

2,005

 

 

 

—

 

 

 

—

 

 

 

2,005

 

Call options on interest rate futures sell contracts

 

 

1,328

 

 

 

—

 

 

 

—

 

 

 

1,328

 

Forward purchase contracts

 

 

—

 

 

 

490

 

 

 

—

 

 

 

490

 

Forward sales contracts

 

 

—

 

 

 

50,363

 

 

 

—

 

 

 

50,363

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

64

 

 

 

64

 

Total derivative liabilities before netting

 

 

3,333

 

 

 

50,853

 

 

 

64

 

 

 

54,250

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(49,561

)

Total derivative liabilities after netting

 

 

3,333

 

 

 

50,853

 

 

 

64

 

 

 

4,689

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

46,692

 

 

 

46,692

 

Total derivative and credit risk transfer strip
   liabilities

 

 

3,333

 

 

 

50,853

 

 

 

46,756

 

 

 

51,381

 

 

$

3,333

 

 

$

1,387,584

 

 

$

79,423

 

 

$

1,420,779

 
Summary of Changes in Items Measured Using Level 3 Inputs on Recurring Basis

The following is a summary of changes in items measured at fair value on a recurring basis using Level 3 inputs that are significant to the estimation of the fair values of the assets and liabilities at either the beginning or end of the periods presented:

 

 

Quarter ended September 30, 2024

 

Assets (1)

 

Interest-only stripped mortgage-backed securities

 

 

Loans
acquired
for sale

 

 

Loans at
fair value

 

 

CRT
derivatives

 

 

Interest rate
lock
commitments

 

 

CRT
strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, June 30, 2024

 

$

87,841

 

 

$

7,994

 

 

$

1,998

 

 

$

24,305

 

 

$

1,552

 

 

$

(16,974

)

 

$

3,941,861

 

 

$

4,048,577

 

Purchases (purchase adjustments) and
   issuances

 

 

—

 

 

 

(156

)

 

 

—

 

 

 

—

 

 

 

18,971

 

 

 

—

 

 

 

—

 

 

 

18,815

 

Repayments and sales

 

 

(40,487

)

 

 

(1,728

)

 

 

(38

)

 

 

(3,350

)

 

 

—

 

 

 

(10,990

)

 

 

—

 

 

 

(56,593

)

Accrual of unearned discount

 

 

2,264

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,264

 

Amounts received pursuant to sales
  of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

87,588

 

 

 

87,588

 

Changes in fair value included in
income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument -
   specific credit risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(3,971

)

 

 

(41

)

 

 

(10

)

 

 

8,735

 

 

 

27,776

 

 

 

14,489

 

 

 

(184,918

)

 

 

(137,940

)

 

 

(3,971

)

 

 

(41

)

 

 

(10

)

 

 

8,735

 

 

 

27,776

 

 

 

14,489

 

 

 

(184,918

)

 

 

(137,940

)

Exchange of mortgage servicing spread
    for interest-only stripped mortgage
   -backed securities

 

 

35,609

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(35,609

)

 

 

—

 

Transfers of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments to loans
   acquired for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(42,397

)

 

 

—

 

 

 

—

 

 

 

(42,397

)

Mortgage servicing rights relating to
   delinquent loans to Agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

125

 

 

 

125

 

Balance, September 30, 2024

 

$

81,256

 

 

$

6,069

 

 

$

1,950

 

 

$

29,690

 

 

$

5,902

 

 

$

(13,475

)

 

$

3,809,047

 

 

$

3,920,439

 

Changes in fair value recognized during
the quarter relating to assets still held
at September 30, 2024

 

$

(3,971

)

 

$

(9

)

 

$

(19

)

 

$

5,460

 

 

$

5,902

 

 

$

3,499

 

 

$

(180,885

)

 

$

(170,023

)

 

(1)
For the purpose of this table, CRT derivative, interest rate lock commitment (“IRLC”), and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

 

Liabilities

 

Quarter ended September 30, 2024

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, June 30, 2024

 

$

32,708

 

Changes in fair value included in income arising from:

 

 

 

Changes in instrument - specific credit risk

 

 

—

 

Other factors

 

 

2,390

 

 

 

2,390

 

Balance, September 30, 2024

 

$

35,098

 

Changes in fair value recognized during the quarter relating
to liability outstanding at September 30, 2024

 

$

2,390

 

 

 

 

Quarter ended September 30, 2023

 

Assets (1)

 

Interest-only stripped mortgage-backed securities

 

 

Loans
acquired
for sale

 

 

Loans at
fair
value

 

 

CRT
derivatives

 

 

Interest
rate lock
commitments

 

 

CRT
strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, June 30, 2023

 

$

—

 

 

$

6,630

 

 

$

2,665

 

 

$

(4,394

)

 

$

(1,298

)

 

$

(78,569

)

 

$

3,977,938

 

 

$

3,902,972

 

Purchases and issuances

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,618

 

 

 

—

 

 

 

16,263

 

 

 

22,881

 

Repayments and sales

 

 

—

 

 

 

(1,383

)

 

 

(510

)

 

 

(4,028

)

 

 

—

 

 

 

(11,241

)

 

 

—

 

 

 

(17,162

)

Amounts received pursuant to sales
  of loans

 

 

—

 

 

 

(496

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

58,560

 

 

 

58,064

 

Changes in fair value included in
income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument -
   specific credit risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(14

)

 

 

131

 

 

 

(58

)

 

 

13,164

 

 

 

(16,255

)

 

 

21,218

 

 

 

160,926

 

 

 

179,112

 

 

 

(14

)

 

 

131

 

 

 

(58

)

 

 

13,164

 

 

 

(16,255

)

 

 

21,218

 

 

 

160,926

 

 

 

179,112

 

Exchange of mortgage servicing spread
    for interest-only stripped mortgage
   -backed securities

 

 

103,547

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(105,096

)

 

 

(1,549

)

Transfers of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments
   to loans acquired for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,587

 

 

 

—

 

 

 

—

 

 

 

7,587

 

Mortgage servicing rights relating to
   delinquent loans to Agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

70

 

 

 

70

 

Balance, September 30, 2023

 

$

103,533

 

 

$

4,882

 

 

$

2,097

 

 

$

4,742

 

 

$

(3,348

)

 

$

(68,592

)

 

$

4,108,661

 

 

$

4,151,975

 

Changes in fair value recognized during
the quarter relating to assets still held
at September 30, 2023

 

$

(14

)

 

$

(104

)

 

$

(74

)

 

$

9,113

 

 

$

(3,348

)

 

$

9,977

 

 

$

160,926

 

 

$

176,476

 

 

(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

 

 

Liabilities

 

Quarter ended September 30, 2023

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, June 30, 2023

 

$

24,060

 

Changes in fair value included in results of operations arising from:

 

 

 

Changes in instrument - specific credit risk

 

 

—

 

Other factors

 

 

4,228

 

 

 

4,228

 

Balance, September 30, 2023

 

$

28,288

 

Changes in fair value recognized during the quarter relating
to liability outstanding at September 30, 2023

 

$

4,228

 

 

 

 

 

Nine months ended September 30, 2024

 

Assets (1)

 

Interest-only stripped mortgage-backed securities

 

 

Loans
acquired
for sale

 

 

Loans at
fair
value

 

 

CRT
derivatives

 

 

Interest rate
lock
commitments

 

 

CRT
strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, December 31, 2023

 

$

94,231

 

 

$

6,318

 

 

$

2,131

 

 

$

16,160

 

 

$

7,532

 

 

$

(46,692

)

 

$

3,919,107

 

 

$

3,998,787

 

Purchases and issuances

 

 

—

 

 

 

5,341

 

 

 

—

 

 

 

—

 

 

 

26,842

 

 

 

—

 

 

 

29,428

 

 

 

61,611

 

Repayments and sales

 

 

(50,541

)

 

 

(5,404

)

 

 

(129

)

 

 

(10,434

)

 

 

—

 

 

 

(34,368

)

 

 

—

 

 

 

(100,876

)

Accrual of unearned discounts

 

 

6,870

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,870

 

Amounts received pursuant to sales
   of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

159,456

 

 

 

159,456

 

Changes in fair value included in
income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument - specific
   credit risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(4,913

)

 

 

(186

)

 

 

(52

)

 

 

23,964

 

 

 

22,774

 

 

 

67,585

 

 

 

(263,676

)

 

 

(154,504

)

 

 

(4,913

)

 

 

(186

)

 

 

(52

)

 

 

23,964

 

 

 

22,774

 

 

 

67,585

 

 

 

(263,676

)

 

 

(154,504

)

Exchange of mortgage servicing spread
    for interest-only stripped mortgage
   -backed securities

 

 

35,609

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(35,609

)

 

 

—

 

Transfers of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments to loans
   acquired for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(51,246

)

 

 

—

 

 

 

—

 

 

 

(51,246

)

Mortgage servicing rights relating to
   delinquent loans to Agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

341

 

 

 

341

 

Balance, September 30, 2024

 

$

81,256

 

 

$

6,069

 

 

$

1,950

 

 

$

29,690

 

 

$

5,902

 

 

$

(13,475

)

 

$

3,809,047

 

 

$

3,920,439

 

Changes in fair value recognized during
the period relating to assets still held
at September 30, 2024

 

$

(4,913

)

 

$

(154

)

 

$

(71

)

 

$

13,716

 

 

$

5,902

 

 

$

33,217

 

 

$

(261,304

)

 

$

(213,607

)

 

(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

 

 

Liabilities

 

Nine months ended September 30, 2024

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, December 31, 2023

 

$

32,667

 

Changes in fair value included in income arising from:

 

 

 

Changes in instrument - specific credit risk

 

 

—

 

Other factors

 

 

2,431

 

 

 

2,431

 

Balance, September 30, 2024

 

$

35,098

 

Changes in fair value recognized during the period relating
to liability outstanding at September 30, 2024

 

$

2,431

 

 

 

 

 

 

Nine months ended September 30, 2023

 

Assets (1)

 

Interest-only stripped mortgage-backed securities

 

 

Loans
acquired
for sale

 

 

Loans at
fair
value

 

 

CRT
derivatives

 

 

Interest
rate lock
commitments

 

 

CRT strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, December 31, 2022

 

$

—

 

 

$

10,708

 

 

$

3,457

 

 

$

(22,098

)

 

$

(478

)

 

$

(137,193

)

 

$

4,012,737

 

 

$

3,867,133

 

Purchases and issuances

 

 

—

 

 

 

4,262

 

 

 

119

 

 

 

—

 

 

 

2,687

 

 

 

—

 

 

 

16,263

 

 

 

23,331

 

Repayments and sales

 

 

—

 

 

 

(9,787

)

 

 

(534

)

 

 

(12,283

)

 

 

—

 

 

 

(35,529

)

 

 

—

 

 

 

(58,133

)

Amounts received pursuant to sales
  of loans

 

 

—

 

 

 

(496

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

249,925

 

 

 

249,429

 

Changes in fair value included in
income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument -
   specific credit risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(14

)

 

 

195

 

 

 

(485

)

 

 

39,123

 

 

 

(3,578

)

 

 

104,130

 

 

 

(64,515

)

 

 

74,856

 

 

 

(14

)

 

 

195

 

 

 

(485

)

 

 

39,123

 

 

 

(3,578

)

 

 

104,130

 

 

 

(64,515

)

 

 

74,856

 

Exchange of mortgage servicing
   spread for interest-only stripped
   mortgage-backed securities

 

 

103,547

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(105,096

)

 

 

(1,549

)

Transfers of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

Loans to REO

 

 

—

 

 

 

—

 

 

 

(460

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(460

)

Interest rate lock commitments
  to loans acquired for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,979

)

 

 

—

 

 

 

—

 

 

 

(1,979

)

Mortgage servicing rights relating to
   delinquent loans to Agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(653

)

 

 

(653

)

Balance, September 30, 2023

 

$

103,533

 

 

$

4,882

 

 

$

2,097

 

 

$

4,742

 

 

$

(3,348

)

 

$

(68,592

)

 

$

4,108,661

 

 

$

4,151,975

 

Changes in fair value recognized
during the period relating to assets
still held at September 30, 2023

 

$

(14

)

 

$

(74

)

 

$

(1,011

)

 

$

26,619

 

 

$

(3,348

)

 

$

68,601

 

 

$

(64,515

)

 

$

26,258

 

(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

 

 

Liabilities

 

Nine months ended September 30, 2023

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, December 31, 2022

 

$

21,925

 

Changes in fair value included in results of operations arising from:

 

 

 

Changes in instrument - specific credit risk

 

 

—

 

Other factors

 

 

6,363

 

 

 

6,363

 

Balance, September 30, 2023

 

$

28,288

 

Changes in fair value recognized during the period relating
to liability outstanding at September 30, 2023

 

$

6,363

 

 
Fair Values and Related Principal Amounts Due upon Maturity of Mortgage Loans Accounted for Under Fair Value Option

Following are the fair values and related principal amounts due upon maturity of loans accounted for under the fair value option (including loans acquired for sale, loans held in consolidated VIEs, and distressed loans):

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

Fair value

 

 

Principal
amount due
upon maturity

 

 

Difference

 

 

Fair value

 

 

Principal
amount due
upon maturity

 

 

Difference

 

 

 

(in thousands)

 

Loans acquired for sale at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

$

1,665,099

 

 

$

1,619,369

 

 

$

45,730

 

 

$

667,857

 

 

$

648,283

 

 

$

19,574

 

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

622

 

 

 

873

 

 

 

(251

)

 

 

433

 

 

 

617

 

 

 

(184

)

In foreclosure

 

 

75

 

 

 

96

 

 

 

(21

)

 

 

728

 

 

 

845

 

 

 

(117

)

 

 

697

 

 

 

969

 

 

 

(272

)

 

 

1,161

 

 

 

1,462

 

 

 

(301

)

 

$

1,665,796

 

 

$

1,620,338

 

 

$

45,458

 

 

$

669,018

 

 

$

649,745

 

 

$

19,273

 

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held in consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

$

1,426,511

 

 

$

1,620,842

 

 

$

(194,331

)

 

$

1,430,427

 

 

$

1,697,305

 

 

$

(266,878

)

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

891

 

 

 

1,122

 

 

 

(231

)

 

 

1,262

 

 

 

1,582

 

 

 

(320

)

In foreclosure

 

 

173

 

 

 

219

 

 

 

(46

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,064

 

 

 

1,341

 

 

 

(277

)

 

 

1,262

 

 

 

1,582

 

 

 

(320

)

 

 

1,427,575

 

 

 

1,622,183

 

 

 

(194,608

)

 

 

1,431,689

 

 

 

1,698,887

 

 

 

(267,198

)

Distressed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

 

460

 

 

 

634

 

 

 

(174

)

 

 

569

 

 

 

728

 

 

 

(159

)

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

1,490

 

 

 

4,332

 

 

 

(2,842

)

 

 

393

 

 

 

2,023

 

 

 

(1,630

)

In foreclosure

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,169

 

 

 

2,546

 

 

 

(1,377

)

 

 

1,490

 

 

 

4,332

 

 

 

(2,842

)

 

 

1,562

 

 

 

4,569

 

 

 

(3,007

)

 

 

1,950

 

 

 

4,966

 

 

 

(3,016

)

 

 

2,131

 

 

 

5,297

 

 

 

(3,166

)

 

$

1,429,525

 

 

$

1,627,149

 

 

$

(197,624

)

 

$

1,433,820

 

 

$

1,704,184

 

 

$

(270,364

)

 
Summary of Changes in Fair Value Included in Current Period Results of Operations

Following are the changes in fair value included in current period income by consolidated statement of income line item for financial statement items accounted for under the fair value option:

 

 

Quarter ended September 30, 2024

 

 

 

Net gains (losses) on investments and financings

 

 

Net gains on loans acquired
 for sale

 

 

Net loan
servicing fees

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

123,433

 

 

$

—

 

 

$

—

 

 

$

15,663

 

 

$

139,096

 

Loans acquired for sale at fair value

 

 

—

 

 

 

65,611

 

 

 

—

 

 

 

—

 

 

 

65,611

 

Loans at fair value

 

 

75,350

 

 

 

—

 

 

 

—

 

 

 

2,229

 

 

 

77,579

 

Credit risk transfer strips

 

 

14,489

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,489

 

MSRs at fair value

 

 

—

 

 

 

—

 

 

 

(184,918

)

 

 

—

 

 

 

(184,918

)

 

$

213,272

 

 

$

65,611

 

 

$

(184,918

)

 

$

17,892

 

 

$

111,857

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

(2,390

)

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(2,390

)

Asset-backed financings of VIEs at fair value

 

 

(72,922

)

 

 

—

 

 

 

—

 

 

 

1,026

 

 

 

(71,896

)

 

$

(75,312

)

 

$

—

 

 

$

—

 

 

$

1,026

 

 

$

(74,286

)

 

 

 

 

Quarter ended September 30, 2023

 

 

 

Net gains (losses) on investments and financings

 

 

Net gains on loans acquired
 for sale

 

 

Net loan
servicing fees

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

(144,031

)

 

$

—

 

 

$

—

 

 

$

1,048

 

 

$

(142,983

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(13,106

)

 

 

—

 

 

 

—

 

 

 

(13,106

)

Loans at fair value

 

 

(54,141

)

 

 

—

 

 

 

—

 

 

 

(5,153

)

 

 

(59,294

)

Credit risk transfer strips

 

 

21,218

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

21,218

 

MSRs at fair value

 

 

—

 

 

 

—

 

 

 

160,926

 

 

 

—

 

 

 

160,926

 

 

$

(176,954

)

 

$

(13,106

)

 

$

160,926

 

 

$

(4,105

)

 

$

(33,239

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

(4,228

)

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(4,228

)

Asset-backed financings at fair value

 

 

58,474

 

 

 

—

 

 

 

—

 

 

 

1,132

 

 

 

59,606

 

 

$

54,246

 

 

$

—

 

 

$

—

 

 

$

1,132

 

 

$

55,378

 

 

 

 

 

Nine months ended September 30, 2024

 

 

 

Net gains (losses) on investments and financings

 

 

Net gains on loans acquired
for sale

 

 

Net loan
servicing fees

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

50,310

 

 

$

—

 

 

$

—

 

 

$

25,340

 

 

$

75,650

 

Loans acquired for sale at fair value

 

 

—

 

 

 

67,243

 

 

 

—

 

 

 

—

 

 

 

67,243

 

Loans at fair value

 

 

71,330

 

 

 

—

 

 

 

—

 

 

 

(511

)

 

 

70,819

 

Credit risk transfer strips

 

 

67,585

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

67,585

 

MSRs at fair value

 

 

—

 

 

 

—

 

 

 

(263,676

)

 

 

—

 

 

 

(263,676

)

 

$

189,225

 

 

$

67,243

 

 

$

(263,676

)

 

$

24,829

 

 

$

17,621

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

(2,431

)

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(2,431

)

Asset-backed financings at fair value

 

 

(64,151

)

 

 

—

 

 

 

—

 

 

 

1,138

 

 

 

(63,013

)

 

$

(66,582

)

 

$

—

 

 

$

—

 

 

$

1,138

 

 

$

(65,444

)

 

 

 

 

Nine months ended September 30, 2023

 

 

 

Net gains (losses) on investments and financings

 

 

Net gains on loans acquired
for sale

 

 

Net loan
servicing fees

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

(127,434

)

 

$

—

 

 

$

—

 

 

$

(1,172

)

 

$

(128,606

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(7,215

)

 

 

—

 

 

 

—

 

 

 

(7,215

)

Loans at fair value

 

 

(61,803

)

 

 

—

 

 

 

—

 

 

 

(6,212

)

 

 

(68,015

)

Credit risk transfer strips

 

 

104,130

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

104,130

 

MSRs at fair value

 

 

—

 

 

 

—

 

 

 

(64,515

)

 

 

—

 

 

 

(64,515

)

 

$

(85,107

)

 

$

(7,215

)

 

$

(64,515

)

 

$

(7,384

)

 

$

(164,221

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

(6,363

)

 

$

—

 

 

$

—

 

 

$

—

 

 

$

(6,363

)

Asset-backed financings at fair value

 

 

66,108

 

 

 

—

 

 

 

—

 

 

 

666

 

 

 

66,774

 

 

$

59,745

 

 

$

—

 

 

$

—

 

 

$

666

 

 

$

60,411

 

 

 
Summary of Carrying Value of Financial Statement Items Remeasured Based on Fair Value on Nonrecurring Basis

Following is a summary of the carrying value of assets that were remeasured during the period based on fair value on a nonrecurring basis:

Real estate acquired in settlement of loans

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

September 30, 2024

 

$

—

 

 

$

—

 

 

$

438

 

 

$

438

 

December 31, 2023

 

$

—

 

 

$

—

 

 

$

753

 

 

$

753

 
Summary of Changes in Fair Value Recognized in Assets that Remeasured at Fair Value on a Nonrecurring Basis

The following table summarizes the fair value changes recognized during the periods on assets held at period end that were remeasured at fair value on a nonrecurring basis:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Real estate acquired in settlement of loans

 

$

9

 

 

$

(258

)

 

$

105

 

 

$

(288

)
Carrying and Fair Values of Notes Payable Secured by Credit Risk Transfer and Mortgage Servicing Rights and Exchangeable Senior Notes The fair values and carrying values of these liabilities are summarized below:

 

 

September 30, 2024

 

 

December 31, 2023

 

Instrument

 

Carrying value

 

 

Fair value

 

 

Carrying value

 

 

Fair value

 

 

 

(in thousands)

 

Notes payable secured by credit risk transfer
      and mortgage servicing assets

 

$

2,830,108

 

 

$

2,846,037

 

 

$

2,910,605

 

 

$

2,904,678

 

Unsecured senior notes

 

$

814,915

 

 

$

818,647

 

 

$

600,458

 

 

$

580,090

 
Key Inputs Used in Determining Fair Value of IO Securities

Following are the key inputs used in determining the fair value of IO securities:

 

 

 

September 30, 2024

 

 

December 31, 2023

 

Fair value (in thousands)

 

$

81,256

 

 

$

94,231

 

Key inputs (1)

 

 

 

 

 

 

Pricing spread (2)

 

 

 

 

 

 

Range

 

5.9% – 6.5%

 

 

5.1% – 5.1%

 

Weighted average

 

6.5%

 

 

5.1%

 

Annual total prepayment speed (3)

 

 

 

 

 

 

Range

 

11.7% – 12.1%

 

 

10.9% – 11.0%

 

Weighted average

 

11.7%

 

 

10.9%

 

Equivalent life (in years)

 

 

 

 

 

 

Range

 

4.4 – 6.8

 

 

4.7 – 7.2

 

Weighted average

 

6.7

 

 

7.1

 

 

(1)
Weighted-average inputs are based on the UPB of the underlying loans.
(2)
Pricing spread represents a margin that is applied to a reference forward rate to develop periodic discount rates. The Company uses the pricing spread over a derived United States Treasury Securities (“Treasury”) yield curve for the purpose of discounting cash flows relating to IO securities.
(3)
Prepayment speed is measured using life total Conditional Prepayment Rate (“CPR”). Equivalent life is provided as supplementary information.
Quantitative Summary of Key Unobservable Inputs Used in Valuation of CRT Derivatives

Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of broker-provided fair values for CRT derivatives:

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

(dollars in thousands)

 

Fair value

 

$

29,690

 

 

$

16,160

 

UPB of loans in reference pools

 

$

5,071,449

 

 

$

5,437,551

 

Key inputs (1)

 

 

 

 

 

 

Discount rate

 

 

 

 

 

 

Range

 

8.4% - 11.7%

 

 

9.0% – 9.7%

 

Weighted average

 

8.7%

 

 

9.6%

 

Voluntary prepayment speed (2)

 

 

 

 

 

 

Range

 

6.8% - 7.1%

 

 

6.9% – 7.6%

 

Weighted average

 

7.1%

 

 

7.4%

 

Involuntary prepayment speed (3)

 

 

 

 

 

 

Range

 

0.1% - 0.1%

 

 

0.2% – 0.8%

 

Weighted average

 

0.1%

 

 

0.3%

 

Remaining loss expectation

 

 

 

 

 

 

Range

 

0.0% - 0.2%

 

 

0.2% – 0.3%

 

Weighted average

 

0.1%

 

 

0.3%

 

 

(1)
Weighted average inputs are based on fair value amounts of the CRT arrangements, except for remaining loss expectation which is based on the UPB of the loans in the reference pools.
(2)
Voluntary prepayment speed is measured using life voluntary CPR.
(3)
Involuntary prepayment speed is measured using life involuntary CPR.
Quantitative Summary of Key Unobservable Inputs Used in Valuation of Interest Rate Lock Commitments

Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

 

 

September 30, 2024

 

 

December 31, 2023

 

Fair value (in thousands) (1)

 

$

5,902

 

 

$

7,532

 

Committed amount (in thousands)

 

$

2,062,088

 

 

$

874,017

 

Key inputs (2)

 

 

 

 

 

 

Pull-through rate

 

 

 

 

 

 

Range

 

52.1% - 99.0%

 

 

50.0% - 98.0%

 

Weighted average

 

87.3%

 

 

82.5%

 

MSR fair value expressed as

 

 

 

 

 

 

Servicing fee multiple

 

 

 

 

 

 

Range

 

2.0 - 8.2

 

 

1.7 - 6.5

 

Weighted average

 

5.3

 

 

4.6

 

Percentage of unpaid principal balance

 

 

 

 

 

 

Range

 

0.5% - 2.6%

 

 

0.4% - 2.4%

 

Weighted average

 

2.0%

 

 

1.7%

 

 

(1)
For purposes of this table, IRLC asset and liability positions are shown net.
(2)
Weighted-average inputs are based on the committed amounts.
Summary of Key Unobservable Inputs Used in Valuation of Credit Risk Transfer Strip Liabilities

Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of the broker-provided fair values of the CRT strip liabilities:

 

 

September 30, 2024

 

 

December 31, 2023

 

 

 

(dollars in thousands)

 

Fair value

 

$

13,475

 

 

$

46,692

 

Unpaid principal balance of loans in the reference pools

 

$

16,636,716

 

 

$

17,714,679

 

Key inputs (1)

 

 

 

 

 

 

Discount rate

 

 

 

 

 

 

Range

 

6.9% - 8.7%

 

 

7.9% – 9.6%

 

Weighted average

 

8.4%

 

 

9.4%

 

Voluntary prepayment speed (2)

 

 

 

 

 

 

Range

 

7.3% - 7.4%

 

 

6.6% – 8.2%

 

Weighted average

 

7.3%

 

 

6.8%

 

Involuntary prepayment speed (3)

 

 

 

 

 

 

Range

 

0.1% - 0.2%

 

 

0.2% – 0.3%

 

Weighted average

 

0.1%

 

 

0.2%

 

Remaining loss expectation

 

 

 

 

 

 

Range

 

0.4% - 1.5%

 

 

0.5% – 1.6%

 

Weighted average

 

0.5%

 

 

0.6%

 

 

(1)
Weighted average inputs are based on fair value amounts of the CRT arrangements, except for remaining loss expectation which is based on the UPB of the loans in the reference pools.
(2)
Voluntary prepayment speed is measured using life voluntary CPR.
(3)
Involuntary prepayment speed is measured using life involuntary CPR.
Key Assumptions Used in Determining Fair Value of MSRs at Time of Initial Recognition

Following are the key inputs used in determining the fair value of MSRs at the time of initial recognition:

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

MSRs recognized (in thousands)

 

$

87,588

 

 

$

58,560

 

 

$

159,456

 

 

$

249,925

 

Unpaid principal balance of underlying loans (in thousands)

 

$

5,130,285

 

 

$

3,052,557

 

 

$

9,203,814

 

 

$

13,458,182

 

Weighted average annual servicing fee rate (in basis points)

 

35

 

 

38

 

 

35

 

 

40

 

Key inputs (1)

 

 

 

 

 

 

 

 

 

 

 

 

Pricing spread (2)

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

5.4% - 7.3%

 

 

5.5% – 8.5%

 

 

5.4% - 8.5%

 

 

5.5% – 8.8%

 

Weighted average

 

5.5%

 

 

5.5%

 

 

5.6%

 

 

5.8%

 

Prepayment speed (3)

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

11.7% - 26.7%

 

 

10.1% – 22.7%

 

 

10.8% - 26.7%

 

 

10.1% – 22.7%

 

Weighted average

 

13.6%

 

 

11.3%

 

 

13.1%

 

 

12.3%

 

Equivalent average life (in years)

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

3.5 – 6.4

 

 

3.2 - 7.2

 

 

3.4 – 7.2

 

 

2.8 - 7.2

 

Weighted average

 

6.3

 

 

7.1

 

 

6.5

 

 

6.8

 

Annual per-loan cost of servicing

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

$68 – $87

 

 

$69 – $71

 

 

$68 – $87

 

 

$68 – $71

 

Weighted average

 

$68

 

 

$71

 

 

$69

 

 

$69

 

 

(1)
Weighted average inputs are based on UPB of the underlying loans.
(2)
The Company uses the pricing spread over a derived Treasury yield curve for the purpose of discounting cash flows relating to MSRs.
(3)
Prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information.
Quantitative Summary of Key Assumptions Used in Valuation of MSRs as of Dates Presented, and Effect on Estimated Fair Value from Adverse Changes in Those Inputs

Following is a quantitative summary of key inputs used in the valuation of MSRs as of the dates presented, and the effect on the fair value from adverse changes in those inputs:

 

 

 

September 30, 2024

 

 

December 31, 2023

 

Fair value (in thousands)

 

$

3,809,047

 

 

$

3,919,107

 

Unpaid principal balance of underlying loans (in thousands)

 

$

228,127,324

 

 

$

230,294,583

 

Weighted average annual servicing fee rate (in basis points)

 

28

 

 

28

 

Weighted average note interest rate

 

3.8%

 

 

3.7%

 

Key inputs (1)

 

 

 

 

 

 

Pricing spread (2)

 

 

 

 

 

 

Range

 

5.4% - 8.1%

 

 

5.5% – 8.5%

 

Weighted average

 

5.4%

 

 

5.5%

 

Effect on fair value (in thousands) of (3):

 

 

 

 

 

 

5% adverse change

 

$(46,966)

 

 

$(48,362)

 

10% adverse change

 

$(92,816)

 

 

$(95,575)

 

20% adverse change

 

$(181,313)

 

 

$(186,699)

 

Prepayment speed (4)

 

 

 

 

 

 

Range

 

7.4% - 18.8%

 

 

6.5% – 17.9%

 

Weighted average

 

7.5%

 

 

7.0%

 

Equivalent average life (in years)

 

 

 

 

 

 

Range

 

2.5 – 8.5

 

 

2.7 – 9.4

 

Weighted average

 

8.2

 

 

8.5

 

Effect on fair value (in thousands) of (3):

 

 

 

 

 

 

5% adverse change

 

$(57,286)

 

 

$(53,964)

 

10% adverse change

 

$(112,596)

 

 

$(106,144)

 

20% adverse change

 

$(217,698)

 

 

$(205,509)

 

Annual per-loan cost of servicing

 

 

 

 

 

 

Range

 

$68 – $89

 

 

$70 – $89

 

Weighted average

 

$68

 

 

$70

 

Effect on fair value (in thousands) of (3):

 

 

 

 

 

 

5% adverse change

 

$(16,607)

 

 

$(17,276)

 

10% adverse change

 

$(33,214)

 

 

$(34,551)

 

20% adverse change

 

$(66,428)

 

 

$(69,103)

 

 

 

(1)
Weighted-average inputs are based on the UPBs of the underlying loans.
(2)
The Company uses a pricing spread over a derived Treasury yield curve for the purpose of discounting cash flows relating to MSRs.
(3)
These sensitivity analyses are limited in that they were performed as of a particular date; only account for the estimated effect of the movements in the indicated inputs; do not incorporate changes in those inputs in relation to other inputs; are subject to the accuracy of the models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such events, including operational adjustments to account for changing circumstances. For these reasons, these analyses should not be viewed as earnings forecasts.
(4)
Prepayment speed is measured using life total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information.