XML 64 R44.htm IDEA: XBRL DOCUMENT v3.19.2
Fair Value (Tables)
 6 Months Ended
Jun. 30, 2019
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:

 

 

 

June 30, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

76,731

 

 

$

—

 

 

$

—

 

 

$

76,731

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

2,600,357

 

 

 

—

 

 

 

2,600,357

 

Loans acquired for sale at fair value

 

 

—

 

 

 

2,463,079

 

 

 

14,188

 

 

 

2,477,267

 

Loans at fair value

 

 

—

 

 

 

284,097

 

 

 

74,473

 

 

 

358,570

 

Excess servicing spread purchased from PFSI

 

 

—

 

 

 

—

 

 

 

194,156

 

 

 

194,156

 

Derivative and credit risk transfer strip assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

62,479

 

 

 

62,479

 

CRT Agreements

 

 

—

 

 

 

—

 

 

 

124,033

 

 

 

124,033

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

14,816

 

 

 

14,816

 

Repurchase agreement derivatives

 

 

—

 

 

 

—

 

 

 

12,046

 

 

 

12,046

 

Forward purchase contracts

 

 

—

 

 

 

34,285

 

 

 

—

 

 

 

34,285

 

Forward sale contracts

 

 

—

 

 

 

3,074

 

 

 

—

 

 

 

3,074

 

MBS put options

 

 

—

 

 

 

8,620

 

 

 

—

 

 

 

8,620

 

MBS call options

 

 

—

 

 

 

4,332

 

 

 

—

 

 

 

4,332

 

Call options on interest rate futures

 

 

16,863

 

 

 

—

 

 

 

—

 

 

 

16,863

 

Put options on interest rate futures

 

 

1,557

 

 

 

—

 

 

 

—

 

 

 

1,557

 

Total derivative and credit risk transfer strip

    assets before netting

 

 

18,420

 

 

 

50,311

 

 

 

213,374

 

 

 

282,105

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(23,323

)

Total derivative and credit risk transfer strip

    assets after netting

 

 

18,420

 

 

 

50,311

 

 

 

213,374

 

 

 

258,782

 

Firm commitment to purchase credit risk transfer

   securities at fair value

 

 

—

 

 

 

—

 

 

 

15,581

 

 

 

15,581

 

Mortgage servicing rights at fair value

 

 

—

 

 

 

—

 

 

 

1,126,427

 

 

 

1,126,427

 

 

 

$

95,151

 

 

$

5,397,844

 

 

$

1,638,199

 

 

$

7,107,871

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed financing of a VIE at fair value

 

$

—

 

 

$

270,077

 

 

$

—

 

 

$

270,077

 

Interest-only security payable at fair value

 

 

—

 

 

 

—

 

 

 

26,356

 

 

 

26,356

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

1,202

 

 

 

1,202

 

Forward purchase contracts

 

 

—

 

 

 

4,052

 

 

 

—

 

 

 

4,052

 

Forward sales contracts

 

 

—

 

 

 

22,052

 

 

 

—

 

 

 

22,052

 

Total derivative liabilities before netting

 

 

—

 

 

 

26,104

 

 

 

1,202

 

 

 

27,306

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,852

)

Total derivative liabilities after netting

 

 

—

 

 

 

26,104

 

 

 

1,202

 

 

 

22,454

 

 

 

$

—

 

 

$

296,181

 

 

$

27,558

 

 

$

318,887

 

 

 

 

December 31, 2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

74,850

 

 

$

—

 

 

$

—

 

 

$

74,850

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

2,610,422

 

 

 

—

 

 

 

2,610,422

 

Loans acquired for sale at fair value

 

 

—

 

 

 

1,626,483

 

 

 

17,474

 

 

 

1,643,957

 

Loans at fair value

 

 

—

 

 

 

290,573

 

 

 

117,732

 

 

 

408,305

 

Excess servicing spread purchased from PFSI

 

 

—

 

 

 

—

 

 

 

216,110

 

 

 

216,110

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRT Agreements

 

 

—

 

 

 

—

 

 

 

123,987

 

 

 

123,987

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

12,162

 

 

 

12,162

 

Repurchase agreement derivatives

 

 

—

 

 

 

—

 

 

 

14,511

 

 

 

14,511

 

Forward purchase contracts

 

 

—

 

 

 

14,845

 

 

 

—

 

 

 

14,845

 

Forward sale contracts

 

 

—

 

 

 

13

 

 

 

—

 

 

 

13

 

MBS put options

 

 

—

 

 

 

218

 

 

 

—

 

 

 

218

 

MBS call options

 

 

—

 

 

 

945

 

 

 

—

 

 

 

945

 

Call options on interest rate futures

 

 

5,137

 

 

 

—

 

 

 

—

 

 

 

5,137

 

Put options on interest rate futures

 

 

178

 

 

 

—

 

 

 

—

 

 

 

178

 

Total derivative assets before netting

 

 

5,315

 

 

 

16,021

 

 

 

150,660

 

 

 

171,996

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,831

)

Total derivative assets after netting

 

 

5,315

 

 

 

16,021

 

 

 

150,660

 

 

 

167,165

 

Firm commitment to purchase credit risk transfer

   securities at fair value

 

 

—

 

 

 

—

 

 

 

37,994

 

 

 

37,994

 

Mortgage servicing rights at fair value

 

 

—

 

 

 

—

 

 

 

1,162,369

 

 

 

1,162,369

 

 

 

$

80,165

 

 

$

4,543,499

 

 

$

1,702,339

 

 

$

6,321,172

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed financing of a VIE at fair value

 

$

—

 

 

$

276,499

 

 

$

—

 

 

$

276,499

 

Interest-only security payable at fair value

 

 

—

 

 

 

—

 

 

 

36,011

 

 

 

36,011

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

174

 

 

 

174

 

Forward purchase contracts

 

 

—

 

 

 

43

 

 

 

—

 

 

 

43

 

Forward sales contracts

 

 

—

 

 

 

29,273

 

 

 

—

 

 

 

29,273

 

Total derivative liabilities before netting

 

 

—

 

 

 

29,316

 

 

 

174

 

 

 

29,490

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(23,576

)

Total derivative liabilities after netting

 

 

—

 

 

 

29,316

 

 

 

174

 

 

 

5,914

 

 

 

$

—

 

 

$

305,815

 

 

$

36,185

 

 

$

318,424

 
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 quarters presented:

 

 

 

Quarter ended June 30, 2019

 

 

 

Loans

acquired

for sale

at fair

value

 

 

Loans at

fair value

 

 

Excess

servicing

spread

 

 

CRT strips

 

 

CRT

Agreement

derivatives

 

 

Interest rate

lock

commitments

(1)

 

 

Repurchase

agreement

derivatives

 

 

Firm

commitment

to purchase

CRT securities

 

 

Mortgage

servicing

rights

 

 

Total

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

$

18,361

 

 

$

109,112

 

 

$

205,081

 

 

$

—

 

 

$

130,447

 

 

$

10,457

 

 

$

17,701

 

 

$

79,784

 

 

$

1,156,908

 

 

$

1,727,851

 

Purchases and issuances

 

 

3,748

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11,350

 

 

 

1,384

 

 

 

—

 

 

 

—

 

 

 

16,482

 

Repayments and sales

 

 

(8,797

)

 

 

(27,795

)

 

 

(10,530

)

 

 

—

 

 

 

(21,170

)

 

 

—

 

 

 

(7,075

)

 

 

(31,925

)

 

 

—

 

 

 

(107,292

)

Capitalization of interest

   and fees

 

 

—

 

 

 

1,166

 

 

 

2,767

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,933

 

Capitalization of advances

 

 

—

 

 

 

694

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

694

 

ESS received pursuant to a

   recapture agreement with

   PFSI

 

 

—

 

 

 

—

 

 

 

442

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

442

 

Amounts received as proceeds

   from sales of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20,396

 

 

 

152,986

 

 

 

173,382

 

Changes in fair value included

   in income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument-

   specific credit risk

 

 

—

 

 

 

2,678

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,678

 

Other factors

 

 

857

 

 

 

(8,129

)

 

 

(3,604

)

 

 

5,675

 

 

 

14,756

 

 

 

33,793

 

 

 

36

 

 

 

4,130

 

 

 

(183,467

)

 

 

(135,953

)

 

 

 

857

 

 

 

(5,451

)

 

 

(3,604

)

 

 

5,675

 

 

 

14,756

 

 

 

33,793

 

 

 

36

 

 

 

4,130

 

 

 

(183,467

)

 

 

(133,275

)

Transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans to REO

 

 

—

 

 

 

(3,253

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,253

)

Loans acquired for sale at fair

   value from "Level 2" to

   "Level 3" (2)

 

 

19

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19

 

Firm commitment to purchase

   CRT securities to Investment

   securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

56,804

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(56,804

)

 

 

—

 

 

 

—

 

Interest rate lock commitments

   to loans acquired for sale

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(41,986

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(41,986

)

Balance, June 30, 2019

 

$

14,188

 

 

$

74,473

 

 

$

194,156

 

 

$

62,479

 

 

$

124,033

 

 

$

13,614

 

 

$

12,046

 

 

$

15,581

 

 

$

1,126,427

 

 

$

1,636,997

 

Changes in fair value

   recognized during the period

   relating to assets still held at

   June 30, 2019

 

$

545

 

 

$

(6,094

)

 

$

(3,604

)

 

$

5,675

 

 

$

(6,414

)

 

$

13,614

 

 

$

—

 

 

$

4,130

 

 

$

(183,467

)

 

$

(175,615

)

 

(1)

For the purpose of this table, the interest rate lock commitment (“IRLC”) asset and liability positions are shown net.

(2)

During the quarter ended June 30, 2019, the Company identified certain “Level 2” fair value loans acquired for sale that were not saleable into the prime mortgage market and therefore transferred them to “Level 3”.

 

 

 

Quarter ended June 30, 2019

 

 

 

Interest-only

 

 

 

security payable

 

 

 

(in thousands)

 

Liabilities:

 

 

 

 

Balance, March 31, 2019

 

$

32,564

 

Changes in fair value included in income arising from:

 

 

 

 

Changes in instrument-specific credit risk

 

 

—

 

Other factors

 

 

(6,208

)

 

 

 

(6,208

)

Balance, June 30, 2019

 

$

26,356

 

Changes in fair value recognized during the quarter

   relating to liability outstanding at June 30, 2019

 

$

(6,208

)

 

 

 

Quarter ended June 30, 2018

 

 

 

Loans

acquired

for sale

at fair

value

 

 

Loans at

fair value

 

 

Excess

servicing

spread

 

 

CRT

Agreement

derivatives

 

 

Interest rate

lock

commitments

(1)

 

 

Repurchase

agreement

derivatives

 

 

Firm

commitment

to purchase

CRT securities

 

 

Mortgage

servicing

rights

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

 

$

7,690

 

 

$

468,387

 

 

$

236,002

 

 

$

103,995

 

 

$

2,709

 

 

$

5,892

 

 

$

—

 

 

$

957,013

 

 

$

1,781,688

 

Purchases and issuances

 

 

2,772

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,231

 

 

 

3,576

 

 

 

—

 

 

 

—

 

 

 

7,579

 

Repayments and sales

 

 

(4,421

)

 

 

(10,511

)

 

 

(12,018

)

 

 

(22,211

)

 

 

—

 

 

 

(2,487

)

 

 

—

 

 

 

—

 

 

 

(51,648

)

Capitalization of interest

 

 

—

 

 

 

2,066

 

 

 

3,910

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,976

 

Capitalization of advances

 

 

—

 

 

 

1,683

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,683

 

ESS received pursuant to a

   recapture agreement with

   PFSI

 

 

—

 

 

 

—

 

 

 

580

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

580

 

Amounts received as proceeds

   from sales of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,426

 

 

 

65,408

 

 

 

69,834

 

Changes in fair value included

   in income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument-

   specific credit risk

 

 

—

 

 

 

369

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

369

 

Other factors

 

 

45

 

 

 

(5,070

)

 

 

996

 

 

 

37,385

 

 

 

(5,105

)

 

 

(69

)

 

 

—

 

 

 

(11,914

)

 

 

16,268

 

 

 

 

45

 

 

 

(4,701

)

 

 

996

 

 

 

37,385

 

 

 

(5,105

)

 

 

(69

)

 

 

—

 

 

 

(11,914

)

 

 

16,637

 

Transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans to REO

 

 

—

 

 

 

(9,451

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(9,451

)

Loans acquired for sale at fair

  value from "Level 2" to

   "Level 3" (2)

 

 

454

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

454

 

Interest rate lock commitments

   to loans acquired for sale

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,972

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,972

 

Balance, June 30, 2018

 

$

6,540

 

 

$

447,473

 

 

$

229,470

 

 

$

119,169

 

 

$

2,807

 

 

$

6,912

 

 

$

4,426

 

 

$

1,010,507

 

 

$

1,827,304

 

Changes in fair value

   recognized during the quarter

   relating to assets still held at

   June 30, 2018

 

$

(93

)

 

$

(4,424

)

 

$

996

 

 

$

15,174

 

 

$

2,807

 

 

$

—

 

 

$

—

 

 

$

(11,914

)

 

$

2,546

 

 

(1)

For the purpose of this table, IRLC asset and liability positions are shown net.

(2)

During the quarter ended June 30, 2018, the Company identified certain “Level 2” fair value loans acquired for sale that were not saleable into the prime mortgage market and therefore transferred them to “Level 3”.

 

 

 

Quarter ended June 30, 2018

 

 

 

Interest-only

 

 

 

security payable

 

 

 

(in thousands)

 

Liabilities:

 

 

 

 

Balance, March 31, 2018

 

$

7,796

 

Changes in fair value included in income arising from:

 

 

 

 

Changes in instrument-specific credit risk

 

 

—

 

Other factors

 

 

(144

)

 

 

 

(144

)

Balance, June 30, 2018

 

$

7,652

 

Changes in fair value recognized during the quarter

   relating to liability outstanding at June 30, 2018

 

$

(144

)

 

 

 

 

Six months ended June 30, 2019

 

 

 

Loans

acquired

for sale

at fair

value

 

 

Loans at

fair value

 

 

Excess

servicing

spread

 

 

CRT strip

 

 

CRT

Agreement

derivatives

 

 

Interest rate

lock

commitments

(1)

 

 

Repurchase

agreement

derivatives

 

 

Firm

commitment

to purchase

CRT securities

 

 

Mortgage

servicing

rights

 

 

Total

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

$

17,474

 

 

$

117,732

 

 

$

216,110

 

 

$

—

 

 

$

123,987

 

 

$

11,988

 

 

$

14,511

 

 

$

37,994

 

 

$

1,162,369

 

 

$

1,702,165

 

Purchases and issuances

 

 

7,079

 

 

 

1,077

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,321

 

 

 

9,297

 

 

 

—

 

 

 

—

 

 

 

31,774

 

Repayments and sales

 

 

(12,019

)

 

 

(31,404

)

 

 

(21,082

)

 

 

—

 

 

 

(42,213

)

 

 

—

 

 

 

(11,567

)

 

 

(31,925

)

 

 

—

 

 

 

(150,210

)

Capitalization of interest

   and fees

 

 

—

 

 

 

1,928

 

 

 

5,833

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,761

 

Capitalization of advances

 

 

—

 

 

 

1,151

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,151

 

ESS received pursuant to a

   recapture agreement with

   PFSI

 

 

—

 

 

 

—

 

 

 

950

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

950

 

Amounts received as proceeds

   from sales of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

39,996

 

 

 

284,854

 

 

 

324,850

 

Changes in fair value included

   in income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument-

   specific credit risk

 

 

—

 

 

 

3,737

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,737

 

Other factors

 

 

845

 

 

 

(8,703

)

 

 

(7,655

)

 

 

5,675

 

 

 

42,259

 

 

 

59,324

 

 

 

(195

)

 

 

26,320

 

 

 

(320,796

)

 

 

(202,926

)

 

 

 

845

 

 

 

(4,966

)

 

 

(7,655

)

 

 

5,675

 

 

 

42,259

 

 

 

59,324

 

 

 

(195

)

 

 

26,320

 

 

 

(320,796

)

 

 

(199,189

)

Transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans to REO

 

 

—

 

 

 

(11,045

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,045

)

Loans acquired for sale at fair

   value from "Level 2" to

   "Level 3" (2)

 

 

809

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

809

 

Firm commitment to purchase

   CRT securities to Investment

   securities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

56,804

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(56,804

)

 

 

—

 

 

 

—

 

Interest rate lock commitments

   to loans acquired for sale

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(72,019

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(72,019

)

Balance, June 30, 2019

 

$

14,188

 

 

$

74,473

 

 

$

194,156

 

 

$

62,479

 

 

$

124,033

 

 

$

13,614

 

 

$

12,046

 

 

$

15,581

 

 

$

1,126,427

 

 

$

1,636,997

 

Changes in fair value

   recognized during the period

   relating to assets still held at

   June 30, 2019

 

$

672

 

 

$

(6,092

)

 

$

(7,655

)

 

$

5,675

 

 

$

47

 

 

$

13,614

 

 

$

—

 

 

$

26,320

 

 

$

(320,796

)

 

$

(288,215

)

 

(1)

For the purpose of this table, IRLC asset and liability positions are shown net.

(2)

During the six months ended June 30, 2019, the Company identified certain “Level 2” fair value loans acquired for sale that were not saleable into the prime mortgage market and therefore transferred them to “Level 3”.

 

 

 

 

Six months ended June 30, 2019

 

 

 

Interest-only

 

 

 

security payable

 

 

 

(in thousands)

 

Liabilities:

 

 

 

 

Balance, December 31, 2018

 

$

36,011

 

Changes in fair value included in income arising from:

 

 

 

 

Changes in instrument-specific credit risk

 

 

—

 

Other factors

 

 

(9,655

)

 

 

 

(9,655

)

Balance, June 30, 2019

 

$

26,356

 

Changes in fair value recognized during the period

   relating to liability outstanding at June 30, 2019

 

$

(9,655

)

 

 

 

 

Six months ended June 30, 2018

 

 

 

Loans

acquired

for sale

at fair

value

 

 

Loans at

fair

value

 

 

Excess

servicing

spread

 

 

CRT

Agreement

derivatives

 

 

Interest rate

lock

commitments

(1)

 

 

Repurchase

agreement

derivatives

 

 

Firm

commitment

to purchase

CRT securities

 

 

Mortgage

servicing

rights

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

$

8,135

 

 

$

768,433

 

 

$

236,534

 

 

$

98,640

 

 

$

4,632

 

 

$

3,748

 

 

$

—

 

 

$

91,459

 

 

$

1,211,581

 

Cumulative effect of a change in

   accounting principle — Adoption

   of fair value accounting for

   mortgage servicing rights

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

773,035

 

 

 

773,035

 

Balance, January 1, 2018

 

$

8,135

 

 

$

768,433

 

 

$

236,534

 

 

$

98,640

 

 

$

4,632

 

 

$

3,748

 

 

$

—

 

 

$

864,494

 

 

$

1,984,616

 

Purchases and issuances

 

 

5,603

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,839

 

 

 

5,740

 

 

 

—

 

 

 

—

 

 

 

17,182

 

Repayments and sales

 

 

(7,960

)

 

 

(283,024

)

 

 

(24,309

)

 

 

(41,540

)

 

 

—

 

 

 

(2,495

)

 

 

—

 

 

 

—

 

 

 

(359,328

)

Capitalization of interest and fees

 

 

—

 

 

 

4,246

 

 

 

7,844

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

12,090

 

Capitalization of advances

 

 

—

 

 

 

3,360

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3,360

 

ESS received pursuant to a recapture

   agreement with PFSI

 

 

—

 

 

 

—

 

 

 

1,484

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,484

 

Amounts received as proceeds from sales

   of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,426

 

 

 

131,954

 

 

 

136,380

 

Changes in fair value included

   in income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument-

   specific credit risk

 

 

—

 

 

 

2,988

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,988

 

Other factors

 

 

148

 

 

 

(17,639

)

 

 

7,917

 

 

 

62,069

 

 

 

(24,571

)

 

 

(81

)

 

 

—

 

 

 

14,059

 

 

 

41,902

 

 

 

 

148

 

 

 

(14,651

)

 

 

7,917

 

 

 

62,069

 

 

 

(24,571

)

 

 

(81

)

 

 

—

 

 

 

14,059

 

 

 

44,890

 

Transfers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans to REO

 

 

—

 

 

 

(30,891

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(30,891

)

Loans acquired for sale at fair

    value from "Level 2" to "Level 3" (2)

 

 

614

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

614

 

Interest rate lock commitments to

   loans acquired for sale

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,907

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,907

 

Balance, June 30, 2018

 

$

6,540

 

 

$

447,473

 

 

$

229,470

 

 

$

119,169

 

 

$

2,807

 

 

$

6,912

 

 

$

4,426

 

 

$

1,010,507

 

 

$

1,827,304

 

Changes in fair value recognized during

   the period relating to assets still held

   at June 30, 2018

 

$

(107

)

 

$

(12,716

)

 

$

7,917

 

 

$

20,529

 

 

$

2,807

 

 

$

77

 

 

$

—

 

 

$

14,059

 

 

$

32,566

 

 

(1)

For the purpose of this table, the IRLC asset and liability positions are shown net.

(2)

During the six months ended June 30, 2018, the Company identified certain “Level 2” fair value loans acquired for sale that were not saleable into the prime mortgage market and therefore transferred them to “Level 3”.

 

 

 

 

Six months ended June 30, 2018

 

 

 

Interest-only

 

 

 

security payable

 

 

 

(in thousands)

 

Liabilities:

 

 

 

 

Balance, December 31, 2017

 

$

7,070

 

Changes in fair value included in income arising from:

 

 

 

 

Changes in instrument- specific credit risk

 

 

—

 

Other factors

 

 

582

 

 

 

 

582

 

Balance, June 30, 2018

 

 

7,652

 

Changes in fair value recognized during the period

   relating to liability outstanding at June 30, 2018

 

$

582

 
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 a consolidated VIE, and distressed loans): 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

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:

 

$

2,476,295

 

 

$

2,377,048

 

 

$

99,247

 

 

$

1,643,465

 

 

$

1,580,504

 

 

$

62,961

 

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

233

 

 

 

285

 

 

 

(52

)

 

 

492

 

 

 

492

 

 

 

—

 

In foreclosure

 

 

739

 

 

 

866

 

 

 

(127

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

972

 

 

 

1,151

 

 

 

(179

)

 

 

492

 

 

 

492

 

 

 

—

 

 

 

$

2,477,267

 

 

$

2,378,199

 

 

$

99,068

 

 

$

1,643,957

 

 

$

1,580,996

 

 

$

62,961

 

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held in a consolidated VIE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

$

284,097

 

 

$

280,845

 

 

$

3,252

 

 

$

290,573

 

 

$

294,617

 

 

$

(4,044

)

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

In foreclosure

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

 

284,097

 

 

 

280,845

 

 

 

3,252

 

 

 

290,573

 

 

 

294,617

 

 

 

(4,044

)

Distressed loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

 

33,890

 

 

 

51,456

 

 

 

(17,566

)

 

 

28,806

 

 

 

43,043

 

 

 

(14,237

)

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

15,900

 

 

 

35,398

 

 

 

(19,498

)

 

 

37,288

 

 

 

71,732

 

 

 

(34,444

)

In foreclosure

 

 

24,683

 

 

 

46,520

 

 

 

(21,837

)

 

 

51,638

 

 

 

86,259

 

 

 

(34,621

)

 

 

 

40,583

 

 

 

81,918

 

 

 

(41,335

)

 

 

88,926

 

 

 

157,991

 

 

 

(69,065

)

 

 

 

74,473

 

 

 

133,374

 

 

 

(58,901

)

 

 

117,732

 

 

 

201,034

 

 

 

(83,302

)

 

 

$

358,570

 

 

$

414,219

 

 

$

(55,649

)

 

$

408,305

 

 

$

495,651

 

 

$

(87,346

)
Summary of Changes in Fair Value Included in Current Period Income

 

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 June 30, 2019

 

 

 

Net loan

servicing fees

 

 

Net gain on

loans acquired

for sale

 

 

Net gain (loss)

on investments

 

 

Net interest

income

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments at fair value

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

—

 

 

 

27,448

 

 

 

(6,214

)

 

 

21,234

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

5,675

 

 

 

—

 

 

 

5,675

 

Loans acquired for sale at fair value

 

 

—

 

 

 

54,790

 

 

 

—

 

 

 

—

 

 

 

54,790

 

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(2,092

)

 

 

1,367

 

 

 

(725

)

ESS at fair value

 

 

—

 

 

 

—

 

 

 

(3,604

)

 

 

2,767

 

 

 

(837

)

Firm commitment to purchase credit risk transfer

   securities at fair value

 

 

—

 

 

 

20,396

 

 

 

4,130

 

 

 

—

 

 

 

24,526

 

MSRs at fair value

 

 

(183,467

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(183,467

)

 

 

$

(183,467

)

 

$

75,186

 

 

$

31,557

 

 

$

(2,080

)

 

$

(78,804

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

6,208

 

 

$

—

 

 

$

6,208

 

Asset-backed financing of a VIE at fair value

 

 

—

 

 

 

—

 

 

 

(2,341

)

 

 

(1,184

)

 

 

(3,525

)

 

 

$

—

 

 

$

—

 

 

$

3,867

 

 

$

(1,184

)

 

$

2,683

 

 

 

 

Quarter ended June 30, 2018

 

 

 

Net loan

servicing fees

 

 

Net gain on

loans acquired

for sale

 

 

Net gain (loss)

on investments

 

 

Net interest

income

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments at fair value

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

—

 

 

 

(8,861

)

 

 

(954

)

 

 

(9,815

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(4,470

)

 

 

—

 

 

 

—

 

 

 

(4,470

)

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(7,485

)

 

 

2,277

 

 

 

(5,208

)

ESS at fair value

 

 

—

 

 

 

—

 

 

 

996

 

 

 

3,910

 

 

 

4,906

 

Firm commitment to purchase credit risk transfer

   securities at fair value

 

 

—

 

 

 

4,426

 

 

 

—

 

 

 

—

 

 

 

4,426

 

MSRs at fair value

 

 

(11,914

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,914

)

 

 

$

(11,914

)

 

$

(44

)

 

$

(15,350

)

 

$

5,233

 

 

$

(22,075

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable

 

$

—

 

 

$

—

 

 

$

144

 

 

$

—

 

 

$

144

 

Asset-backed financing of a VIE at fair value

 

 

—

 

 

 

—

 

 

 

2,960

 

 

 

(213

)

 

 

2,747

 

 

 

$

—

 

 

$

—

 

 

$

3,104

 

 

$

(213

)

 

$

2,891

 

 

 

 

 

Six months ended June 30, 2019

 

 

 

Net loan

servicing fees

 

 

Net gain on

loans acquired

for sale

 

 

Net gain (loss)

on investments

 

 

Net interest

income

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments at fair value

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

—

 

 

 

64,370

 

 

 

(10,770

)

 

 

53,600

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

5,675

 

 

 

—

 

 

 

5,675

 

Loans acquired for sale at fair value

 

 

—

 

 

 

92,593

 

 

 

—

 

 

 

—

 

 

 

92,593

 

Loans at fair value

 

 

—

 

 

 

—

 

 

 

1,978

 

 

 

2,279

 

 

 

4,257

 

ESS at fair value

 

 

—

 

 

 

—

 

 

 

(7,655

)

 

 

5,833

 

 

 

(1,822

)

Firm commitment to purchase credit risk transfer

   securities at fair value

 

 

—

 

 

 

39,996

 

 

 

26,320

 

 

 

—

 

 

 

66,316

 

MSRs at fair value

 

 

(320,796

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(320,796

)

 

 

$

(320,796

)

 

$

132,589

 

 

$

90,688

 

 

$

(2,658

)

 

$

(100,177

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

9,655

 

 

$

—

 

 

$

9,655

 

Asset-backed financing of a VIE at fair value

 

 

—

 

 

 

—

 

 

 

(5,198

)

 

 

(2,005

)

 

 

(7,203

)

 

 

$

—

 

 

$

—

 

 

$

4,457

 

 

$

(2,005

)

 

$

2,452

 

 

 

 

Six months ended June 30, 2018

 

 

 

Net loan

servicing fees

 

 

Net gain on

loans acquired

for sale

 

 

Net gain (loss)

on investments

 

 

Net interest

income

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments at fair value

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

—

 

 

 

(31,258

)

 

 

(1,394

)

 

 

(32,652

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(28,148

)

 

 

—

 

 

 

—

 

 

 

(28,148

)

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(23,013

)

 

 

4,051

 

 

 

(18,962

)

ESS at fair value

 

 

—

 

 

 

—

 

 

 

7,917

 

 

 

7,844

 

 

 

15,761

 

Firm commitment to purchase credit risk transfer

   securities at fair value

 

 

—

 

 

 

4,426

 

 

 

—

 

 

 

—

 

 

 

4,426

 

MSRs at fair value

 

 

14,059

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

14,059

 

 

 

$

14,059

 

 

$

(23,722

)

 

$

(46,354

)

 

$

10,501

 

 

$

(45,516

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

(582

)

 

$

—

 

 

$

(582

)

Asset-backed financing of a VIE at fair value

 

 

—

 

 

 

—

 

 

 

9,142

 

 

 

126

 

 

 

9,268

 

 

 

$

—

 

 

$

—

 

 

$

8,560

 

 

$

126

 

 

$

8,686

 

 

 
Summary of Carrying Value of Financial Statement Items Re-measured Based on Fair Value on Nonrecurring Basis

Following is a summary of the carrying value of REO that was re-measured based on fair value on a nonrecurring basis:

 

Real estate acquired in settlement of loans

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

June 30, 2019

 

$

—

 

 

$

—

 

 

$

34,696

 

 

$

34,696

 

December 31, 2018

 

$

—

 

 

$

—

 

 

$

24,515

 

 

$

24,515

 

 
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 period on REO held at period end that were remeasured at fair value on a nonrecurring basis:

 

 

 

Quarter ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(in thousands)

 

Real estate asset acquired in settlement of loans

 

$

1,831

 

 

$

(3,914

)

 

$

(607

)

 

$

(6,023

)
Fair Values of Other Borrowings

Following are the fair values of the other borrowings:

 

Instrument

 

Source of fair value

 

June 30, 2019

 

 

December 31, 2018

 

 

 

 

 

(in thousands)

 

Exchangeable senior notes

 

Broker indications

 

$

253,133

 

 

$

247,172

 

Notes payable

 

 

 

 

 

 

 

 

 

 

 

 

Broker indications

 

$

1,375,534

 

 

 

 

 

 

 

Discounted cash flow analysis

 

 

 

 

 

$

444,403

 
Quantitative Summary of Key Inputs Used in Valuation of Loans at Fair Value (Excluding Loans Held in a VIE)

Following is a quantitative summary of key inputs used in the valuation of the Company’s “Level 3” loans at fair value:

 

Key inputs (1)

 

June 30, 2019

 

 

December 31, 2018

 

Discount rate

 

 

 

 

 

 

 

 

Range

 

3.3% – 19.6%

 

 

2.8% – 19.6%

 

Weighted average

 

9.8%

 

 

12.0%

 

Twelve-month projected housing price index change

 

 

 

 

 

 

 

 

Range

 

2.3% – 2.9%

 

 

3.1% – 3.7%

 

Weighted average

 

2.6%

 

 

3.4%

 

Voluntary prepayment speed (2)

 

 

 

 

 

 

 

 

Range

 

1.2% – 7.6%

 

 

0.9% – 8.3%

 

Weighted average

 

3.0%

 

 

3.2%

 

Total prepayment speed (3)

 

 

 

 

 

 

 

 

Range

 

7.7% – 18.0%

 

 

8.3% – 22.0%

 

Weighted average

 

14.1%

 

 

18.3%

 

 

(1)

Weighted-average inputs are based on fair value amounts of the loans.

(2)

Prepayment speed is measured using Life Voluntary Conditional Prepayment Rate (“CPR”).

(3)

Total prepayment speed is measured using Life Total CPR.
Summary of Key Inputs Used in Determining Fair Value of ESS

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

 

Key inputs (1)

 

June 30, 2019

 

 

December 31, 2018

 

UPB of underlying loans (in thousands)

 

$

21,757,903

 

 

$

23,196,033

 

Average servicing fee rate (in basis points)

 

 

34

 

 

 

34

 

Average ESS rate (in basis points)

 

 

19

 

 

 

19

 

Pricing spread (2)

 

 

 

 

 

 

 

 

Range

 

3.0% - 3.3%

 

 

2.8% - 3.2%

 

Weighted average

 

3.2%

 

 

3.1%

 

Annual total prepayment speed (3)

 

 

 

 

 

 

 

 

Range

 

8.7% - 15.2%

 

 

8.2% - 29.5%

 

Weighted average

 

11.1%

 

 

9.7%

 

Life (in years)

 

 

 

 

 

 

 

 

Range

 

2.9 - 7.3

 

 

1.6 - 7.6

 

Weighted average

 

6.2

 

 

6.8

 

 

(1)

Weighted-average inputs are based on 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 applies pricing spreads to the forward rates implied by the United States Dollar London Interbank Offered Rate (“LIBOR”) swap curve for purposes of discounting cash flows relating to ESS.

(3)

Prepayment speed is measured using Life Total CPR.
Summary of Key Unobservable Inputs Used in Valuation of Credit Risk Transfer Strips  

Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of the adjusted broker-provided fair values used to derive the value of the CRT strips:

 

Key inputs (1)

 

June 30, 2019

 

Discount rate

 

7.6%

 

Voluntary prepayment speed (2)

 

22.4%

 

Involuntary prepayment speed (3)

 

0.1%

 

Remaining loss expectation (4)

 

0.1%

 
Quantitative Summary of Key Unobservable Inputs Used in Valuation of CRT Agreements

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

 

Key inputs (1)

 

June 30, 2019

 

 

December 31, 2018

 

Discount rate

 

 

 

 

 

 

 

 

Range

 

5.4% – 6.1%

 

 

6.6% – 7.5%

 

Weighted average

 

5.9%

 

 

7.3%

 

Voluntary prepayment speed (2)

 

 

 

 

 

 

 

 

Range

 

16.0% – 17.6%

 

 

9.0% – 10.6%

 

Weighted average

 

17.2%

 

 

9.9%

 

Involuntary prepayment speed (3)

 

 

 

 

 

 

 

 

Range

 

0.2% – 0.3%

 

 

0.2% – 0.2%

 

Weighted average

 

0.3%

 

 

0.2%

 

Remaining loss expectation (4)

 

 

 

 

 

 

 

 

Range

 

0.1% – 0.1%

 

 

0.1% – 0.2%

 

Weighted average

 

0.1%

 

 

0.2%

 

 

(1)

Weighted average inputs are based on fair value amounts of the CRT Agreements.

(2)

Voluntary prepayment speed is measured using Life Voluntary CPR.

(3)

Involuntary prepayment speed is measured using Life Involuntary CPR.

(4)

Remaining loss expectation is measured as expected future contractual losses divided by the UPB of the reference loans.
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:

 

Key inputs (1)

 

June 30, 2019

 

 

December 31, 2018

 

Pull-through rate

 

 

 

 

 

 

 

 

Range

 

35.7% - 100%

 

 

45.4% - 100%

 

Weighted average

 

90.9%

 

 

91.8%

 

MSR fair value expressed as

 

 

 

 

 

 

 

 

Servicing fee multiple

 

 

 

 

 

 

 

 

Range

 

1.8 - 5.8

 

 

2.4 - 5.6

 

Weighted average

 

4.5

 

 

 

4.3

 

Percentage of UPB

 

 

 

 

 

 

 

 

Range

 

0.6% - 2.7%

 

 

0.6% - 3.6%

 

Weighted average

 

1.5%

 

 

2.2%

 

 

(1)

Weighted-average inputs are based on the committed amounts.
Summary of Key Unobservable Inputs Used in Valuation of Firm Commitment to Purchase CRT Securities

The Company categorizes its firm commitment to purchase CRT securities as a “Level 3” fair value asset. The fair value of the firm commitment is estimated using a discounted cash flow approach to estimate the fair value of the CRT securities to be purchased less the contractual purchase price. Key inputs used in the estimation of fair value of the firm commitment are the discount rate and the voluntary and involuntary prepayment speeds of the reference loans. The firm commitment to purchase CRT securities is recognized initially as a component of Net gain on loans acquired for sale. Subsequent changes in fair value are recorded in Net gain (loss) on investments.

Following is a quantitative summary of key unobservable inputs in the valuation of firm commitment to purchase CRT securities:

 

Key inputs (1)

 

June 30, 2019

 

 

December 31, 2018

 

Discount rate

 

6.7%

 

 

7.9%

 

Voluntary prepayment speed (2)

 

16.4%

 

 

12.4%

 

Involuntary prepayment speed (3)

 

0.1%

 

 

0.1%

 

Remaining loss expectation (4)

 

0.1%

 

 

0.1%

 

 

(1)

Weighted average inputs are based on the UPB of the underlying loans.

(2)

Voluntary prepayment speed is measured using Life Voluntary CPR.

(3)

Involuntary prepayment speed is measured using Life Involuntary CPR.

(4)

Remaining loss expectation is measured as expected future contractual losses divided by the UPB of the reference loans.
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 June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(MSR recognized and UPB of underlying loan amounts in thousands)

 

MSR recognized

 

$

152,986

 

 

$

65,408

 

 

$

284,854

 

 

$

131,954

 

Key inputs (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

UPB of underlying loans

 

$

11,086,509

 

 

$

5,282,564

 

 

$

20,331,686

 

 

$

10,397,305

 

Weighted average annual servicing fee rate (in basis

   points)

 

31

 

 

26

 

 

32

 

 

26

 

Pricing spread (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

5.9% – 9.9%

 

 

7.3% – 12.3%

 

 

5.8% – 9.9%

 

 

7.3% – 12.6%

 

Weighted average

 

5.9%

 

 

7.4%

 

 

5.9%

 

 

7.5%

 

Prepayment speed (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

9.0% – 20.1%

 

 

3.2% – 30.8%

 

 

8.7% – 22.8%

 

 

3.2% – 30.8%

 

Weighted average

 

12.0%

 

 

9.5%

 

 

12.1%

 

 

8.8%

 

Life (in years)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

3.6 – 6.7

 

 

2.6 – 11.7

 

 

3.6 – 6.9

 

 

2.6 – 11.9

 

Weighted average

 

6.6

 

 

7.7

 

 

6.6

 

 

8.0

 

Annual per-loan cost of servicing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

$78 – $78

 

 

$77 – $79

 

 

$78 – $78

 

 

$77 – $79

 

Weighted average

 

$78

 

 

$79

 

 

$78

 

 

$79

 

 

(1)

Weighted-average inputs are based on 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 applies pricing spreads to the forward rates implied by the United States LIBOR swap curve for purposes of discounting cash flows relating to MSRs.

(3)

Prepayment speed is measured using Life Total CPR.

 
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: 

 

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

(Carrying value, UPB of underlying loans

and effect on fair value amounts in

thousands)

 

Carrying value

 

$

1,126,427

 

 

$

1,162,369

 

Key inputs (1):

 

 

 

 

 

 

 

 

UPB of underlying loans

 

$

106,200,501

 

 

$

92,410,226

 

Weighted average annual servicing fee

   rate (in basis points)

 

 

27

 

 

 

25

 

Weighted average note interest rate

 

4.3%

 

 

4.2%

 

Pricing spread (2)

 

 

 

 

 

 

 

 

Range

 

5.9% – 11.1%

 

 

5.7% – 10.7%

 

Weighted average

 

5.9%

 

 

5.8%

 

Effect on fair value of:

 

 

 

 

 

 

 

 

5% adverse change

 

$(12,867)

 

 

$(13,872)

 

10% adverse change

 

$(25,440)

 

 

$(27,428)

 

20% adverse change

 

$(49,747)

 

 

$(53,626)

 

Prepayment speed (3)

 

 

 

 

 

 

 

 

Range

 

10.2% – 33.6%

 

 

8.1% – 27.1%

 

Weighted average

 

13.9%

 

 

9.8%

 

Life (in years)

 

 

 

 

 

 

 

 

Range

 

2.4 -5.8

 

 

2.7 - 7.3

 

Weighted average

 

 

5.7

 

 

 

7.1

 

Effect on fair value of:

 

 

 

 

 

 

 

 

5% adverse change

 

$(29,417)

 

 

$(21,661)

 

10% adverse change

 

$(57,394)

 

 

$(42,458)

 

20% adverse change

 

$(109,409)

 

 

$(81,660)

 

Annual per-loan cost of servicing

 

 

 

 

 

 

 

 

Range

 

$77 – $78

 

 

$77 – $78

 

Weighted average

 

$78

 

 

$78

 

Effect on fair value of:

 

 

 

 

 

 

 

 

5% adverse change

 

$(8,064)

 

 

$(8,298)

 

10% adverse change

 

$(16,128)

 

 

$(16,597)

 

20% adverse change

 

$(32,256)

 

 

$(33,194)

 

 

(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 applies pricing spreads to the forward rates implied by the United States Dollar LIBOR swap curve for purposes of discounting cash flows relating to MSRs.

(3)

Prepayment speed is measured using Life Total CPR.