Fair Value (Tables)

6 Months Ended

Jun. 30, 2022

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following tables display the Company’s assets and liabilities measured at fair value on a recurring basis. The Company often economically hedges the fair value change of its assets or liabilities with derivatives and other financial instruments. The tables below display the hedges separately from the hedged items, and therefore do not directly display the impact of the Company’s risk management activities:


	Recurring Fair Value Measurements
	June 30, 2022
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	—	$	8,701,947	$	87,490	$	8,789,437

Mortgage servicing rights	—		—		3,226,191		3,226,191

Derivative assets	4,407		24,923		—		29,330

Total assets	$	4,407	$	8,726,870	$	3,313,681	$	12,044,958
Liabilities:

Derivative liabilities	$	16,537	$	94,227	$	—	$	110,764
Total liabilities	$	16,537	$	94,227	$	—	$	110,764


	Recurring Fair Value Measurements
	December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	$	—	$	7,149,399	$	12,304	$	7,161,703

Mortgage servicing rights	—		—		2,191,578		2,191,578

Derivative assets	38,767		41,367		—		80,134

Total assets	$	38,767	$	7,190,766	$	2,203,882	$	9,433,415
Liabilities:

Derivative liabilities	$	1,915	$	51,743	$	—	$	53,658
Total liabilities	$	1,915	$	51,743	$	—	$	53,658

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the reconciliation for the Company’s Level 3 assets measured at fair value on a recurring basis:


	Three Months Ended						Six Months Ended

	June 30, 2022						June 30, 2022
(in thousands)	Available-For-Sale Securities			Mortgage Servicing Rights			Available-For-Sale Securities			Mortgage Servicing Rights
Beginning of period level 3 fair value	$	12,530		$	3,089,963		$	12,304		$	2,191,578
Gains (losses) included in net (loss) income:
Realized	(405)			(113,715)			(1,273)			(228,004)
Unrealized	753		(1)	199,272		(2)	1,680		(1)	724,185		(2)
Reversal of (provision for) credit losses	(254)			—			1,127			—
Net gains (losses) included in net (loss) income	94			85,557			1,534			496,181
Other comprehensive loss	1,641			—			427			—
Purchases	79,600			59,945			79,600			544,750
Sales	(6,375)			—			(6,375)			—
Settlements	—			(9,274)			—			(6,318)
Gross transfers into level 3	—			—			—			—
Gross transfers out of level 3	—			—			—			—
End of period level 3 fair value	$	87,490		$	3,226,191		$	87,490		$	3,226,191
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	753	(3)	$	195,868	(4)	$	1,680	(3)	$	700,354	(4)
Change in unrealized gains or losses for the period included in other comprehensive (loss) income for assets held at the end of the reporting period	$	2,395		$	—		$	2,108		$	—

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(1)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss.

(2)The change in unrealized gains or losses on MSR was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss.

(3)The change in unrealized gains or losses on available-for-sale securities accounted for under the fair value option that were held at the end of the reporting period was recorded in (loss) gain on investment securities on the condensed consolidated statements of comprehensive loss.

(4)The change in unrealized gains or losses on MSR that were held at the end of the reporting period was recorded in gain (loss) on servicing asset on the condensed consolidated statements of comprehensive loss.

Fair Value Inputs, Assets, Quantitative Information

The tables below present information about the significant unobservable market data used by the third-party pricing vendors as inputs into models utilized to inform their best estimates of the fair value measurement of the Company’s MSR classified as Level 3 fair value assets at June 30, 2022 and December 31, 2021:


June 30, 2022
Valuation Technique	Unobservable Input	Range			Weighted Average (1)
Discounted cash flow	Constant prepayment speed	6.8%	-	8.1%		7.4%
	Delinquency	0.8%	-	0.8%		0.8%
	Option-adjusted spread	4.9%	-	8.2%		5.0%
	Per loan annual cost to service	$67.21	-	$80.55		$67.64


December 31, 2021
Valuation Technique	Unobservable Input	Range			Weighted Average (1)
Discounted cash flow	Constant prepayment speed	10.0%	-	17.9%		12.9%
	Delinquency	0.9%	-	1.8%		1.3%
	Option-adjusted spread	4.6%	-	9.2%		4.7%
	Per loan annual cost to service	$66.04	-	$83.91		$66.76

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(1)Calculated by averaging the weighted average significant unobservable inputs used by the multiple third-party pricing vendors in the fair value measurement of MSR.

Fair Value, by Balance Sheet Grouping

The following table presents the carrying values and estimated fair values of assets and liabilities that are required to be recorded or disclosed at fair value at June 30, 2022 and December 31, 2021:


	June 30, 2022				December 31, 2021
(in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Available-for-sale securities	$	8,789,437	$	8,789,437	$	7,161,703	$	7,161,703


Mortgage servicing rights	$	3,226,191	$	3,226,191	$	2,191,578	$	2,191,578

Cash and cash equivalents	$	511,889	$	511,889	$	1,153,856	$	1,153,856
Restricted cash	$	627,725	$	627,725	$	934,814	$	934,814
Derivative assets	$	29,330	$	29,330	$	80,134	$	80,134
Reverse repurchase agreements	$	158,971	$	158,971	$	134,682	$	134,682
Other assets	$	3,234	$	3,234	$	3,332	$	3,332
Liabilities:
Repurchase agreements	$	7,958,247	$	7,958,247	$	7,656,445	$	7,656,445


Revolving credit facilities	$	825,761	$	825,761	$	420,761	$	420,761
Term notes payable	$	397,383	$	388,099	$	396,776	$	395,030
Convertible senior notes	$	281,711	$	257,106	$	424,827	$	435,774
Derivative liabilities	$	110,764	$	110,764	$	53,658	$	53,658