MORTGAGE SERVICING RIGHTS

12 Months Ended

Dec. 31, 2019

NOTE 3—MORTGAGE SERVICING RIGHTS

The fair value of MSRs at December 31, 2019 and December 31, 2018 was $910.5 million and $858.7 million, respectively. The Company uses a discounted static cash flow valuation approach and the key economic assumption is the discount rate. See the following sensitivities related to the discount rate:

The impact of a 100-basis point increase in the discount rate at December 31, 2019 would be a decrease in the fair value of $28.5 million to the MSRs outstanding as of December 31, 2019.

The impact of a 200-basis point increase in the discount rate at December 31, 2019 would be a decrease in the fair value of $55.0 million to the MSRs outstanding as of December 31, 2019.

These sensitivities are hypothetical and should be used with caution. These estimates do not include interplay among assumptions and are estimated as a portfolio rather than individual assets.

Activity related to capitalized MSRs (net of accumulated amortization) for the years ended December 31, 2019 and 2018 follows:


	For the year ended December 31,
Roll Forward of MSRs (in thousands)	2019		2018
Beginning balance	$	670,146	$	634,756
Additions, following the sale of loan		206,885		176,565
Purchases¹		—		5,265
Amortization		(137,792)		(131,739)
Pre-payments and write-offs		(20,440)		(14,701)
Ending balance	$	718,799	$	670,146

¹ For the year ended December 31, 2018, the purchases line also contains $3.5 million of MSRs acquired as compensation for originating a large loan held for investment.

The following table summarizes the gross value, accumulated amortization, and net carrying value of the Company’s MSRs as of December 31, 2019 and 2018:


Components of MSRs (in thousands)	December 31, 2019		December 31, 2018
Gross Value	$	1,201,542	$	1,100,439
Accumulated amortization		(482,743)		(430,293)
Net carrying value	$	718,799	$	670,146

The expected amortization of MSRs recorded as of December 31, 2019 is shown in the table below. Actual amortization may vary from these estimates.


	Expected
(in thousands)	Amortization
Year Ending December 31,
2020	$	131,447
2021		118,500
2022		103,567
2023		91,498
2024		78,362
Thereafter		195,425
Total	$	718,799

The Company recorded write-offs of OMSRs related to loans that were repaid prior to the expected maturity and loans that defaulted. These write-offs are included as a component of the MSR roll forward shown above and as a component of Amortization and depreciation in the accompanying Consolidated Statements of Income and relate to OMSRs only. Prepayment fees totaling $26.8 million, $18.9 million, and $17.3 million were collected for 2019, 2018, and 2017, respectively, and are included as a component of Other revenues in the Consolidated Statements of Income. Escrow earnings totaling $51.4 million, $38.2 million, and $19.1 million were earned for the years ended December 31, 2019, 2018, and 2017, respectively, and are included as a component of Escrow earnings and other interest income in the Consolidated Statements of Income. All other ancillary servicing fees were immaterial for the periods presented.

Management reviews the capitalized MSRs for temporary impairment quarterly by comparing the aggregate carrying value of the MSR portfolio to the aggregate estimated fair value of the portfolio. Additionally, MSRs related to Fannie Mae loans where the Company has risk-sharing obligations are assessed for permanent impairment on an asset-by-asset basis, considering factors such as debt service coverage ratio, property location, loan-to-value ratio, and property type. Except for defaulted or prepaid loans, no temporary or permanent impairment was recognized for the years ended December 31, 2019, 2018, and 2017.

The weighted average remaining life of the aggregate MSR portfolio is 7.5 years.