Loan Sales and Servicing Activities

9 Months Ended

Sep. 30, 2013

Note 6—Loan Sales and Servicing Activities

The Company purchases and sells mortgage loans to the secondary mortgage market without recourse for credit losses. However, the Company maintains continuing involvement with the loans in the form of servicing arrangements and the liability under representations and warranties it makes to purchasers and insurers of the loans.

The following table summarizes cash flows between the Company and transferees upon sale of mortgage loans in transactions where the Company maintains continuing involvement with the mortgage loans (primarily the obligation to service the loans on behalf of the loans’ owners or owners’ agents):

	Quarter ended September 30,					Nine months ended September 30,
	2013			2012		2013			2012
	(in thousands)
Cash flows:
Sales proceeds	$	4,515,106		$	2,654,125	$	13,210,810		$	5,112,530
Servicing fees received	$	16,403		$	3,940	$	38,104		$	8,327
Net servicing advances	$	(717	)	$	1,009	$	(4,375	)	$	2,191
Quarter-end information:
Unpaid principal balance of loans outstanding at period-end	$	22,776,613		$	6,444,618	$	22,776,613		$	6,444,618
Loans delinquent 30-89 days	$	380,070		$	93,069	$	380,070		$	93,069
Loans delinquent 90 or more days or in foreclosure or bankruptcy	$	247,269		$	39,950	$	247,269		$	39,950

The Company’s mortgage servicing portfolio is summarized as follows:

	September 30, 2013
	Servicing rights owned		Contract servicing and subservicing		Total loans serviced
	(in thousands)
Affiliated entities	$	—	$	29,555,254	$	29,555,254
Agencies	21,725,393		—		21,725,393
Private investors	1,051,220		50,379		1,101,599
Mortgage loans held for sale	490,088		—		490,088
	$	23,266,701	$	29,605,633	$	52,872,334
Amount subserviced for the Company	$	42,201	$	554,070	$	596,271
Delinquent mortgage loans:
30 days	$	307,399	$	265,806	$	573,205
60 days	85,367		114,390		199,757
90 days or more	168,468		1,422,071		1,590,539
	561,234		1,802,267		2,363,501
Loans pending foreclosure	69,889		1,611,708		1,681,597
	$	631,123	$	3,413,975	$	4,045,098
Custodial funds managed by the Company (1)	$	389,267	$	266,285	$	655,552

	December 31, 2012
	Servicing rights owned		Contract servicing and subservicing		Total loans serviced
	(in thousands)
Affiliated entities	$	—	$	16,552,939	$	16,552,939
Agencies	9,860,284		—		9,860,284
Private investors	1,321,584		—		1,321,584
Mortgage loans held for sale	417,742		—		417,742
	$	11,599,610	$	16,552,939	$	28,152,549
Amount subserviced for the Company	$	45,562	$	375,818	$	421,380
Delinquent mortgage loans:
30 days	$	191,884	$	187,653	$	379,537
60 days	60,886		122,564		183,450
90 days or more	112,847		851,851		964,698
	365,617		1,162,068		1,527,685
Loans pending foreclosure	75,329		1,290,687		1,366,016
	$	440,946	$	2,452,755	$	2,893,701
Custodial funds managed by the Company (1)	$	263,562	$	150,080	$	413,642

(1) Borrower and investor custodial cash accounts relate to loans serviced under the servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns interest on custodial funds it manages on behalf of the loans’ investors, which is recorded as part of the interest income in the Company’s consolidated statements of income.

Following is a summary of the geographical distribution of loans included in the Company’s servicing portfolio for the top five and all other states as measured by the total unpaid principal balance:

State	September 30, 2013		December 31, 2012
	(in thousands)
California	$	18,952,692	$	10,696,508
Virginia	2,984,671		*
Texas	2,962,697		1,223,382
Florida	2,395,337		1,385,286
Colorado	2,109,970		1,299,295
Washington	*		1,143,849
All other states	23,466,967		12,404,229
	$	52,872,334	$	28,152,549

* State did not represent a top five state as of the respective date.

Certain of the loans serviced by the Company are subserviced on the Company’s behalf by other mortgage loan servicers. Loans are subserviced for the Company when the loans are secured by property in the State of Massachusetts where the Company is not licensed and a license is required to perform such services, or on a transitional basis for loans where the Company has obtained the rights to service the loans but servicing of the loans has not yet transferred to the Company’s servicing system.

- Definition

The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows.

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