Mortgage Servicing Rights, Net

9 Months Ended

Sep. 30, 2020

The changes in the carrying amount of MSRs were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Mortgage Servicing Rights	2020		2019		2020		2019
Beginning Balance	$	460,473	$	413,425	$	432,666	$	416,131
Additions	53,006		35,186		126,571		73,873
Purchases from an affiliate	—		123		200		845

Amortization	(24,901)		(22,503)		(70,859)		(64,618)
Ending Balance	$	488,578	$	426,231	$	488,578	$	426,231

Valuation Allowance
Beginning Balance	$	(37,241)	$	(12,642)	$	(19,022)	$	(4,322)
Decrease (increase)	1,850		(7,380)		(16,369)		(15,700)
Ending Balance	$	(35,391)	$	(20,022)	$	(35,391)	$	(20,022)
Net Balance	$	453,187	$	406,209	$	453,187	$	406,209

Servicing fees are included in “Management services, servicing fees and other” on the accompanying unaudited condensed consolidated statements of operations and were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Servicing fees	$	29,432	$	26,526	$	84,347	$	78,134
Escrow interest and placement fees	876		6,518		4,995		17,505
Ancillary fees	2,060		3,955		5,584		11,270
Total	$	32,368	$	36,999	$	94,926	$	106,909

Newmark’s primary servicing portfolio at September 30, 2020 and December 31, 2019 was $64.6 billion and $59.9 billion, respectively. Also, Newmark is the named special servicer for a number of commercial mortgage-backed securitizations. Upon certain specified events (such as, but not limited to, loan defaults and loans assumptions), the administration of the loan is transferred to Newmark. Newmark’s special servicing portfolio was $2.3 billion and $2.4 billion at September 30, 2020 and December 31, 2019, respectively.

The estimated fair value of the MSRs at September 30, 2020 and December 31, 2019 was $482.4 million and $441.7 million, respectively.

Fair values are estimated using a valuation model that calculates the present value of the future net servicing cash flows. The cash flows assumptions used are based on assumptions Newmark believes market participants would use to value the portfolio. Significant assumptions include estimates of the cost of servicing per loan, discount rate, earnings rate on escrow deposits and prepayment speeds. The discount rates used in measuring fair value for the nine months ended September 30, 2020 and the year ended December 31, 2019 were between 6.1% and 13.5%, respectively, and varied based on investor type. An increase in discount rate of 100 basis points or 200 basis points would result in a decrease in fair value by $13.2 million and $25.7 million, respectively, at September 30, 2020 and by $11.9 million and $23.3 million, respectively, at December 31, 2019.