Mortgage Servicing Rights, Net

9 Months Ended

Sep. 30, 2022

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	2022		2021		2022		2021
Beginning Balance	$	577,948	$	544,725	$	563,488	$	528,983
Additions	26,752		28,246		98,378		98,820


Amortization	(29,793)		(28,760)		(86,959)		(83,592)
Ending Balance	$	574,907	$	544,211	$	574,907	$	544,211

Valuation Allowance
Beginning Balance	$	(9,268)	$	(18,319)	$	(13,186)	$	(34,254)
Decrease (increase)	321		8,031		4,239		23,966
Ending Balance	$	(8,947)	$	(10,288)	$	(8,947)	$	(10,288)
Net Balance	$	565,960	$	533,923	$	565,960	$	533,923

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,
	2022		2021		2022		2021
Servicing fees	$	37,333	$	35,444	$	110,367	$	102,534
Escrow interest and placement fees	6,870		1,117		10,276		3,168
Ancillary fees	6,830		3,533		19,986		7,352
Total	$	51,033	$	40,094	$	140,629	$	113,054

Newmark’s primary servicing portfolio at September 30, 2022 and December 31, 2021 was $69.1 billion and $68.4 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 $1.8 billion and $2.0 billion at September 30, 2022 and December 31, 2021, respectively.

The estimated fair value of the MSRs at September 30, 2022 and December 31, 2021 was $655.3 million and $608.0 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, 2022 and year ended December 31, 2021 were between 6.1% and 13.5% 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 $18.2 million and $35.6 million, respectively, at September 30, 2022 and by $18.0 million and $35.1 million, respectively, at December 31, 2021.