Mortgage Servicing Rights, Net

9 Months Ended

Sep. 30, 2023

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	2023		2022		2023		2022
Beginning Balance	$	550,563	$	577,948	$	576,428	$	563,488
Additions	23,170		26,752		54,789		98,378


Amortization	(29,830)		(29,793)		(87,314)		(86,959)
Ending Balance	$	543,903	$	574,907	$	543,903	$	574,907

Valuation Allowance
Beginning Balance	$	(6,032)	$	(9,268)	$	(7,876)	$	(13,186)
Decrease	2,333		321		4,177		4,239
Ending Balance	$	(3,699)	$	(8,947)	$	(3,699)	$	(8,947)
Net Balance	$	540,204	$	565,960	$	540,204	$	565,960

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,
	2023		2022		2023		2022
Servicing fees	$	38,035	$	37,333	$	112,652	$	110,367
Escrow interest and placement fees	15,004		6,870		37,752		10,276
Ancillary fees	201		6,830		2,961		19,986
Total	$	53,240	$	51,033	$	153,365	$	140,629

Newmark’s primary servicing portfolio as of September 30, 2023 and December 31, 2022 was $70.7 billion and $69.0 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 loan assumptions), the administration of the loan is transferred to Newmark. Newmark’s special servicing portfolio was $1.7 billion at September 30, 2023 and December 31, 2022, respectively.

The estimated fair value of the MSRs as of September 30, 2023 and December 31, 2022 was $676.3 million and $667.6 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, 2023 and year ended December 31, 2022 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 $17.9 million and $35.1 million, respectively, as of September 30, 2023 and by $18.3 million and $35.7 million, respectively, as of December 31, 2022.