Note 5—Loan Sales and Servicing Activities

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

The following table summarizes cash flows between the Company and transferees as a result of the sale of mortgage loans in transactions where the Company maintains continuing involvement as servicer of the mortgage loans:


	Quarter ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
	(in thousands)
Cash flows:
Sales proceeds	$	11,375,408	$	13,600,232	$	34,208,217	$	38,097,411
Servicing fees received (1)	$	123,626	$	97,312	$	354,535	$	272,303
Net servicing advances (recoveries)	$	4,147	$	(15,061)	$	(20,572)	$	(1,271)

(1)

Net of guarantee fees paid to the Agencies.

The following table summarizes unpaid principal balance (the “UPB”) of the mortgage loans sold by the Company in which it maintains continuing involvement:


	September 30,		December 31,
	2018		2017
	(in thousands)
Unpaid principal balance of mortgage loans outstanding	$	139,305,079	$	120,853,138
Delinquencies:
30-89 days	$	5,967,607	$	5,097,688
90 days or more:
Not in foreclosure	$	1,904,299	$	2,303,114
In foreclosure	$	640,555	$	606,744
Foreclosed	$	24,216	$	30,310
Bankruptcy	$	889,814	$	657,368

The following tables summarize the UPB of the Company’s mortgage loan servicing portfolio:


	September 30, 2018
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	139,305,079	$	—	$	139,305,079
Purchased		55,619,760		—		55,619,760
		194,924,839		—		194,924,839
Advised Entities		—		87,226,461		87,226,461
Mortgage loans held for sale		2,352,771		—		2,352,771
	$	197,277,610	$	87,226,461	$	284,504,071
Subserviced for the Company (1)	$	6,459,716	$	—	$	6,459,716
Delinquent mortgage loans:
30 days	$	6,457,528	$	596,202	$	7,053,730
60 days		1,810,285		119,314		1,929,599
90 days or more:
Not in foreclosure		2,805,375		255,766		3,061,141
In foreclosure		928,268		149,313		1,077,581
Foreclosed		35,604		193,401		229,005
	$	12,037,060	$	1,313,996	$	13,351,056
Bankruptcy	$	1,277,484	$	116,207	$	1,393,691
Custodial funds managed by the Company (2)	$	3,764,023	$	1,203,229	$	4,967,252

(1)

Certain of the mortgage loans serviced by the Company are subserviced on the Company’s behalf by other mortgage loan servicers on a transitional basis when the Company has purchased the rights to service the loans but servicing of the loans has not yet been transferred to the Company’s servicing system.

(2)

Custodial funds include borrower and investor custodial cash accounts relating to mortgage loans serviced under servicing agreements and are not recorded on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the mortgage loans’ investors, which are included in Interest income in the Company’s consolidated statements of income.


	December 31, 2017
			Contract		Total
	Servicing		servicing and		mortgage
	rights owned		subservicing		loans serviced
	(in thousands)
Investor:
Non-affiliated entities:
Originated	$	120,853,138	$	—	$	120,853,138
Purchased		47,016,708		—		47,016,708
		167,869,846		—		167,869,846
Advised Entities		—		74,980,268		74,980,268
Mortgage loans held for sale		2,998,377		—		2,998,377
	$	170,868,223	$	74,980,268	$	245,848,491
Delinquent mortgage loans:
30 days	$	5,326,710	$	515,922	$	5,842,632
60 days		1,935,216		215,957		2,151,173
90 days or more:
Not in foreclosure		3,690,159		541,945		4,232,104
In foreclosure		916,614		293,835		1,210,449
Foreclosed		41,244		278,890		320,134
	$	11,909,943	$	1,846,549	$	13,756,492
Bankruptcy	$	1,046,969	$	176,324	$	1,223,293
Custodial funds managed by the Company (1)	$	3,267,279	$	901,041	$	4,168,320

(1)

Following is a summary of the geographical distribution of mortgage loans included in the Company’s mortgage loan servicing portfolio for the top five and all other states as measured by UPB:


	September 30,		December 31,
State	2018		2017
	(in thousands)
California	$	50,009,289	$	45,621,369
Texas		23,023,181		19,741,970
Florida		21,006,280		17,490,194
Virginia		18,308,994		16,210,673
Maryland		13,176,658		11,350,939
All other states		158,979,669		135,433,346
	$	284,504,071	$	245,848,491