Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:


	Quarter ended March 31,
	2019		2018
	(in thousands)
Balance at beginning of quarter	$	2,820,612	$	638,010
Reclassification of mortgage servicing rights previously accounted for under the amortization method pursuant to adoption of the fair value method of accounting		—		1,482,426
Balance after reclassification		2,820,612		2,120,436
Additions:
Purchases		227,772		27,606
Resulting from mortgage loan sales		115,751		143,910
		343,523		171,516
Change in fair value due to:
Changes in inputs used in valuation model (1)		(161,638)		130,449
Other changes in fair value (2)		(97,407)		(67,912)
Total change in fair value		(259,045)		62,537
Balance at end of quarter	$	2,905,090	$	2,354,489

	March 31,		December 31,
	2019		2018
		(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable	$	2,675,704	$	2,807,333

(1)

Principally reflects changes in discount rate and prepayment speed inputs, primarily due to changes in market interest rates, and changes in expected borrower performance and servicer losses given default.

(2)

Represents changes due to realization of cash flows.

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:


	Quarter ended March 31,
	2019		2018
	(in thousands)
Balance at beginning of quarter	$	8,681	$	14,120
Mortgage servicing liabilities resulting from mortgage loan sales		794		2,037
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		3,301		2,643
Other changes in fair value (2)		(4,932)		(6,737)
Total change in fair value		(1,631)		(4,094)
Balance at end of quarter	$	7,844	$	12,063

(1)

Principally reflects changes in expected borrower performance and servicer losses given default.

(2)

Represents changes due to realization of cash flows.

Servicing fees relating to MSRs and MSLs are recorded in Net mortgage loan servicing fees—Mortgage loan servicing fees—From non-affiliates on the consolidated statements of income; late charges and other ancillary fees relating to MSRs and MSLs are recorded in Net mortgage loan servicing fees—Mortgage loan servicing fees—Ancillary and other fees on the Company’s consolidated statements of income. Such amounts are summarized below:


	Quarter ended March 31,
	2019		2018
	(in thousands)
Contractual servicing fees	$	166,790	$	135,483
Ancillary and other fees:
Late charges		9,812		7,459
Other		1,661		1,562
	$	178,263	$	144,504