Mortgage Servicing Rights and Mortgage Servicing Liabilities

9 Months Ended

Sep. 30, 2020

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights and Mortgage Servicing Liabilities

Note 9—Mortgage Servicing Rights and Mortgage Servicing Liabilities

Mortgage Servicing Rights at Fair Value

The activity in MSRs is as follows:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	2,213,539	$	2,720,335	$	2,926,790	$	2,820,612
Additions:
Resulting from loan sales		245,946		246,757		753,795		545,839
Purchases (purchase adjustments), net		(287)		46		25,473		227,445
		245,659		246,803		779,268		773,284
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(26,208)		(286,880)		(1,040,751)		(704,967)
Other changes in fair value (2)		(99,169)		(124,005)		(331,486)		(332,676)
Total change in fair value		(125,377)		(410,885)		(1,372,237)		(1,037,643)
Balance at end of period	$	2,333,821	$	2,556,253	$	2,333,821	$	2,556,253
					September 30,		December 31,
					2020		2019
					(in thousands)
Fair value of mortgage servicing rights pledged to secure Assets sold under agreements to repurchase and Notes payable secured by mortgage servicing assets					$	2,330,600	$	2,920,603

(1) Principally reflects changes in discount rate, prepayment speed and servicing cost inputs.

(2) Represents changes due to realization of cash flows.

Mortgage Servicing Liabilities at Fair Value

The activity in MSLs is summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Balance at beginning of period	$	29,858	$	12,948	$	29,140	$	8,681
Mortgage servicing liabilities resulting from loan sales		—		19,501		6,576		27,133
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		10,822		8,630		24,927		14,687
Other changes in fair value (2)		(8,982)		(6,785)		(28,945)		(16,207)
Total change in fair value		1,840		1,845		(4,018)		(1,520)
Balance at end of period	$	31,698	$	34,294	$	31,698	$	34,294

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

(2) Represents changes due to realization of cash flows.

Contractual servicing fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—From non-affiliates on the consolidated statements of income; other fees relating to MSRs and MSLs are recorded in Net loan servicing fees—Loan servicing fees—Other on the Company’s consolidated statements of income. Such amounts are summarized below:

	Quarter ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(in thousands)
Contractual servicing fees	$	203,696	$	185,967	$	601,527	$	533,510
Other fees:
Late charges		7,615		12,430		28,718		31,258
Other		6,960		4,846		17,781		9,119
	$	218,271	$	203,243	$	648,026	$	573,887