Mortgage Servicing Rights and Mortgage Servicing Liabilities

6 Months Ended

Jun. 30, 2021

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 June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Balance at beginning of period	$	3,268,910	$	2,193,697	$	2,581,174	$	2,926,790
Additions:
Resulting from loan sales		483,362		225,534		953,895		507,849
Purchases		—		—		—		25,760
		483,362		225,534		953,895		533,609
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		(239,514)		(98,681)		73,376		(1,014,543)
Other changes in fair value (2)		(100,110)		(107,011)		(195,797)		(232,317)
Total change in fair value		(339,624)		(205,692)		(122,421)		(1,246,860)
Balance at end of period	$	3,412,648	$	2,213,539	$	3,412,648	$	2,213,539
					June 30,		December 31,
					2021		2020
					(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					$	3,408,088	$	2,577,964

(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 June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Balance at beginning of period	$	46,026	$	29,761	$	45,324	$	29,140
Mortgage servicing liabilities resulting from loan sales		57,421		—		64,383		6,576
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		11,083		9,673		17,847		14,105
Other changes in fair value (2)		(14,439)		(9,576)		(27,463)		(19,963)
Total change in fair value		(3,356)		97		(9,616)		(5,858)
Balance at end of period	$	100,091	$	29,858	$	100,091	$	29,858

(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 June 30,				Six months ended June 30,
	2021		2020		2021		2020
	(in thousands)
Contractual servicing fees	$	208,275	$	199,178	$	419,028	$	397,831
Other fees:
Late charges		6,665		8,490		14,596		21,103
Other		7,768		5,971		15,622		10,821
	$	222,708	$	213,639	$	449,246	$	429,755