Mortgage Servicing Rights and Mortgage Servicing Liabilities

9 Months Ended

Sep. 30, 2022

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,
	2022		2021		2022		2021
	(in thousands)
Balance at beginning of period	$	5,217,167	$	3,412,648	$	3,878,078	$	2,581,174
Additions:
MSRs resulting from loan sales		345,077		432,429		1,359,632		1,386,324
Purchases		4,140		—		4,140		—
		349,217		432,429		1,363,772		1,386,324
Change in fair value due to:
Changes in valuation inputs used in valuation model (1)		237,154		(119,674)		794,779		(46,298)
Other changes in fair value (2)		(141,866)		(114,283)		(374,957)		(310,080)
Total change in fair value		95,288		(233,957)		419,822		(356,378)
Balance at end of period	$	5,661,672	$	3,611,120	$	5,661,672	$	3,611,120
UPB of underlying loans at end of period					$	303,800,226	$	259,220,948
					September 30,		December 31,
					2022		2021
					(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					$	5,604,447	$	3,856,791

(1) Principally reflects changes in annual total prepayment speed, pricing spread, per loan annual cost of servicing and UPB of underlying loan 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,
	2022		2021		2022		2021
	(in thousands)
Balance at beginning of period	$	2,337	$	100,091	$	2,816	$	45,324
Mortgage servicing liabilities resulting from loan sales		—		33,764		—		98,147
Changes in fair value due to:
Changes in valuation inputs used in valuation model (1)		(38)		(54,222)		(305)		(36,375)
Other changes in fair value (2)		(85)		(32,066)		(297)		(59,529)
Total change in fair value		(123)		(86,288)		(602)		(95,904)
Balance at end of period	$	2,214	$	47,567	$	2,214	$	47,567
UPB of underlying loans at end of period					$	35,143	$	8,885,785

(1) Principally reflects changes in expected borrower performance and servicer losses given default. During the quarter ended September 30, 2021, significant changes were made to valuation inputs used to estimate the fair value of MSLs in recognition of the observed increase in the proportion of performing government insured or guaranteed loans and reduced expected costs and losses from defaulted government insured or guaranteed loans underlying the Company’s MSLs.

(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,
	2022		2021		2022		2021
	(in thousands)
Contractual servicing fees	$	270,336	$	216,592	$	774,483	$	635,620
Other fees:
Late charges		10,533		7,480		30,177		22,076
Other		2,952		7,457		11,487		23,079
	$	283,821	$	231,529	$	816,147	$	680,775