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Servicing Activities
 6 Months Ended
Jun. 30, 2018
Transfers and Servicing [Abstract]  
Servicing Activities
4. Servicing Activities

Total Servicing Portfolio
The following table summarizes the total servicing portfolio, which consists of loans associated with capitalized MSRs owned and secured, loans held for sale, and the portfolio associated with loans subserviced for others: 
 
June 30,
2018
 
December 31,
2017
 
Fair Value
 
UPB
 
Fair Value
 
UPB
 
(In millions)
Capitalized MSRs owned
$
46

 
$
7,121

 
$
57

 
$
8,592

Capitalized MSRs under secured borrowing arrangements and subserviced
437

 
45,770

 
419

 
49,193

Total capitalized MSRs
$
483

 
$
52,891

 
$
476

 
$
57,785

Subserviced
 
 
75,810

 
 
 
89,844

Other servicing
 
 
323

 
 
 
526

Total
 
 
$
129,024

 
 
 
$
148,155



Loan Servicing Income, Net
The following table summarizes the components of Loan servicing income, net:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
(In millions)
Servicing fees from capitalized portfolio
$
6

 
$
48

 
$
12

 
$
102

Subservicing fees
16

 
10

 
33

 
21

MSR yield on secured asset (1)
13

 
1

 
27

 
1

Late fees and other ancillary revenue
10

 
6

 
18

 
15

Loss on sale of MSRs and related costs
(1
)
 
(4
)
 
(1
)
 
(13
)
Curtailment interest paid to investors
—

 
(3
)
 
(1
)
 
(6
)
Loan servicing income
44

 
58

 
88

 
120

Change in fair value of MSRs, net of related derivatives (2)
(10
)
 
(29
)
 
13

 
(58
)
Change in fair value of MSRs secured liability
6

 
(1
)
 
(18
)
 
(1
)
Loan servicing income, net
$
40

 
$
28

 
$
83

 
$
61

____________________
(1) 
Amounts are related to the secured borrowing treatment of the MSR sales to New Residential. The income from the MSR yield on secured asset is fully offset by the implied interest cost recognized on the MSRs secured liability within Net interest expense. Refer to Note 9, 'Debt and Borrowing Arrangements' for additional information on the components of Net interest expense.
(2) 
There was no MSR derivative activity during the three and six months ended June 30, 2018. MSR derivative gains during the three and six months ended June 30, 2017 were not significant.

Mortgage Servicing Rights
The activity in the total loan servicing portfolio unpaid principal balance associated with capitalized mortgage servicing rights consisted of:
 
Six Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
MSRs Owned
 
MSRs Secured Asset
 
(In millions)
Balance, beginning of period
$
8,592

 
$
84,657

 
$
49,193

 
$
—

Additions from loans sold with servicing retained
871

 
1,605

 
—

 
—

Payoffs and curtailments
(744
)
 
(6,649
)
 
(4,027
)
 
(80
)
Sales that have been derecognized
(994
)
 
(12,516
)
 
—

 
—

Sales accounted for as secured borrowing
(604
)
 
(13,164
)
 
604

 
13,164

Balance, end of period
$
7,121

 
$
53,933

 
$
45,770

 
$
13,084



The activity in total capitalized MSRs consisted of: 
 
Six Months Ended
June 30,
 
Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
 
MSRs Owned
 
MSRs Secured Asset
 
(In millions)
Balance, beginning of period
$
57

 
$
690

 
$
419

 
$
—

Additions from loans sold with servicing retained
3

 
18

 
—

 
—

Sales that have been derecognized
(9
)
 
(95
)
 
—

 
—

Sales accounted for as secured borrowing
—

 
(113
)
 
—

 
113

Changes in fair value due to:
 
 
 
 
 
 
 
Realization of expected cash flows
(4
)
 
(53
)
 
(37
)
 
—

Changes in market inputs or assumptions used in the valuation model
(1
)
 
(6
)
 
55

 
1

Balance, end of period
$
46

 
$
441

 
$
437

 
$
114


MSR Sales. During the three and six months ended June 30, 2018, the Company received $3 million and $9 million, respectively, and, during the three and six months ended June 30, 2017, the Company received $20 million and $91 million, respectively, in cash from sales of MSRs that have been derecognized and removed from the Condensed Consolidated Balance Sheets. During the three and six months ended June 30, 2018, the Company received an additional $1 million and $8 million, respectively, in cash related to document holdback from sales of MSRs that have been accounted for as a secured borrowing arrangement. As of June 30, 2018, the Company has a $34 million gross accounts receivable related to holdback from executed MSR sales and transfers to address indemnification claims and mortgage loan document deficiencies, which is included in Accounts receivable, net in the Condensed Consolidated Balance Sheets.
MSR Sale Commitments. The following table summarizes the Company's MSRs and its commitments under sale agreements, based on the portfolio as of June 30, 2018:
 
June 30, 2018
 
UPB
 
Fair Value
 
(In millions)
MSR commitments:
 
 
 
New Residential
$
5,257

 
$
30

Other counterparties
14

 
—

MSRs capitalized under secured borrowing arrangements and subserviced
45,770

 
437

Non-committed
1,850

 
16

Total MSRs
$
52,891

 
$
483



Commitments to sell MSRs include: (i) private investor MSRs that are committed under a sale agreement with New Residential dated December 28, 2016; (ii) agreements to sell a portion of the Company's newly-created MSRs to third parties through flow-sale agreements, where the Company will have continuing involvement as a subservicer; or (iii) agreements for small portfolio sales of existing MSRs, consistent with its intention to not retain a significant amount of MSRs in the future.

If the remaining sales of private investor MSRs to New Residential are completed, the Company does not anticipate retaining a significant amount of capitalized MSRs in the future. The final proceeds the Company may receive from New Residential is dependent on the portfolio composition at each transfer date and are subject to the approvals of multiple counterparties, including origination sources, investors and trustees, as well as other customary closing requirements. In addition, the Company has commitments to transfer approximately $94 million of Servicing advances to New Residential (based on the June 30, 2018 portfolio).

In addition to the commitments presented on the preceding table, as of June 30, 2018, the Company had commitments to sell MSRs through third-party flow sales related to $9 million of the unpaid principal balance of Mortgage loans held for sale and Interest rate lock commitments that are expected to result in closed loans.

Sales of Mortgage Loans

Residential mortgage loans are sold through one of the following methods: (i) sales to or pursuant to programs sponsored by Fannie Mae, Freddie Mac and the Government National Mortgage Association (collectively, the "Agencies") or (ii) sales to private investors. The Company may have continuing involvement in mortgage loans sold by retaining MSRs and/or recourse obligations, as discussed further in Note 11, 'Commitments and Contingencies'.

The following table sets forth information regarding cash flows relating to loan sales in which the Company has continuing involvement: 
 
Six Months Ended
June 30,
 
2018
 
2017
 
(In millions)
Proceeds from new loan sales or securitizations
$
584

 
$
1,651

Servicing fees from capitalized portfolio (1) 
29

 
104

Purchases of previously sold loans (2) 
(2
)
 
(15
)
Servicing advances (3) 
(244
)
 
(627
)
Repayment of servicing advances (3) 
301

 
782

____________________
(1) 
Includes servicing fees, late fees and other ancillary servicing revenue in which the Company has continuing involvement.
(2) 
Includes purchases of repurchase eligible loans and excludes indemnification payments to investors and insurers of the related mortgage loans. 
(3) 
Outstanding servicing advance receivables are presented in Servicing advances, net in the Condensed Consolidated Balance Sheets, except for advances related to loans in foreclosure or real estate owned, which are included in Other assets. During the six months ended June 30, 2018, repayment of servicing advances for advances associated with sales of MSRs were not significant. During the six months ended June 30, 2017, repayment of servicing advances included $21 million received for advances associated with sales of MSRs.

During the three and six months ended months ended June 30, 2018, pre-tax gains of $5 million and $18 million, respectively, related to the sale or securitization of residential mortgage loans were recognized in Gain on loans held for sale, net in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

During the three and six months ended months ended June 30, 2017, pre-tax gains of $46 million and $95 million, respectively, related to the sale or securitization of residential mortgage loans were recognized in Gain on loans held for sale, net in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).