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Other Investments
 12 Months Ended
Dec. 31, 2020
Investments, All Other Investments [Abstract]  
Other Investments Other Investments
Other investments at December 31, 2020 and December 31, 2019 are summarized in the following table.
Table 10.1 – Components of Other Investments
(In Thousands)December 31, 2020December 31, 2019
Servicer advance investments$231,489 $169,204 
Shared home appreciation options42,440 45,085 
Excess MSRs34,418 31,814 
Mortgage servicing rights8,815 42,224 
Investment in multifamily loan fund— 39,802 
Other31,013 30,001 
Total Other Investments$348,175 $358,130 
Servicer advance investments
In 2018, we and a third-party co-investor, through two partnerships (“SA Buyers”) consolidated by us, purchased the outstanding servicer advances and excess MSRs related to a portfolio of legacy residential mortgage-backed securitizations serviced by the co-investor (See Note 4 for additional information regarding the transaction). During the year ended December 31, 2020, we funded additional purchases of outstanding servicer advances and excess MSRs under the same partnership structure. At December 31, 2020, we had funded $94 million of total capital to the SA Buyers (see Note 16 for additional detail).
Our servicer advance investments (owned by the consolidated SA Buyers) are comprised of outstanding servicer advance receivables, the requirement to purchase all future servicer advances made with respect to a specified pool of residential mortgage loans, and a portion of the mortgage servicing fees from the underlying loan pool. A portion of the remaining mortgage servicing fees from the underlying loan pool are paid directly to the third-party servicer for the performance of servicing duties and a portion is paid to excess MSRs that we own as a separate investment. We hold our servicer advance investments at our taxable REIT subsidiaries.
Servicer advances are non-interest bearing and are a customary feature of residential mortgage securitization transactions. Servicer advances are generally reimbursable cash payments made by a servicer when the borrower fails to make scheduled payments due on a residential mortgage loan or to support the value of the collateral property. Servicer advances typically fall into three categories:
•Principal and Interest Advances: cash payments made by the servicer to cover scheduled principal and interest payments on a residential mortgage loan that have not been paid on a timely basis by the borrower.
•Escrow Advances (Taxes and Insurance Advances): Cash payments made by the servicer to third parties on behalf of the borrower for real estate taxes and insurance premiums on the property that have not been paid on a timely basis by the borrower.
•Corporate Advances: Cash payments made by the servicer to third parties for the reimbursable costs and expenses incurred in connection with the foreclosure, preservation and sale of the mortgaged property, including attorneys’ and other professional fees.
Servicer advances are generally permitted to be repaid from amounts received with respect to the related residential mortgage loan, including payments from the borrower or amounts received from the liquidation of the property securing the loan. Residential mortgage servicing agreements generally require a servicer to make advances in respect of serviced residential mortgage loans unless the servicer determines in good faith that the advance would not be ultimately recoverable from the proceeds of the related residential mortgage loan or the mortgaged property.
At December 31, 2020, our servicer advance investments had a carrying value of $231 million and were associated with a portfolio of residential mortgage loans with an unpaid principal balance of $9.14 billion. The outstanding servicer advance receivables associated with this investment were $218 million at December 31, 2020, which were financed with short-term non-recourse securitization debt (see Note 13 for additional detail on this debt). The servicer advance receivables were comprised of the following types of advances at December 31, 2020 and December 31, 2019:
Table 10.2 – Components of Servicer Advance Receivables
(In Thousands)December 31, 2020December 31, 2019
Principal and interest advances$110,923 $15,081 
Escrow advances (taxes and insurance advances)79,279 96,732 
Corporate advances27,454 39,769 
Total Servicer Advance Receivables$217,656 $151,582 
We account for our servicer advance investments at fair value and during the years ended December 31, 2020 and 2019, we recorded $11 million of Other interest income associated with these investments for each of these periods, and recorded a net market valuation loss of $9 million and a net market valuation gain of $3 million, respectively, through Investment fair value changes, net in our consolidated statements of income.
Shared Home Appreciation Options
In the third quarter of 2019, we entered into a flow purchase agreement to acquire shared home appreciation options. Under this arrangement, our counterparty purchases an option to buy a fractional interest in a homeowner's ownership interest in residential property, and subsequently the counterparty sells the option contract to us. Pursuant to the terms of the option contract, we share in both home price appreciation and depreciation. At December 31, 2020, we had acquired $47 million of shared home appreciation options under this flow purchase agreement. We account for these investments under the fair value option and during the years ended December 31, 2020 and 2019, we recorded a net market valuation loss of $2 million and a net market valuation gain of $1 million, respectively, related to these assets through Investment fair value changes, net on our consolidated statements of income.
Excess MSRs
In association with our servicer advance investments described above, we (through our consolidated SA Buyers) invested in excess MSRs associated with the same portfolio of legacy residential mortgage-backed securitizations. Additionally, we own excess MSRs associated with specified pools of multifamily loans. We account for our excess MSRs at fair value and during the years ended December 31, 2020 and 2019, we recognized $12 million and $8 million of Other interest income, respectively, and recorded net market valuation losses of $8 million and $3 million, respectively, through Investment fair value changes, net on our consolidated statements of income.
Mortgage Servicing Rights
We invest in mortgage servicing rights associated with residential mortgage loans and contract with licensed sub-servicers to perform all servicing functions for these loans. The majority of our investments in MSRs were made through the retention of servicing rights associated with the residential jumbo mortgage loans that we acquired and subsequently transferred to third parties. We hold our MSR investments at our taxable REIT subsidiaries.
At December 31, 2020 and December 31, 2019, our MSRs had a fair value of $9 million and $42 million, respectively, and were associated with loans with an aggregate principal balance of $2.59 billion and $4.35 billion, respectively. During the years ended December 31, 2020 and 2019, including net market valuation gains and losses on our MSRs and related risk management derivatives, we recorded a net loss of $10 million and income of $4 million, respectively, through Other income on our consolidated statements of income (loss).
Investment in Multifamily Loan Fund
In January 2019, we invested in a limited partnership created to acquire floating rate, light-renovation multifamily loans from Freddie Mac. At December 31, 2020, the carrying amount of our investment in the partnership was zero and we had no remaining funding obligations to the partnership. During the year ended December 31, 2020, we acquired $56 million of securities from the partnership's securitization transactions. During the years ended December 31, 2020 and 2019, we recorded income of $1 million for each of these periods associated with this investment in Other income on our consolidated statements of income (loss).