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Reverse Mortgage Interests, Net
 9 Months Ended
Sep. 30, 2018
Reverse Mortgage Interests [Abstract]  
Reverse Mortgage Interests, Net

Reverse mortgage interests, net consists of the following.
 
Successor

 
Predecessor

Reverse Mortgage Interests, Net
September 30, 2018
 
December 31, 2017
Participating interests in HECM mortgage-backed securities, net of $55 and $0 premium, respectively
$
6,074

 
$
7,107

Other interests securitized, net of $117 and $0 discount, respectively
1,003

 
912

Unsecuritized interests, net of $151 and $89 discount, respectively
1,810

 
2,080

Reserves
(1
)
 
(115
)
Total reverse mortgage interests, net
$
8,886

 
$
9,984



Participating Interests in HMBS
Participating interests in HMBS consist of the Company's reverse mortgage interests in HECM loans which have been transferred to GNMA and subsequently securitized through the issuance of HMBS. During the two months ended September 30, 2018, a total of $44 in UPB was transferred to GNMA and securitized by the Company. During the seven months ended July 31, 2018 and nine months ended September 30, 2017, a total of $198 and $416 in UPB were transferred to GNMA and securitized by the Predecessor, respectively.

Other Interests Securitized
Other interests securitized consist of reverse mortgage interests that no longer meet HMBS program eligibility criteria and have been repurchased out of HMBS. These reverse mortgage interests have subsequently been transferred to private securitization trusts and are accounted for as a secured borrowing. No such securitizations occurred during the two months ended September 30, 2018. During the seven months ended July 31, 2018, a total of $760 UPB was securitized through Trust 2018-1 and Trust 2018-2 and a total of $284 UPB from Trust 2016-2 and Trust 2016-3 were called and debt extinguished. Refer to Other Nonrecourse Debt in Note 10, Indebtedness, for additional information.

Unsecuritized Interests
Unsecuritized interests in reverse mortgages consists of the following.
 
Successor
 
Predecessor
Unsecuritized Interests
September 30, 2018
 
December 31, 2017
Repurchased HECM loans
$
1,512

 
$
1,751

HECM related receivables
353

 
311

Funded borrower draws not yet securitized
68

 
82

REO related receivables
28

 
25

Purchase discount
(151
)
 
(89
)
Total unsecuritized interests
$
1,810

 
$
2,080



Unsecuritized interests include repurchased HECM loans for which the Company is required to repurchase from the HMBS pool when the outstanding principal balance of the HECM loan is equal to or greater than 98% of the maximum claim amount established at origination in accordance with HMBS program guidelines. The Company repurchased a total of $608 of HECM loans out of GNMA HMBS securitizations during the two months ended September 30, 2018, of which $138 were subsequently assigned to a third party in accordance with applicable servicing agreements. The Predecessor repurchased a total of $2,439 and $3,270 of HECM loans out of GNMA HMBS securitizations during the seven months ended July 31, 2018 and nine months ended September 30, 2017, respectively, of which $512 and $802 were subsequently assigned to a third party in accordance with applicable servicing agreements, respectively. To the extent a loan is not subject to applicable servicing agreements and assigned to a third party, the loan is either subject to assignment to HUD, per contractual obligations with GNMA, liquidated via a payoff from the borrower or liquidated via a foreclosure according to the terms of the underlying mortgage.

The Company also estimates and records an asset for probable recoveries from prior servicers for their respective portion of the losses associated with the underlying loans that were not serviced in accordance with established guidelines. Receivables from prior servicers totaled $25 and $22 for the Company and Predecessor's reverse loan portfolio at September 30, 2018 and December 31, 2017, respectively.

Purchase of Reverse Mortgage Servicing Rights and Interests
On December 1, 2016, the Predecessor executed an asset purchase agreement with a large financial institution and acquired servicing rights and reverse mortgage interests. As part of the asset purchase agreement, the Predecessor agreed to acquire remaining components of the reverse portfolio, primarily including servicing of whole HECM loans and REO advances upon receiving regulatory approval. In September 2017, the Predecessor executed a mortgage servicing rights purchase agreement and a subservicing agreement to acquire servicing rights and subservicing contracts on the remaining reverse portfolio. In March 2018, the Predecessor executed an asset purchase agreement to acquire reverse mortgage interests on the subservicing contracts acquired in September 2017 referenced above, acquiring $467 UPB of participating interests in HECM loans and $460 UPB of related HMBS obligations. The Predecessor performed a relative fair value allocation upon the March 2018 acquisition, resulting in the aforementioned assets and liabilities in addition to $2 of HECM related receivables and $7 of purchase discount within unsecuritized interests. In addition, the Predecessor paid net proceeds of $1 for the acquisition of these assets and assumption of related liabilities.

Reserves for Reverse Mortgage Interests
The Company records reserves related to reverse mortgage interests based on potential unrecoverable costs and loss exposures expected to be realized. Recoverability is determined based on the Company’s ability to meet U.S. Department of Housing and Urban Development ("HUD") servicing guidelines and is viewed as two different categories of expenses: financial and operational. Financial exposures are defined as the cost of doing business related to servicing the HECM product and include potential unrecoverable costs primarily based on HUD claim guidelines related to recoverable expenses and unfavorable changes in the appraised value of the loan collateral. Operational exposures are defined as unrecoverable debenture interest curtailments imposed for missed HUD specified servicing timelines.

The activity of the reserves for reverse mortgage interests is set forth below.
 
Successor
 
 
Predecessor
 
For the Period August 1 - September 30, 2018
 
 
For the Period July 1 - July 31, 2018
 
Three Months Ended September 30, 2017
 
For the Period January 1 - July 31, 2018
 
Nine Months Ended September 30, 2017
Reserves for reverse mortgage interests
 
 
 
 
 
Balance - beginning of period
$
—

 
 
$
117

 
$
149

 
$
115

 
$
131

Provision, net
1

 
 
12

 
22

 
32

 
44

Write-offs
—

 
 
—

 
(83
)
 
(18
)
 
(87
)
Balance - end of period
$
1

 
 
$
129

 
$
88

 
$
129

 
$
88



Purchase Discount for Reverse Mortgage Interests
In connection with the Merger, the Company recorded the acquired reverse mortgage interests at estimated fair value as of the acquisition date, which resulted in a preliminary purchase premium of $58 for participating interests in HMBS and a preliminary purchase discount of $278 for other interest securitized and unsecuritized interests. The following table sets forth the activities of the purchase premiums and discounts for reverse mortgage interests.
 
Successor
 
For the Period August 1 - September 30, 2018
Purchase premiums and discounts for reverse mortgage interests
Premium for Participating Interests in HMBS
 
Discount for Other Interest Securitized
 
Discount for Unsecuritized Interests
Balance - beginning of period
$
58

 
$
(117
)
 
$
(161
)
Additions
—

 
—

 
—

Accretion/(Amortization)
(3
)
 
—

 
10

Balance - end of period
$
55

 
$
(117
)
 
$
(151
)

In connection with previous reverse mortgage portfolio acquisitions, the Predecessor recorded a purchase discount within unsecuritized interests. The following table sets forth the activities of the purchase discounts for reverse mortgage interests.
 
Predecessor
Purchase discounts for reverse mortgage interests
For the Period July 1 - July 31, 2018
 
Three Months Ended September 30, 2017
 
For the Period January 1 - July 31, 2018
 
Nine Months Ended September 30, 2017
Balance - beginning of period
$
(84
)
 
$
(43
)
 
$
(89
)
 
$
(43
)
Additions
—

 
(75
)
 
(7
)
 
(75
)
Accretion
2

 
22

 
14

 
22

Balance - end of period
$
(82
)
 
$
(96
)
 
$
(82
)
 
$
(96
)


Reverse Mortgage Interest Income
The Company accrues interest income for its participating interest in reverse mortgages based on the stated rates underlying HECM loans and FHA guidelines. Total interest earned on the Company's reverse mortgage interests was $72 for the two months ended September 30, 2018. Total interest earned on the Predecessor's reverse mortgage interests was $38 and $274 for the one and seven months ended July 31, 2018, respectively, and $137 and $370 for the three and nine months ended September 30, 2017, respectively.