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Mortgage Servicing Rights ("MSRs") and Related Liabilities (Tables)
 9 Months Ended
Sep. 30, 2018
Transfers and Servicing [Abstract]  
Schedule of Servicing Assets at Fair Value
The following table sets forth the carrying value of the Company's and Predecessor's MSRs and the related liabilities.
 
Successor
 
Predecessor
MSRs and Related Liabilities
September 30, 2018
 
December 31, 2017
Forward MSRs - fair value
$
3,485

 
$
2,937

Reverse MSRs - amortized cost
15

 
4

Mortgage servicing rights
$
3,500

 
$
2,941

 
 
 
 
Mortgage servicing liabilities - amortized cost
$
79

 
$
41

 
 
 
 
Excess spread financing - fair value
$
1,097

 
$
996

Mortgage servicing rights financing - fair value
26

 
10

MSR related liabilities - nonrecourse at fair value
$
1,123

 
$
1,006



The following table sets forth the activities of forward MSRs.
 
Successor
 
 
Predecessor
 
For the Period August 1 - September 30, 2018
 
 
For the Period January 1 - July 31, 2018
 
Nine Months Ended September 30, 2017
MSRs - Fair Value
 
 
 
Fair value - beginning of period
$
3,413

 
 
$
2,937

 
$
3,160

Additions:
 
 
 
 
 
 
Servicing retained from mortgage loans sold
43

 
 
162

 
151

Purchases of servicing rights
72

 
 
144

 
30

Dispositions:
 
 
 
 
 
 
Sales of servicing assets(1)
(63
)
 
 
4

 
(24
)
Changes in fair value:
 
 
 
 
 
 
Changes in valuation inputs or assumptions used in the valuation model
65

 
 
330

 
(113
)
Other changes in fair value
(45
)
 
 
(164
)
 
(248
)
Fair value - end of period
$
3,485

 
 
$
3,413

 
$
2,956



(1) Amount for the seven months ended July 31, 2018 is related to the sale of nonperforming loans, which have a negative MSR value.
The following table provides a breakdown of credit sensitive and interest sensitive unpaid principal balance ("UPB") for the Company's forward MSRs.
 
Successor
 
Predecessor
 
September 30, 2018
 
December 31, 2017
MSRs - Sensitivity Pools
UPB
 
Fair Value
 
UPB
 
Fair Value
Credit sensitive
$
144,697

 
$
1,652

 
$
167,605

 
$
1,572

Interest sensitive
129,789

 
1,833

 
113,775

 
1,365

Total
$
274,486

 
$
3,485

 
$
281,380

 
$
2,937
Schedule of Assumptions for Fair Value of Mortgage Service Rights
The Company used the following key weighted-average inputs and assumptions in estimating the fair value of MSRs.
 
Successor
 
Predecessor
Credit Sensitive
September 30, 2018
 
December 31, 2017
Discount rate
11.2
%
 
11.4
%
Total prepayment speeds
11.2
%
 
15.2
%
Expected weighted-average life
6.7 years

 
5.7 years

 
 
 
 
Interest Sensitive
 
 
 
Discount rate
9.2
%
 
9.2
%
Total prepayment speeds
8.9
%
 
10.7
%
Expected weighted-average life
7.4 years

 
6.7 years

The range of key assumptions used in the Company's valuation of excess spread financing are as follows.
Excess Spread Financing
Prepayment Speeds
 
Average
Life (Years)
 
Discount Rate
 
Recapture Rate
Successor
 
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
Low
5.9%
 
5.3
 
8.5%
 
7.6%
High
15.0%
 
8.5
 
14.0%
 
26.7%
Weighted-average
10.6%
 
6.7
 
10.6%
 
17.7%
Predecessor
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Low
6.2%
 
4.4
 
8.5%
 
7.2%
High
21.2%
 
6.9
 
14.1%
 
30.0%
Weighted-average
13.7%
 
5.9
 
10.8%
 
18.7%
The following table sets forth the weighted average assumptions used in the valuation of the mortgage servicing rights financing liability.
 
Successor
 
Predecessor
Mortgage Servicing Rights Financing Assumptions
September 30, 2018
 
December 31, 2017
Advance financing rates
4.9
%
 
3.5
%
Annual advance recovery rates
18.2
%
 
23.2
%
Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets
The following table shows the hypothetical effect on the excess spread financing fair value when applying certain unfavorable variations of key assumptions to these liabilities for the dates indicated.
 
Discount Rate
 
Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
 
200 bps
Adverse
Change
 
10%
Adverse
Change
 
20%
Adverse
Change
Successor
 
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
Excess spread financing
$
44

 
$
92

 
$
33

 
$
68

Predecessor
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Excess spread financing
$
37

 
$
78

 
$
34

 
$
71

The following table shows the hypothetical effect on the fair value of the MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated.
 
Discount Rate
 
Total Prepayment Speeds
MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
 
200 bps
Adverse
Change
 
10%
Adverse
Change
 
20%
Adverse
Change
Successor
 
 
 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
 
Mortgage servicing rights
$
(138
)
 
$
(266
)
 
$
(117
)
 
$
(227
)
Predecessor
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
Mortgage servicing rights
$
(108
)
 
$
(208
)
 
$
(118
)
 
$
(227
)
Schedule of Fees Earned in Exchange for Servicing Financial Assets
The following table sets forth the items comprising revenues associated with servicing loan portfolios.
 
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
Servicing Revenue
 
 
 
 
 
Contractually specified servicing fees(1)
$
163

 
 
$
79

 
$
251

 
$
574

 
$
759

Other service-related income(1)(2)
18

 
 
10

 
40

 
66

 
126

Incentive and modification income(1)
8

 
 
4

 
19

 
37

 
63

Late fees(1)
14

 
 
7

 
22

 
53

 
67

Reverse servicing fees
13

 
 
4

 
16

 
37

 
43

Mark-to-market adjustments(2)(3)
24

 
 
25

 
(44
)
 
196

 
(160
)
Counterparty revenue share(4)
(26
)
 
 
(16
)
 
(53
)
 
(111
)
 
(174
)
Amortization, net of accretion(5)
(31
)
 
 
(16
)
 
(60
)
 
(112
)
 
(187
)
Total servicing revenue
$
183

 
 
$
97

 
$
191

 
$
740

 
$
537



(1) Amounts include subservicing related revenues.
(2) In the fourth quarter of 2017, the Predecessor reevaluated presentation of adjustments related to certain Ginnie Mae early buyout activities and reclassified $4 and $16 from other service-related income to mark-to-market adjustments for the three and nine months ended September 30, 2017, respectively. Total servicing revenue was not affected by this reclassification adjustment.
(3) Mark-to-market ("MTM") adjustments include fair value adjustments on MSR, excess spread financing and MSR financing liabilities. The amount of MSR MTM reflected is net of cumulative incurred losses related to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio, and these incurred losses have been transferred to reserves on advances and other receivables. These cumulative incurred losses for the Company totaled $13 for the two months ended September 30, 2018. These cumulative incurred losses for the Predecessor totaled $4 and $38 for the one and seven months ended July 31, 2018, respectively, and $15 and $53 for the three and nine months ended September 30, 2017, respectively.
(4) Counterparty revenue share represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements and the payments made associated with MSRs financing arrangements.
(5) Amortization is net of excess spread accretion of $22 for the two months ended September 30, 2018, $11 and $78 for the one and seven months ended July 31, 2018, respectively, and $41 and $123 for the three and nine months ended September 30, 2017, respectively.