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Mortgage Servicing Rights and Related Liabilities
 3 Months Ended
Mar. 31, 2022
Transfers and Servicing [Abstract]  
Mortgage Servicing Rights and Related Liabilities
3. Mortgage Servicing Rights and Related Liabilities

The following table sets forth the carrying value of the Company’s mortgage servicing rights (“MSRs”) and the related liabilities. In estimating the fair value of all mortgage servicing rights and related liabilities, the impact of the current environment was considered in the determination of key assumptions.
MSRs and Related LiabilitiesMarch 31, 2022December 31, 2021
MSRs - fair value$6,006 $4,223 
Excess spread financing - fair value$815 $768 
Mortgage servicing rights financing - fair value30 10 
MSR related liabilities - nonrecourse at fair value$845 $778 

Mortgage Servicing Rights
The following table sets forth the activities of MSRs:
Three Months Ended March 31,
MSRs - Fair Value20222021
Fair value - beginning of period$4,223 $2,703 
Additions:
Servicing retained from mortgage loans sold200 288 
Purchases of servicing rights1,015 67 
Dispositions:
Sales of servicing assets(4)(2)
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)798 521 
Changes in valuation due to amortization(235)(243)
Other changes9 20 
Fair value - end of period$6,006 $3,354 

During the three months ended March 31, 2022 and 2021, the Company sold $361 and $50 in unpaid principal balance (“UPB”) of MSRs, of which $342 and none were retained by the Company as subservicer, respectively.

MSRs are segregated between investor type into agency and non-agency pools (referred to herein as “investor pools”) based upon contractual servicing agreements with investors at the respective balance sheet date to evaluate the MSR portfolio and fair value of the portfolio. Agency investors primarily consist of government sponsored enterprises (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”), and the Government National Mortgage Association (“Ginnie Mae” or “GNMA”). Non-agency investors consist of investors in private-label securitizations.

The following table provides a breakdown of UPB and fair value for the Company’s MSRs:
March 31, 2022December 31, 2021
MSRs - UPB and Fair Value BreakdownUPBFair ValueUPBFair Value
Investor Pools
Agency$377,225 $5,635 $302,851 $3,859 
Non-agency34,615 371 36,357 364 
Total$411,840 $6,006 $339,208 $4,223 

Refer to Note 13, Fair Value Measurements, for further discussion on key weighted-average inputs and assumptions used in estimating the fair value of MSRs.
The following table shows the hypothetical effect on the fair value of the Company’s MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated:
Discount Rate
Total Prepayment Speeds
Cost to Service per Loan
MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
March 31, 2022
Mortgage servicing rights$(207)$(399)$(134)$(259)$(56)$(113)
December 31, 2021
Mortgage servicing rights$(141)$(272)$(148)$(286)$(46)$(93)

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

Excess Spread Financing - Fair Value
The Company had excess spread financing liability of $815 and $768 as of March 31, 2022 and December 31, 2021, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of excess spread financing liability.

The following table shows the hypothetical effect on the Company’s 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
March 31, 2022
Excess spread financing$31 $64 $23 $47 
December 31, 2021
Excess spread financing$26 $54 $28 $58 

These hypothetical sensitivities should be evaluated with care. The effect on fair value of an adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Also, a positive change in the above assumptions would not necessarily correlate with the corresponding decrease in the net carrying amount of the excess spread financing. Excess spread financing’s cash flow assumptions that are utilized in determining fair value are based on the related cash flow assumptions used in the financed MSRs. Any fair value change recognized in the financed MSRs attributable to related cash flows assumptions would inherently have an inverse impact on the carrying amount of the related excess spread financing.

Mortgage Servicing Rights Financing - Fair Value
The Company had MSR financing liability of $30 and $10 as of March 31, 2022 and December 31, 2021, respectively. Refer to Note 13, Fair Value Measurements, for key weighted-average inputs and assumptions used in the valuation of the MSR financing liability.
Servicing Segment Revenues
The following table sets forth the items comprising total revenues for the Servicing segment:
Three Months Ended March 31,
Total Revenues - Servicing20222021
Contractually specified servicing fees(1)
$327 $276 
Other service-related income(1)
48 145 
Incentive and modification income(1)
9 14 
Late fees(1)
19 18 
Mark-to-market adjustments(2)
553 365 
Amortization, net of accretion(3)
(202)(167)
Other(4)
(38)(83)
Total revenues - Servicing$716 $568 

(1)The Company recognizes revenue on an earned basis for services performed. Amounts include subservicing related revenues.
(2)Mark-to-market (“MTM”) adjustments include fair value adjustments on MSR, excess spread financing and MSR financing liabilities. The amount of MSR MTM includes the impact of negative modeled cash flows which have been transferred to reserves on advances and other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio. The impact of negative modeled cash flows was $6 and $12 for the three months ended March 31, 2022 and 2021.
(3)Amortization is net of excess spread accretion of $33 and $76 during the three months ended March 31, 2022 and 2021, respectively.
(4)Other represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements, portfolio runoff and the payments made associated with MSR financing arrangements.