MORTGAGE SERVICING RIGHTS

3 Months Ended

Mar. 31, 2020

7. MORTGAGE SERVICING RIGHTS

The Company owns variable interests in an entity that invests in MSRs. Refer to the “Variable Interest Entities” Note for a detailed discussion on this topic.

MSRs represent the rights associated with servicing pools of residential mortgage loans. The Company and its subsidiaries do not originate or directly service residential mortgage loans. Rather, these activities are carried out by duly licensed subservicers who perform substantially all servicing functions for the loans underlying the MSRs. The Company intends to hold the MSRs as investments and elected to account for all of its investments in MSRs at fair value. As such, they are recognized at fair value on the accompanying Consolidated Statements of Financial Condition with changes in the estimated fair value presented as a component of Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss). Servicing income, net of servicing expenses, is reported in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).

The following table presents activity related to MSRs for the three months ended March 31, 2020 and 2019:



	Three Months Ended
	March 31, 2020			March 31, 2019
	(dollars in thousands)
Fair value, beginning of period	$	378,078		$	557,813
Change in fair value due to:
Changes in valuation inputs or assumptions ⁽¹⁾	(79,224		)	(43,089		)
Other changes, including realization of expected cash flows	(18,296		)	(13,979		)
Fair value, end of period	$	280,558		$	500,745

⁽¹⁾ Principally represents changes in discount rates and prepayment speed inputs used in valuation model, primarily due to changes in interest rates.

For the three months ended March 31, 2020 and 2019, the Company recognized $22.8 million and $27.8 million of net servicing income from MSRs in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).