Mortgage Banking Operations (Tables)
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6 Months Ended |
Jun. 30, 2018 |
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| Mortgage Banking [Abstract] |
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| Mortgage loans on real estate, by loan |
Loans held for sale consisted of the following. | | | | | | | | | (in thousands) | At June 30,
2018 | | At December 31,
2017 | | | | | Single family | $ | 527,088 |
| | $ | 577,313 |
| Multifamily DUS® (1) | 35,656 |
| | 29,651 |
| Small Business Administration ("SBA") | 4,253 |
| | 3,938 |
| CRE-Non-DUS® (1)(2) | 1,517 |
| | — |
| Total loans held for sale | $ | 568,514 |
| | $ | 610,902 |
|
| | (1) | Fannie Mae Multifamily Delegated Underwriting and Servicing Program (“DUS"®) is a registered trademark of Fannie Mae. |
| | (2) | Loans originated as Held for Investment. |
Loans sold proceeds consisted of the following. | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Single family | $ | 1,768,348 |
| (1 | ) | $ | 1,808,500 |
| | $ | 3,319,072 |
| (1 | ) | $ | 3,548,237 |
| Multifamily DUS® (2) | 54,621 |
| | 35,312 |
| | 87,597 |
| | 112,161 |
| SBA | 3,622 |
| | 3,532 |
| | 7,314 |
| | 11,167 |
| CRE-Non-DUS® (2)(3) | 114,650 |
| | 21,163 |
| | 114,650 |
| | 26,714 |
| Total loans sold | $ | 1,941,241 |
| | $ | 1,868,507 |
| | $ | 3,528,633 |
| | $ | 3,698,279 |
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| | (1) | Includes proceeds of $138.6 million in single family loans originated as held for investment. |
| | (2) | Fannie Mae Multifamily DUS® is a registered trademark of Fannie Mae. |
| | (3) | Loans originated as Held for Investment. |
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| Net gain on loan origination and sale activity |
Gain on loan origination and sale activities, including the effects of derivative risk management instruments, consisted of the following. | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Single family: | | | | | | | | Servicing value and secondary market gains(1) | $ | 48,093 |
| | $ | 57,353 |
| | $ | 89,520 |
| | $ | 107,891 |
| Loan origination and funding fees | 6,158 |
| | 6,823 |
| | 11,603 |
| | 12,604 |
| Total single family | 54,251 |
| | 64,176 |
| | 101,123 |
| | 120,495 |
| Multifamily DUS® | 1,613 |
| | 1,273 |
| | 2,759 |
| | 4,633 |
| SBA | 385 |
| | 316 |
| | 686 |
| | 918 |
| CRE-Non-DUS® (2) | 800 |
| | 143 |
| | 800 |
| | 143 |
| Total gain on loan origination and sale activities | $ | 57,049 |
| | $ | 65,908 |
| | $ | 105,368 |
| | $ | 126,189 |
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| | (1) | Comprised of gains and losses on interest rate lock and purchase loan commitments (which considers the value of servicing), single family loans held for sale, forward sale commitments used to economically hedge secondary market activities, and changes in the Company's repurchase liability for loans that have been sold. |
| | (2) | Loan originated as held for investment. |
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| Company's portfolio of loans serviced for others |
The composition of loans serviced for others that contribute to loan servicing income is presented below at the unpaid principal balance. | | | | | | | | | (in thousands) | At June 30,
2018 | | At December 31,
2017 | | | | | Single family | | | | U.S. government and agency | $ | 18,493,704 |
| | $ | 22,123,710 |
| Other | 579,472 |
| | 507,437 |
| | 19,073,176 |
| | 22,631,147 |
| Commercial | | | | Multifamily DUS® | 1,357,929 |
| | 1,311,399 |
| Other | 82,083 |
| | 79,797 |
| | 1,440,012 |
| | 1,391,196 |
| Total loans serviced for others | $ | 20,513,188 |
| | $ | 24,022,343 |
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| Mortgage repurchase losses |
The following is a summary of changes in the Company's liability for estimated mortgage repurchase losses.
| | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Balance, beginning of period | $ | 2,665 |
| | $ | 2,863 |
| | $ | 3,015 |
| | $ | 3,382 |
| Additions (reductions), net of adjustments(1) | (5 | ) | | 328 |
| | 605 |
| | (32 | ) | Realized losses (2) | (156 | ) | | (201 | ) | | (1,116 | ) | | (360 | ) | Balance, end of period | $ | 2,504 |
| | $ | 2,990 |
| | $ | 2,504 |
| | $ | 2,990 |
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| | (1) | Includes additions for new loan sales and changes in estimated probable future repurchase losses on previously sold loans. |
| | (2) | Includes principal losses and accrued interest on repurchased loans, “make-whole” settlements, settlements with claimants and certain related expense. |
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| Revenue from mortgage servicing, including the effects of derivative risk management instruments |
Revenue from mortgage servicing, including the effects of derivative risk management instruments, consisted of the following. | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Servicing income, net: | | | | | | | | Servicing fees and other | $ | 18,385 |
| | $ | 15,977 |
| | $ | 36,836 |
| | $ | 32,156 |
| Changes in fair value of single family MSRs due to modeled amortization (1) | (9,400 | ) | | (8,909 | ) | | (18,270 | ) | | (17,429 | ) | Amortization of multifamily and SBA MSRs | (1,064 | ) | | (761 | ) | | (2,113 | ) | | (1,692 | ) | | 7,921 |
| | 6,307 |
| | 16,453 |
| | 13,035 |
| Risk management, single family MSRs: | | | | | | | | Changes in fair value of MSRs due to changes in market inputs and/or model updates (2) | 11,299 |
| (3) | (6,417 | ) | | 41,318 |
| (3) | (4,285 | ) | Net (loss) gain from derivatives economically hedging MSR | (12,188 | ) | | 8,874 |
| | (43,165 | ) | | 9,253 |
| | (889 | ) | | 2,457 |
| | (1,847 | ) | | 4,968 |
| Loan servicing income | $ | 7,032 |
| | $ | 8,764 |
| | $ | 14,606 |
| | $ | 18,003 |
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| | (1) | Represents changes due to collection/realization of expected cash flows and curtailments. |
| | (2) | Principally reflects changes in market inputs, which include current market interest rates and prepayment model updates, both of which affect future prepayment speed and cash flow projections. |
(3) Includes pre-tax income of $573 thousand, net of brokerage fees and prepayment reserves, resulting from the sale of single family MSRs during the three and six months ended June 30, 2018.
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| Key economic assumptions used in measuring initial FV of capitalized single family MSRs |
Key economic assumptions used in measuring the initial fair value of capitalized single family MSRs were as follows. | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (rates per annum) (1) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Constant prepayment rate ("CPR") (2) | 15.69 | % | | 14.75 | % | | 14.72 | % | | 13.39 | % | Discount rate (3) | 10.29 | % | | 10.30 | % | | 10.26 | % | | 10.29 | % |
| | (1) | Weighted average rates for sales during the period for sales of loans with similar characteristics. |
| | (2) | Represents the expected lifetime average. |
(3) Discount rate is a rate based on market observations.
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| Schedule of sensitivity analysis of fair value, transferor's interests in transferred financial assets |
Key economic assumptions and the sensitivity of the current fair value for single family MSRs to immediate adverse changes in those assumptions were as follows. | | | | | (dollars in thousands) | At June 30, 2018 | | | Fair value of single family MSR | $ | 245,744 |
| Expected weighted-average life (in years) | 6.58 |
| Constant prepayment rate (1) | 11.18 | % | Impact on fair value of 25 basis points adverse change in interest rates | $ | (13,929 | ) | Impact on fair value of 50 basis points adverse change in interest rates | $ | (29,665 | ) | Discount rate | 10.40 | % | Impact on fair value of 100 basis points increase | $ | (8,988 | ) | Impact on fair value of 200 basis points increase | $ | (17,353 | ) |
(1) Represents the expected lifetime average.
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| Changes in single family MSRs measured at fair value |
The changes in single family MSRs measured at fair value are as follows. | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Beginning balance | $ | 294,062 |
| | $ | 235,997 |
| | $ | 258,560 |
| | $ | 226,113 |
| Additions and amortization: | | | | | | | | Originations | 16,673 |
| | 15,748 |
| | 31,026 |
| | 31,666 |
| Purchases | — |
| | 211 |
| | — |
| | 565 |
| Sale of single family MSRs | (66,890 | ) | | — |
| | (66,890 | ) | | — |
| Changes due to modeled amortization(1) | (9,400 | ) | | (8,909 | ) | | (18,270 | ) | | (17,429 | ) | Net additions and amortization | (59,617 | ) | | 7,050 |
| | (54,134 | ) | | 14,802 |
| Changes in fair value of MSRs due to changes in market inputs and/or model updates (2) | 11,299 |
| (3 | ) | (6,426 | ) | | 41,318 |
| (3 | ) | (4,294 | ) | Ending balance | $ | 245,744 |
| | $ | 236,621 |
| | $ | 245,744 |
| | $ | 236,621 |
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| | (1) | Represents changes due to collection/realization of expected cash flows and curtailments. |
| | (2) | Principally reflects changes in market inputs, which include current market interest rates and prepayment model updates, both of which affect future prepayment speed and cash flow projections. |
(3) Includes pre-tax income of $573 thousand, net of brokerage fees and prepayment reserves, resulting from the sale of single family MSRs during the three and six months ended June 30, 2018.
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| Changes in multifamily MSRs measured at the lower of amortized cost or fair value |
The changes in multifamily MSRs measured at the lower of amortized cost or fair value were as follows. | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | (in thousands) | 2018 | | 2017 | | 2018 | | 2017 | | | | | | | | | Beginning balance | $ | 26,042 |
| | $ | 21,424 |
| | $ | 26,093 |
| | $ | 19,747 |
| Origination | 1,409 |
| | 937 |
| | 2,343 |
| | 3,545 |
| Amortization | (991 | ) | | (761 | ) | | (1,976 | ) | | (1,692 | ) | Ending balance | $ | 26,460 |
| | $ | 21,600 |
| | $ | 26,460 |
| | $ | 21,600 |
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| Projected amortization expense for the gross carrying value of multifamily MSRs |
At June 30, 2018, the expected weighted-average life of the Company’s multifamily MSRs was 10.32 years. Projected amortization expense for the gross carrying value of multifamily MSRs is estimated as follows. | | | | | (in thousands) | At June 30, 2018 | | | Remainder of 2018 | $ | 1,845 |
| 2019 | 3,626 |
| 2020 | 3,557 |
| 2021 | 3,357 |
| 2022 | 3,046 |
| 2023 and thereafter | 11,029 |
| Carrying value of multifamily MSR | $ | 26,460 |
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