Mortgage Servicing Rights (Tables)
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3 Months Ended |
Mar. 31, 2021 |
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| Transfers and Servicing [Abstract] |
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| Summary of Mortgage Servicing Rights |
The following table summarizes changes in the MSR assets for the three months ended March 31, 2021:
| | | | | | | | For the three months ended March 31, 2021 | | Balance, at December 31, 2020 under amortization method | $ | 1,756,864 | | | Cumulative effect of adopting fair value method | 3,440 | | | Fair value, at January 1, 2021 | 1,760,304 | | | Capitalization of mortgage servicing rights | 599,389 | | | | | Changes in fair value: | | Due to changes in valuation inputs or assumptions | 197,802 | | | Due to collection/ realization of cash flows/ other | (257,061) | | | Total changes in fair value | (59,259) | | | Fair value, end of period | $ | 2,300,434 | |
Prior to the election of the fair value option on January 1, 2021, the Company accounted for MSRs based on the lower cost or market using the amortization method. The following table summarizes changes to the MSR assets for the three months ended March 31, 2020 under the amortization method: | | | | | | | | For the three months ended March 31, 2020 | | Balance, beginning of period | $ | 731,353 | | | Capitalization of mortgage servicing rights | 463,831 | | | Amortization | (39,210) | | | Loans paid in full | (37,166) | | | Sales | (255,229) | | | Impairment | (142,377) | | | Balance, end of period | $ | 721,202 | |
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| Summary of Loan Servicing Income |
The following table summarizes the loan servicing income recognized during the three months ended March 31, 2021 and 2020, respectively (in thousands): | | | | | | | | | | | | | Three months ended March 31, | | 2021 | | 2020 | | Contractual servicing fees | $ | 122,306 | | | $ | 49,120 | | | Late, ancillary and other fees | 1,483 | | | 977 | | Loan servicing income | $ | 123,789 | | | $ | 50,097 | |
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| Summary of Key Assumptions Used in Determining the Fair Value |
The key unobservable inputs used in determining the fair value of the Company’s MSRs were as follows at March 31, 2021 and December 31, 2020, respectively: | | | | | | | | | | | | | | | | | | | | | | | | | | March 31,
2021 | | December 31,
2020 | | Discount rates | 9.0 | % | — | 14.5 | % | | 9.0 | % | — | 14.5 | % | | Annual prepayment speeds | 8.3 | % | — | 40.5 | % | | 8.8 | % | — | 42.2 | % | | Cost of servicing | $75 | | — | $121 | | | $75 | | — | $126 | |
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| Schedule of Analysis of Change in Fair Value |
The hypothetical effect of an adverse change in these key assumptions would result in a decrease in fair values as follows at March 31, 2021 and December 31, 2020, respectively, (in thousands): | | | | | | | | | | | | | | March 31,
2021 | | December 31,
2020 | | Discount rate: | | | | | + 10% adverse change – effect on value | $ | (77,423) | | | $ | (56,889) | | | + 20% adverse change – effect on value | (149,634) | | | (110,040) | | | Prepayment speeds: | | | | | + 10% adverse change – effect on value | $ | (99,119) | | | $ | (87,752) | | | + 20% adverse change – effect on value | (191,558) | | | (169,230) | | | Cost of servicing: | | | | | + 10% adverse change – effect on value | $ | (27,761) | | | $ | (21,643) | | | + 20% adverse change – effect on value | (55,522) | | | (43,285) | |
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