6.	MORTGAGE BANKING ACTIVITIES

Mortgage loans serviced for others, which are not reported in United Community’s assets, totaled $1.3 billion at December 31, 2017 and $1.2 billion as of December 31, 2016. Mortgage banking income is comprised of gains recognized on the sale of loans and changes in fair value of mortgage banking derivatives and changes in fair value of loans held for sale carried at fair value.

Mortgage loans serviced for others are not reported as assets. The principal balance of these loans at year-end are as follows:

	2017		2016
	(Dollars in thousands)
Mortgage loan portfolios serviced for:
FHLMC	$	1,003,441	$	956,278
FNMA		242,444		208,114
Private investor		23,404		-

Customer escrow balances in connection with loans serviced for FHLMC and FNMA totaled $15.3 million and $14.3 million at year-end 2017 and 2016.

Activity for capitalized mortgage servicing rights, included in other assets, was as follows:

	For the Year Ended December 31,
	2017			2016			2015
	(Dollars in thousands)
Balance, beginning of period	$	6,070		$	5,686		$	5,535
Originations		2,555			2,478			1,951
Amortized to expense		(1,944	)		(2,094	)		(1,800	)
Balance, end of period		6,681			6,070			5,686
Less valuation allowance		(9	)		—			(39	)
Net balance	$	6,672		$	6,070		$	5,647

Fair value of mortgage servicing rights was $10.9 million, $10.2 million and $9.1 million at December 31, 2017, 2016, and 2015, respectively.

Activity in the valuation allowance for mortgage servicing rights was as follows:

	For the Year Ended December 31,
	2017			2016			2015
	(Dollars in thousands)
Balance, beginning of period	$	—		$	(39	)	$	(58	)
Impairment charges		(15	)		(727	)		(299	)
Recoveries		6			766			318
Balance, end of period	$	(9	)	$	—		$	(39	)

Key economic assumptions used in measuring the value of mortgage servicing rights at December 31, 2017 and 2016 were as follows:

	2017			2016
Weighted average prepayment rate	181 PSA			165 PSA
Weighted average life (in years)	6.35			6.64
Weighted average discount rate		9	%		9	%

At year-end 2017, the Company had approximately $40.2 million of interest rate lock commitments and $155.0 million of forward commitments for the future delivery of residential mortgage loans, including construction perm loans that are held in available for sale. At year-end 2016, the Company had approximately $30.2 million of interest rate lock commitments and $124.0 million of forward commitments for the future delivery of residential mortgage loans, including construction perm loans that are held in available for sale. The fair value of these mortgage banking derivatives was not material at year-end 2017 or 2016.

Home Savings may receive requests for reimbursements from Freddie Mac and Fannie Mae, both of whom in the normal course purchase loans originated by Home Savings, for the purpose of making them whole on certain loans sold in the secondary market. These sold loans may have certain identified weaknesses such that, in the opinion of management, a settlement to the investor might be required. For the twelve months ended December 31, 2017, Home Savings recognized no expenses associated with such repurchases. Home Savings had no liability reserve for future make-whole settlements at December 31, 2017 and 2016 because management believed no reserve was necessary given the recent historical losses incurred to date, there were no loans in the pipeline to be repurchased and the probability that future losses will not occur. For the twelve months ended December 31, 2016, Home Savings recognized no expenses associated with such repurchases. For the twelve months ended December 31, 2015, Home Savings recognized a recovery of expenses of $554,000 associated with such repurchases.