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Mortgage Banking Activities
 3 Months Ended
Mar. 31, 2013
Mortgage Banking Activities

Note 17. Mortgage Banking Activities

The following table presents the components of mortgage banking activities, net, recorded in our consolidated income statement for the three months ended March 31, 2013 and 2012.

Components of Mortgage Banking Activities, Net

 

     Three Months Ended March 31,  

(In Thousands)

    2013     2012  

Income from MSRs, net:

     

Income

    $             851      $             14   

Late charges

      7        -       

Cost of sub-servicer

      (178 )      (4 ) 
  

 

 

    

 

 

  

Income from MSRs, net:

      680        10   

Changes in fair value of:

     

Residential loans, at fair value

      34,763        -       

MSRs

      342        (17 ) 

Risk management derivatives (1)

      1,022        (3,056 ) 
  

 

 

    

 

 

  

Net market valuation adjustments

      36,127        (3,073 ) 

Net gains on residential loan sales

      107        7,365   

Net gains on commercial loan originations

      40        -       

Net gains on commercial loan sales

      7,138        -       
  

 

 

    

 

 

  

Mortgage Banking Activities, Net

    $ 44,092      $ 4,302   
  

 

 

    

 

 

  

 

(1)

Represents market valuations of derivatives that are used to manage risks associated with our accumulation of residential and commercial loans.

Mortgage Servicing Rights

During the three months ended March 31, 2013, we transferred an aggregate $2.24 billion (principal balance) of residential loans to four Sequoia securitization entities and accounted for the transfers as sales in accordance with GAAP. As a result of these sales, during the three months ended March 31, 2013, we recorded MSRs of $12 million at a taxable REIT subsidiary of ours. These MSRs represent rights we had acquired and retained to service $1.56 billion of loans transferred (original principal balance) to these securitizations or sold to third parties. At March 31, 2013, the principal balance of the loans underlying our MSRs was $2.47 billion.

 

We contract with a licensed sub-servicer to perform all servicing functions for loans underlying our MSRs. The following table presents activity for MSRs for the three months ended March 31, 2013 and 2012.

MSR Activity

 

     Three Months Ended March 31,  

(In Thousands)

            2013                     2012          

Balance at beginning of period

    $ 5,315      $ -   

Additions

      12,466        1,579   

Changes in fair value due to:

     

Changes in assumptions (1)

      806        -   

Other changes (2)

      (464 )      (17 ) 
  

 

 

    

 

 

  

Balance at End of Period

    $             18,123      $             1,562   
  

 

 

    

 

 

  

 

(1)

Primarily reflects changes in discount rates and prepayment assumptions due to changes in interest rates.

 

(2)

Reflects the impact of MSR-related cash flows received during the period.