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Reverse Mortgage Interests, Net
 3 Months Ended
Mar. 31, 2019
Reverse Mortgage Interests [Abstract]  
Reverse Mortgage Interests, Net
5. Reverse Mortgage Interests, Net

Reverse mortgage interests, net consists of the following:
 
Successor
Reverse Mortgage Interests, Net
March 31, 2019
 
December 31, 2018
Participating interests in HECM mortgage-backed securities (“HMBS”), net of $36 and $58 premium, respectively
$
5,293

 
$
5,664

Other interests securitized, net of $112 and $100 discount, respectively
950

 
1,064

Unsecuritized interests, net of $95 and $122 discount, respectively
1,254

 
1,219

Reserves
(8
)
 
(13
)
Total reverse mortgage interests, net
$
7,489

 
$
7,934



Participating Interests in HMBS
Participating interests in HMBS consist of the Company’s reverse mortgage interests in HECM loans which have been transferred to GNMA and subsequently securitized through the issuance of HMBS. During the three months ended March 31, 2019 and 2018, a total of $82 and $85 in UPB was transferred to GNMA and securitized by the Company and Predecessor, respectively.

In March 2019, the Company entered into an agreement with Fannie Mae for the transfer of reverse mortgage loans. As a result, $61 was transferred from Fannie Mae and securitized into GNMA HMBS during the three months ended March 31, 2019.

Other Interests Securitized
Other interests securitized consist of reverse mortgage interests that no longer meet HMBS program eligibility criteria and have been repurchased out of HMBS. These reverse mortgage interests have subsequently been transferred to private securitization trusts and are accounted for as a secured borrowing. No such securitizations occurred during the three months ended March 31, 2019. The Company sold $20 UPB of Trust 2018-3 during the three months ended March 31, 2019. During the three months ended March 31, 2018, the Predecessor securitized a total of $443 UPB through Trust 2018-1 and Trust 2018-2 and a total of $284 UPB from Trust 2016-2 and Trust 2016-3 were called and the related debt was extinguished. Refer to Other Nonrecourse Debt in Note 10, Indebtedness, for additional information.

Unsecuritized Interests
Unsecuritized interests in reverse mortgages consists of the following:
 
Successor
 
March 31, 2019
 
December 31, 2018
Repurchased HECM loans (exceeds 98% MCA)
$
941

 
$
949

HECM related receivables
270

 
300

Funded borrower draws not yet securitized
114

 
76

REO-related receivables
24

 
16

Purchase discount
(95
)
 
(122
)
Total unsecuritized interests
$
1,254

 
$
1,219



Unsecuritized interests include repurchased HECM loans for which the Company is required to repurchase from the HMBS pool when the outstanding principal balance of the HECM loan is equal to or greater than 98% of the maximum claim amount (“MCA”) established at origination in accordance with HMBS program guidelines. The Company and the Predecessor repurchased a total of $740 and $1,051 of HECM loans out of GNMA HMBS securitizations during the three months ended March 31, 2019 and 2018, respectively, of which $188 and $229 were subsequently assigned to a third party in accordance with applicable servicing agreements, respectively. To the extent a loan is not subject to applicable servicing agreements and assigned to a third party, the loan is either subject to assignment to U.S. Department of Housing and Urban Development (“HUD”), per contractual obligations with GNMA, liquidated via a payoff from the borrower or liquidated via a foreclosure according to the terms of the underlying mortgage.

The Company and the Predecessor also estimate and record an asset for probable recoveries from prior servicers for their respective portion of the losses associated with the underlying loans that were not serviced in accordance with established guidelines. Receivables from prior servicers totaled $16 and $18 for the Company’s reverse loan portfolio at March 31, 2019 and December 31, 2018, respectively.

Reserves for Reverse Mortgage Interests
The Company records reserves related to reverse mortgage interests based on potential unrecoverable costs and loss exposures expected to be realized. Recoverability is determined based on the Company’s ability to meet HUD servicing guidelines and is viewed as two different categories of expenses: financial and operational. Financial exposures are defined as the cost of doing business related to servicing the HECM product and include potential unrecoverable costs primarily based on HUD claim guidelines related to recoverable expenses and unfavorable changes in the appraised value of the loan collateral. Operational exposures are defined as unrecoverable debenture interest curtailments imposed for missed HUD-specified servicing timelines. Reserves for reverse mortgage interests are related to both financial and operational exposures.

The activity of the reserves for reverse mortgage interests is set forth below.
 
Successor
 
 
Predecessor
Reserves for reverse mortgage interests
Three Months Ended March 31, 2019
 
 
Three Months Ended March 31, 2018
Balance - beginning of period
$
13

 
 
$
115

Provision
—

 
 
26

Write-offs
(5
)
 
 
(7
)
Balance - end of period
$
8

 
 
$
134



Purchase Discount for Reverse Mortgage Interests
In connection with the Merger, the Company recorded the acquired reverse mortgage interests at estimated fair value as of the acquisition date, which resulted in a purchase premium of $42 for participating interests in HMBS, and a purchase discount of $298 for other interest securitized and unsecuritized interests as this population of reverse mortgage interests represents a portion of the portfolio that has more risk of loss attributable to financial and operational exposures related to being serviced through foreclosure and collateral liquidation.

The following table sets forth the activities of the purchase premiums and discounts for reverse mortgage interests.
 
Successor
 
 Three Months Ended March 31, 2019
Purchase premiums and discounts for reverse mortgage interests
Net Premium for Participating Interests in HMBS(1)
 
Net Discount for Other Interest Securitized(1)
 
Net Discount for Unsecuritized Interests(1)
Balance - beginning of period
$
58

 
$
(100
)
 
$
(122
)
Adjustments(2)
(16
)
 
(2
)
 
(6
)
Utilization of purchase discounts
—

 
6

 
22

(Amortization)/Accretion
(14
)
 
(15
)
 
18

Transfers(3)
8

 
(1
)
 
(7
)
Balance - end of period
$
36

 
$
(112
)
 
$
(95
)

(1) 
Net position as certain items are in a premium/(discount) position, based on the characteristics of underlying tranches of loans.
(2) 
Adjustments to premium/(discount) due to revised cost to service assumption utilized in the valuation of reverse mortgage assets and liabilities acquired from the Merger. See Note 2, Acquisitions for additional information.
(3) 
Transfer of premium/(discount) based on the transfer of associated loans between categories based upon the underlying loan characteristics.

In connection with previous reverse mortgage portfolio acquisitions, the Predecessor recorded a purchase discount within unsecuritized interests. The following table sets forth the activities of the purchase discounts for reverse mortgage interests.
 
Predecessor
Purchase discounts for reverse mortgage interests
 Three Months Ended March 31, 2018
Balance - beginning of period
$
(89
)
Additions
(7
)
Accretion
6

Balance - end of period
$
(90
)


Reverse Mortgage Interest Income
The Company accrues interest income for its participating interest in reverse mortgages based on the stated rates underlying HECM loans and FHA guidelines. Total interest earned on the Company’s and the Predecessor’s reverse mortgage interests was $82 and $119 for the three months ended March 31, 2019 and 2018, respectively.