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Reverse Mortgage Interests, Net
 12 Months Ended
Dec. 31, 2019
Reverse Mortgage Interest [Abstract]  
Reverse Mortgage Interests, Net
6. Reverse Mortgage Interests, Net

Reverse mortgage interests, net consists of the following:
 
Successor
 
December 31, 2019
 
December 31, 2018
Participating interests in HECM mortgage-backed securities, including $10 and $58 purchase premium, respectively
$
4,292

 
$
5,664

Other interests securitized, net of $56 and $100 purchase discount, respectively
938

 
1,064

Unsecuritized interests, net of $68 and $122 purchase discount, respectively
1,052

 
1,219

Reserves
(3
)
 
(13
)
Total reverse mortgage interests, net
$
6,279

 
$
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. The Company does not own these loans, but due to HMBS program buyout requirements, such interests are consolidated in the Company’s consolidated balance sheets. The Company does not originate reverse mortgages, but during the year ended December 31, 2019 and five months ended December 31, 2018, a total of $265 and $107 in UPB associated with new draws on existing loans were transferred to GNMA and securitized by the Company, respectively. During the seven months ended July 31, 2018 a total of $198 in UPB was transferred to GNMA and securitized by the Predecessor.

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 year ended December 31, 2019.

Other Interests Securitized
Other interests securitized consist of reverse mortgage interests that no longer meet HMBS program eligibility criteria primarily because they have reached 98% of their MCA, which is established at origination and in accordance with HMBS program guidelines, requiring a repurchase of loans from the respective HMBS trust. These reverse mortgage interests have subsequently been transferred to private securitization trusts and are accounted for as a secured borrowing. During the year ended December 31, 2019, the Company securitized a total of $751 UPB through Trust 2019-1 and Trust 2019-2 and a total of $476 UPB from Trust 2017-2 and Trust 2018-1 was called and the related debt was extinguished. The Company sold $20 UPB of Trust 2018-3 retained bonds during the year ended December 31, 2019. During the five months ended December 31, 2018, the Company securitized a total of $364 UPB through Trust 2018-3 and a total of $188 UPB from Trust 2017-1 was called and the related debt was extinguished. During the seven months ended July 31, 2018, the Predecessor securitized a total of $760 UPB through Trust 2018-1 and Trust 2018-2 and a total of $284 UPB from Trust 2016-2 and Trust 2016-3 was called and the related debt was extinguished. Refer to Other Nonrecourse Debt in Note 12, Indebtedness, for additional information.

Unsecuritized Interests
Unsecuritized interests in reverse mortgages consists of the following:
 
Successor
 
December 31, 2019
 
December 31, 2018
Repurchased HECM loans (exceed 98% MCA)
$
789

 
$
949

HECM related receivables(1)
250

 
300

Funded borrower draws not yet securitized
67

 
76

REO-related receivables
14

 
16

Purchase discount
(68
)
 
(122
)
Total unsecuritized interests
$
1,052

 
$
1,219



(1) 
HECM related receivables consist primarily of receivables from FNMA for corporate advances and service fees and claims receivables from the U.S. Department of Housing and Urban Development on reverse mortgage interests.

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 MCA established at origination in accordance with HMBS program guidelines. These unsecuritized interests are primarily financed through available warehouse lines. The Company repurchased a total of $2,333 and $1,429 of HECM loans out of GNMA HMBS securitizations during the year ended December 31, 2019 and five months ended December 31, 2018, respectively, of which $616 and $328 were subsequently assigned to a third party in accordance with applicable servicing agreements, respectively. The Predecessor repurchased a total of $2,439 of HECM loans out of GNMA HMBS securitizations during the seven months ended July 31, 2018, of which, $512 was subsequently assigned to a third party in accordance with applicable servicing agreements. 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 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 assigned a total of $1,819 and $1,493 of HECM loans to HUD during the year ended December 31, 2019 and five months ended December 31, 2018, respectively. The Predecessor assigned a total of $1,712 of HECM loans to HUD during the seven months ended July 31, 2018.

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 assessed with respect to both financial and operational exposures.

The following table set forth the activities of the servicing reserves for reverse mortgage interests:
 
Successor
 
 
Predecessor
Reserves for reverse mortgage interests
Year Ended December 31, 2019
 
Five Months Ended December 31, 2018
 
 
Seven Months Ended July 31, 2018
Balance - beginning of period
$
13

 
$
—

 
 
$
115

Provisions (release), net
(3
)
 
13

 
 
32

Write-offs
(7
)
 
—

 
 
(18
)
Balance - end of period
$
3

 
$
13

 
 
$
129



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 due to the higher exposure to financial and operational losses of servicing the loans through foreclosure and collateral liquidation. The premium and discount are amortized and accreted, respectively, based on the effective yield method, whereby the Company updates it prepayment assumptions for actual prepayments on a quarterly basis.

The following table sets forth the activities of the purchase premiums and discounts for reverse mortgage interests:
 
Successor
 
Year Ended December 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(3)
—

 
33

 
63

(Amortization)/Accretion
(49
)
 
23

 
4

Transfers(4)
17

 
(10
)
 
(7
)
Balance - end of period
$
10

 
$
(56
)
 
$
(68
)

 
Successor
 
Five Months Ended December 31, 2018
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

 
$
(117
)
 
$
(173
)
Utilization of purchase discounts(3)
—

 
—

 
43

Accretion/(Amortization)
—

 
17

 
8

Balance - end of period
$
58

 
$
(100
)
 
$
(122
)

(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 3, Acquisitions, for additional information.
(3) 
Utilization of purchase discounts to mitigate loss on liquidated loans, for which the remaining receivable was written-off.
(4) 
Transfer of premium/(discount) based on the transfer of associated loans between categories consistent with 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
Seven Months Ended July 31, 2018
Balance - beginning of period
$
(89
)
Additions
(7
)
Accretion
14

Balance - end of period
$
(82
)


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 reverse mortgage interests was $307 and $206 for the year ended December 31, 2019 and five months ended December 31, 2018, respectively. Total interest earned on the Predecessor’s reverse mortgage interests was $274 and $490 for the seven months ended July 31, 2018 and year ended December 31, 2017, respectively.