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Mortgage Servicing Rights ("MSRs") and Related Liabilities (Tables)
 3 Months Ended
Mar. 31, 2020
Transfers and Servicing [Abstract]  
Schedule of Servicing Assets at Fair Value
The following table sets forth the carrying value of the Company’s mortgage servicing rights (“MSRs”) and the related liabilities:
MSRs and Related Liabilities
March 31, 2020
 
December 31, 2019
Forward MSRs - fair value
$
3,109

 
$
3,496

Reverse MSRs - amortized cost
6

 
6

Mortgage servicing rights
$
3,115

 
$
3,502

 
 
 
 
Mortgage servicing liabilities - amortized cost
$
53

 
$
61

 
 
 
 
Excess spread financing - fair value
$
1,242

 
$
1,311

Mortgage servicing rights financing - fair value
43

 
37

MSR related liabilities - nonrecourse at fair value
$
1,285

 
$
1,348



The following table sets forth the activities of forward MSRs:
Forward MSRs - Fair Value
Three Months Ended March 31, 2020
 
Three Months Ended March 31, 2019
Fair value - beginning of period
$
3,496

 
$
3,665

Additions:
 
 
 
Servicing retained from mortgage loans sold
123

 
66

Purchases of servicing rights(1)
24

 
409

Dispositions:
 
 
 
Sales of servicing assets
—

 
(260
)
Changes in fair value:
 
 
 
Changes in valuation inputs or assumptions used in the valuation model
(401
)
 
(332
)
Other changes in fair value
(133
)
 
(67
)
Fair value - end of period
$
3,109

 
$
3,481



(1) 
Purchases of servicing rights during the three months ended March 31, 2019 includes $271 of mortgage servicing rights that were acquired from Pacific Union. See Note 2, Acquisitions, for further discussion.

The following table provides a breakdown of UPB and fair value for the Company’s forward MSRs:
 
March 31, 2020
 
December 31, 2019
Forward MSRs - UPB and fair value breakdown
UPB
 
Fair Value
 
UPB
 
Fair Value
Acquisition Pools
 
 
 
 
 
 
 
 Credit sensitive
$
138,726

 
$
1,386

 
$
147,895

 
$
1,613

 Interest sensitive
151,908

 
1,723

 
148,887

 
1,883

Total
$
290,634

 
$
3,109

 
$
296,782

 
$
3,496

 
 
 
 
 
 
 
 
Investors Pools
 
 
 
 
 
 
 
 Agency(1)
$
238,956

 
$
2,618

 
$
240,688

 
$
2,944

 Non-agency(2)
51,678

 
491

 
56,094

 
552

Total
$
290,634

 
$
3,109

 
$
296,782

 
$
3,496



(1) 
Agency investors primarily consist of government sponsored enterprises (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”), and the Government National Mortgage Association (“Ginnie Mae” or “GNMA”).
(2) 
Non-agency investors consist of investors in private-label securitizations.
Schedule of Assumptions for Fair Value of Mortgage Service Rights
The Company used the following weighted-average assumptions in the Company’s valuation of excess spread financing:
Excess Spread Financing Assumptions
March 31, 2020
 
December 31, 2019
Discount rate
11.6
%
 
11.6
%
Prepayment speeds
12.8
%
 
12.6
%
Recapture rate
18.6
%
 
20.1
%
Average life
5.7 years

 
5.8 years

The Company used the following key weighted-average inputs and assumptions in estimating the fair value of forward MSRs:
Forward MSRs - Key inputs and assumptions
March 31, 2020
 
December 31, 2019
Total MSR Portfolio
 
 
 
Discount rate
9.7
%
 
9.7
%
Prepayment speeds
13.4
%
 
13.1
%
Average life
5.7 years

 
5.8 years

 
 
 
 
Acquisition Pools:
 
 
 
Credit Sensitive
 
 
 
Discount rate
10.2
%
 
10.4
%
Prepayment speeds
13.0
%
 
12.7
%
Average life
5.9 years

 
6.0 years

 
 
 
 
Interest Sensitive
 
 
 
Discount rate
9.1
%
 
9.1
%
Prepayment speeds
13.8
%
 
13.5
%
Average life
5.5 years

 
5.7 years

 
 
 
 
Investor Pools:
 
 
 
Agency
 
 
 
Discount rate
9.0
%
 
9.0
%
Prepayment speeds
13.2
%
 
13.0
%
Average life
5.6 years

 
5.8 years

 
 
 
 
Non-agency
 
 
 
Discount rate
12.6
%
 
12.6
%
Prepayment speeds
14.3
%
 
13.8
%
Average life
6.1 years

 
6.2 years

The following table sets forth the weighted-average assumptions used in the valuation of the mortgage servicing rights financing liability:
Mortgage Servicing Rights Financing Assumptions
March 31, 2020
 
December 31, 2019
Advance financing rates
1.7
%
 
3.5
%
Annual advance recovery rates
18.4
%
 
18.8
%
Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets
The following table shows the hypothetical effect on the fair value of the Company’s forward MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated:
 
Discount Rate
 
Total Prepayment Speeds
Forward MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
 
200 bps
Adverse
Change
 
10%
Adverse
Change
 
20%
Adverse
Change
March 31, 2020
 
 
 
 
 
 
 
Mortgage servicing rights
$
(111
)
 
$
(214
)
 
$
(158
)
 
$
(305
)
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Mortgage servicing rights
$
(127
)
 
$
(245
)
 
$
(165
)
 
$
(317
)
The following table shows the hypothetical effect on the Company’s excess spread financing fair value when applying certain unfavorable variations of key assumptions to these liabilities for the dates indicated:
 
Discount Rate
 
Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
 
200 bps
Adverse
Change
 
10%
Adverse
Change
 
20%
Adverse
Change
March 31, 2020
 
 
 
 
 
 
 
Excess spread financing
$
43

 
$
89

 
$
48

 
$
98

 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
Excess spread financing
$
46

 
$
95

 
$
46

 
$
96
Schedule of Reverse Mortgage Servicing Rights and Liabilities - Amortized Cost
The following table sets forth the activities of reverse MSRs and mortgage servicing liabilities (“MSL”) for three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31,
 
2020
 
2019
Reverse MSRs and Liabilities - Amortized Cost
Assets
 
Liabilities
 
Assets
 
Liabilities
Balance - beginning of period
$
6

 
$
61

 
$
11

 
$
71

Amortization/accretion
—

 
(8
)
 
—

 
(18
)
Adjustments(1)
—

 
—

 
(4
)
 
37

Balance - end of the period
$
6

 
$
53

 
$
7

 
$
90

Fair value - end of period
$
6

 
$
27

 
$
7

 
$
75


(1) 
Reverse MSR and MSL net adjustments recorded by the Company during the three months ended March 31, 2019 primarily relate to the fair value adjustments for reverse MSR and MSL assumed from the Merger resulting from the revised cost to service assumption used in the valuation of reverse MSR and MSL during the measurement period.
Schedule of Fees Earned in Exchange for Servicing Financial Assets
The following table sets forth the items comprising total revenues for the Servicing segment:
Total Revenues - Servicing
Three Months Ended March 31, 2020
 
Three Months Ended March 31, 2019
Contractually specified servicing fees(1)
$
297

 
$
281

Other service-related income(1)
49

 
50

Incentive and modification income(1)
10

 
7

Late fees(1)
27

 
25

Reverse servicing fees
6

 
9

Mark-to-market adjustments(2)
(383
)
 
(293
)
Counterparty revenue share(3)
(76
)
 
(48
)
Amortization, net of accretion(4)
(76
)
 
(23
)
Total revenues - Servicing
$
(146
)
 
$
8



(1) 
The Company recognizes revenue on an earned basis for services performed. Amounts include subservicing related revenues.
(2) 
Mark-to-market (“MTM”) adjustments include fair value adjustments on MSR, excess spread financing and MSR financing liabilities. The amount of MSR MTM includes the impact of negative modeled cash flows which have been transferred to reserves on advances and other receivables. The negative modeled cash flows relate to advances and other receivables associated with inactive and liquidated loans that are no longer part of the MSR portfolio. The impact of negative modeled cash flows for the Company was $10 and $11 for the three months ended March 31, 2020 and 2019, respectively.
(3) 
Counterparty revenue share represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements and the payments made associated with MSR financing arrangements.
(4) 
Amortization for the Company is net of excess spread accretion of $68 and $36 and MSL accretion of $8 and $18 for the three months ended March 31, 2020 and 2019, respectively.