Mortgage Servicing Rights and Related Liabilities (Tables)

9 Months Ended

Sep. 30, 2023

Schedule of servicing assets at fair value

The following table sets forth the carrying value of the Company’s MSR and the related liabilities. In estimating the fair value of all mortgage servicing rights and related liabilities, the impact of the current environment was considered in the determination of key assumptions.


MSRs and Related Liabilities	September 30, 2023		December 31, 2022
MSRs - fair value	$	8,504	$	6,654

Excess spread financing at fair value	$	446	$	509
Mortgage servicing rights financing at fair value	21		19
MSR related liabilities - nonrecourse at fair value	$	467	$	528

The following table sets forth the activities of MSRs:


	Nine Months Ended September 30,
MSRs - Fair Value	2023		2022
Fair value - beginning of period	$	6,654	$	4,223
Additions:
Servicing retained from mortgage loans sold	219		481
Purchases and acquisitions of servicing rights	2,305		1,256
Dispositions:
Sales of servicing assets and excess yield	(555)		(293)
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model (MSR MTM)	304		1,363
Changes in valuation due to amortization	(444)		(644)
Other changes(1)	21		22
Fair value - end of period	$	8,504	$	6,408

(1)Amounts primarily represent negative fair values reclassified from the MSR asset to reserves as underlying loans are removed from the MSR and other reclassification adjustments.

The following table provides a breakdown of UPB and fair value for the Company’s MSRs:


	September 30, 2023				December 31, 2022
MSRs - UPB and Fair Value Breakdown by Investor Pools	UPB		Fair Value		UPB		Fair Value
Agency	$	501,315	$	8,193	$	380,502	$	6,322
Non-agency	27,009		311		30,880		332
Total	$	528,324	$	8,504	$	411,382	$	6,654

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 MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated:


	Option Adjusted Spread(1)				Total Prepayment Speeds				Cost to Service per Loan
MSRs - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change		10% Adverse Change		20% Adverse Change
September 30, 2023
Mortgage servicing rights	$	(341)	$	(655)	$	(179)	$	(348)	$	(80)	$	(159)

	Discount Rate				Total Prepayment Speeds				Cost to Service per Loan
MSRs - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change		10% Adverse Change		20% Adverse Change
December 31, 2022
Mortgage servicing rights	$	(266)	$	(511)	$	(136)	$	(264)	$	(61)	$	(122)

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:


	Option Adjusted Spread(1)				Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change
September 30, 2023
Excess spread financing	$	15	$	32	$	9	$	17

	Discount Rate				Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities	100 bps Adverse Change		200 bps Adverse Change		10% Adverse Change		20% Adverse Change
December 31, 2022
Excess spread financing	$	19	$	40	$	11	$	22

Schedule of fees earned in exchange for servicing financial assets

The following table sets forth the items comprising total “revenues - service related, net”:


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenues - Service Related, net	2023		2022		2023		2022
Contractually specified servicing fees(1)	$	440	$	371	$	1,231	$	1,076
Other service-related income(1)	25		22		58		94
Incentive and modification income(1)	18		4		32		22
Servicing late fees(1)	24		19		68		57
Mark-to-market adjustments - Servicing
MSR MTM	270		239		304		1,363
Loss on MSR hedging activities	(192)		(100)		(244)		(329)
(Loss) gain on MSR sales	(3)		(2)		29		(1)
Reclassifications(2)	(8)		(10)		(26)		(22)
Excess spread / MSR financing MTM	(4)		(3)		2		(134)
Total mark-to-market adjustments - Servicing	63		124		65		877
Amortization, net of accretion
MSR amortization	(171)		(183)		(444)		(644)
Excess spread accretion	11		14		32		74
Total amortization, net of accretion	(160)		(169)		(412)		(570)
Originations service fees(3)	18		20		45		86
Corporate/Xome related service fees	22		22		62		56
Other(4)	(18)		(18)		(54)		(88)
Total revenues - Service Related, net	$	432	$	395	$	1,095	$	1,610

(1)The Company recognizes revenue on an earned basis for services performed. Amounts include subservicing related revenues. Amounts also include servicing fees from loans sold with servicing retained of $175 and $172 for the three months ended September 30, 2023 and 2022, respectively, and $528 and $488 for the nine months ended September 30, 2023 and 2022, respectively.

(2)Reclassifications include 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.

(3)Amounts include fees collected from customers for originated loans and from other lenders for loans purchased through the correspondent channel, and include loan application, underwriting, and other similar fees.

(4)Other represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements, portfolio runoff and the payments made associated with MSR financing arrangements.