Introduction to Mortgage Servicing Examinations Training - March 2023

Mortgage, LLC Notes to Consolidated Financial Statements (continued) (Dollars in Thousands)

MSRs: The fair value of MSRs (including MSRs collateral for financing liability and MSRs financing liability) is determined using an internal valuation model that calculates the present value of estimated net future cash flows. The model includes estimates of prepayment speeds, discount rate, cost to service, float earnings, contractual servicing fee income, and ancillary income among others. MSRs are classified as Level 3. Forward commitments: The Company’s forward commitments are valued based on quoted prices for similar assets in an active market with inputs that are observable and are classified within Level 2 of the valuation hierarchy.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The table below shows a summary of financial statement items that are measured at estimated fair value on a recurring basis, including assets measured under the fair value option. There were no material transfers of assets or liabilities recorded at fair value on a recurring basis between Levels 1, 2 or 3 during the year ended December 31, 2021 or the year ended December 31, 2020.

Level 1

Level 2

Level 3

Total

Balance at December 31, 2021 Assets: Mortgage loans held for sale .................................. $ IRLCs ...................................................................... MSRs ...................................................................... Forward commitments ............................................

— $ 17,013,416 $ 2,309,366 $ 19,322,782

— — —

— —

538,861

538,861

5,385,613

5,385,613

17,337

—

17,337

Total assets

$

— $ 17,030,753 $ 8,233,840 $ 25,264,593

Liabilities: Forward commitments ............................................ $

— $ — $

19,911 $ 19,911 $

— $ — $

19,911 19,911

Total liabilities

$

Balance at December 31, 2020 Assets: Mortgage loans held for sale .................................. $ IRLCs ...................................................................... MSRs ...................................................................... MSRs collateral for financing liability (1) .............. Forward commitments ............................................ Liabilities: Forward commitments ............................................ $ MSRs financing liability (1) ................................... Total assets $

— $ 22,285,440 $

579,666 $ 22,865,106

— — — —

— — —

1,897,194 2,862,685

1,897,194 2,862,685

205,033

205,033 20,584

20,584

—

— $ 22,306,024 $ 5,544,578 $ 27,850,602

— $

506,071 $

— $

506,071 187,794 693,865

—

—

187,794

Total liabilities

$

— $

506,071 $

187,794 $

(1) Refer to Note 3, Mortgage Servicing Rights for further information regarding both the MSRs collateral for financing liability and MSRs financing liability. The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of:

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