Transfers of Residential Loans

12 Months Ended

Dec. 31, 2018

Transfers of Residential Loans Disclosure

Transfers of Residential Loans

Sales of Mortgage Loans

As part of its originations activities, the Company sells substantially all of its originated or purchased mortgage loans into the secondary market. The Company sells conventional-conforming and government-backed mortgage loans through GSE and agency-sponsored programs. The Company also sells non-conforming mortgage loans to private investors. The Company accounts for these transfers as sales. If the servicing rights are retained upon sale, the Company receives a fee for servicing the sold loans, which represents continuing involvement. During the period from February 10, 2018 through December 31, 2018, the period from January 1, 2018 through February 9, 2018 and the year ended December 31, 2017, 57%, 54% and 41%, respectively, of all mortgage loans sold by the Company were pooled into mortgage-backed securities guaranteed by Ginnie Mae, 28%, 39% and 50%, respectively, were purchased by Fannie Mae, and the remaining 15%, 7% and 9%, respectively, were primarily sold to Freddie Mac.

Certain guarantees arise from agreements associated with the sale of the Company's residential loans. Under these agreements, the Company may be obligated to repurchase loans, or otherwise indemnify or reimburse the credit owner or insurer for losses incurred, due to material breach of contractual representations and warranties. Refer to Note 29 for further information.

The following table presents the carrying amounts of the Company’s net assets that relate to its continued involvement with mortgage loans that have been sold with servicing rights retained and the unpaid principal balance of these sold loans (in thousands):



	Carrying Value of Net Assets Recorded on the Consolidated Balance Sheets									Unpaid Principal Balance of Sold Loans
	Servicing Rights, Net		Servicer and Protective Advances, Net		Payables and Accrued Liabilities			Total		Unpaid Principal Balance of Sold Loans
Successor
December 31, 2018	$	323,335	$	25,449	$	—		$	348,784	$	28,461,158


Predecessor
December 31, 2017	$	385,744	$	30,762	$	(32	)	$	416,474	$	36,274,449

At December 31, 2018 and 2017, 3.0% and 2.9%, respectively, of mortgage loans sold and serviced by the Company were 60 days or more past due.

The following table presents a summary of cash flows related to sales of mortgage loans (in thousands):



	Successor		Predecessor
	For the Period From February 10, 2018 Through December 31, 2018		For the Period From January 1, 2018 Through February 9, 2018		For the Year Ended December 31, 2017
Cash proceeds received from sales, net of fees	$	11,389,421	$	1,415,435	$	16,863,357
Servicing fees collected ⁽¹⁾	96,019		13,884		121,064
Repurchases of previously sold loans ⁽²⁾	123,641		14,948		95,950

__________


(1)	Represents servicing fees collected on all loans sold whereby the Company has continued involvement with mortgage loans that have been sold with servicing rights retained.


(2)	Includes Ginnie Mae buyout loans of $113.6 million, $14.2 million and $84.2 million for the period from February 10, 2018 through December 31, 2018, the period from January 1, 2018 through February 9, 2018 and the year ended December 31, 2017, respectively.

In connection with these sales, the Company recorded servicing rights using a fair value model that utilizes Level 3 unobservable inputs or using an agreed upon sales price considered to be Level 2 within the fair value hierarchy. Refer to Note 13 for information relating to servicing of residential loans.

Transfers of Reverse Loans

The Company, through RMS, is an approved issuer of Ginnie Mae HMBS. The HMBS are guaranteed by Ginnie Mae and collateralized by participation interests in HECMs insured by the FHA. The Company both originated and purchased HECMs that were pooled and securitized into HMBS that the Company sold into the secondary market with servicing rights retained. Effective January 2017, the Company exited the reverse mortgage originations business. The Company no longer has any reverse loans remaining in its originations pipeline and has finalized the shutdown of the reverse mortgage originations business. The Company continues to fund undrawn Tails available to borrowers.

Based upon the structure of the Ginnie Mae securitization program, the Company determined that it has not met all of the requirements for sale accounting and accounts for these transfers as secured borrowings. Under this accounting treatment, the reverse loans remain on the consolidated balance sheets as residential loans. The proceeds from the transfer of reverse loans are recorded as HMBS related obligations with no gain or loss recognized on the transfer. Ginnie Mae, as guarantor of the HMBS, is obligated to the holders of the HMBS in an instance of RMS default on its servicing obligations, or when the proceeds realized on HECMs are insufficient to repay all outstanding HMBS related obligations. Ginnie Mae has recourse to RMS to the extent of the participation interests in HECMs serving as collateral to the HMBS, but does not have recourse to the general assets of the Company, except that Ginnie Mae has recourse to RMS in connection with certain claims relating to the performance and obligations of RMS as both an issuer of HMBS and a servicer of HECMs underlying HMBS.

At December 31, 2018, the unpaid principal balance and the carrying value associated with both the reverse loans and the real estate owned pledged as collateral to the securitization pools were $6.8 billion and $7.1 billion, respectively.

DITECH HOLDING Corp 10-K