TWO Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Servicing Activities (Tables)

Servicing Activities (Tables)

12 Months Ended

Dec. 31, 2024

Schedule of Servicing Assets at Fair Value

The following table summarizes activity related to the Company’s MSR portfolio for the years ended December 31, 2024, 2023 and 2022.


	Year Ended
	December 31,
(in thousands)		2024		2023		2022
Balance at beginning of period		$	3,052,016	$	2,984,937	$	2,191,578
Purchases of mortgage servicing rights		115,587		317,194		640,051
Additions from sales of mortgage loans		667		—		—
Sales of mortgage servicing rights (1)		(81,014)		(115,754)		(259,059)
Changes in fair value due to:
Changes in valuation inputs or assumptions used in the valuation model (2)		140,168		97,859		793,631
Other changes in fair value (3)		(231,606)		(227,663)		(371,023)
Other changes (4)		(1,547)		(4,557)		(10,241)
Balance at end of period (5)		$	2,994,271	$	3,052,016	$	2,984,937

____________________

(1)During the year ended December 31, 2023, excess MSR was transferred to Agency-sponsored trusts in exchange for stripped mortgage backed securities, or SMBS. In each transaction, a portion of the SMBS was acquired by third parties and the Company acquired the remaining balance of those SMBS, which were briefly included within Agency AFS securities until their sale in the same year.

(2)Includes the impact of acquiring MSR at a cost different from fair value.

(3)Primarily represents changes due to the realization of cash flows.

(4)Includes purchase price adjustments, contractual prepayment protection, and changes due to the Company’s purchase of the underlying collateral.

(5)Based on the prior month-end’s principal balance of the loans underlying the Company’s MSR, increased for current month purchases.

Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets

As of December 31, 2024 and December 31, 2023, the key economic assumptions and sensitivity of the fair value of MSR to immediate 10% and 20% adverse changes in these assumptions were as follows:


(dollars in thousands, except per loan data)	December 31, 2024			December 31, 2023
Weighted average prepayment speed:	6.3		%	6.2		%
Impact on fair value of 10% adverse change	$	(61,975)		$	(74,042)
Impact on fair value of 20% adverse change	$	(120,142)		$	(146,237)
Weighted average delinquency:	0.8		%	0.9		%
Impact on fair value of 10% adverse change	$	(1,297)		$	(4,654)
Impact on fair value of 20% adverse change	$	(2,567)		$	(12,376)
Weighted average option-adjusted spread:	5.1		%	5.3		%
Impact on fair value of 10% adverse change	$	(70,293)		$	(59,285)
Impact on fair value of 20% adverse change	$	(137,449)		$	(119,776)
Weighted average per loan annual cost to service:	$	65.02		$	68.27
Impact on fair value of 10% adverse change	$	(36,191)		$	(24,111)
Impact on fair value of 20% adverse change	$	(72,381)		$	(48,985)

Schedule of Servicing Revenue

The following table presents the components of servicing income recorded on the Company’s consolidated statements of comprehensive income (loss) for the years ended December 31, 2024, 2023 and 2022:


	Year Ended
	December 31,
(in thousands)		2024		2023		2022
Servicing fee income		$	528,206	$	555,221	$	564,923
Ancillary and other fee income		16,718		5,149		1,932
Float income		136,724		125,407		37,056
Total		$	681,648	$	685,777	$	603,911