v3.25.1
Fair Value
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value
Note 3 – Fair Value
Fair value is estimated based on a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are inputs that reflect the assumptions that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs to valuation techniques into three broad levels whereby the highest priority is given to Level 1 inputs and the lowest to Level 3 inputs.
The carrying amounts and the estimated fair values of our financial instruments and certain of our nonfinancial assets measured at fair value on a recurring or non-recurring basis or disclosed, but not measured, at fair value are as follows:
  March 31, 2025December 31, 2024
 LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets     
Loans held for sale, at fair value (a) (d)
3, 2$1,402.2 $1,402.2 $1,290.2 $1,290.2 
Loans held for investment, at fair value (a)
3$10,812.5 $10,812.5 $11,125.3 $11,125.3 
Advances, net (b)
3$514.0 $514.0 $577.2 $577.2 
Receivables, net (b)
3$222.3 $222.3 $176.4 $176.4 
Financial liabilities     
Advance match funded liabilities (b)
3$377.5 $377.5 $417.1 $417.1 
HMBS-related borrowings, at fair value (a)
3$10,587.6 $10,587.6 $10,872.1 $10,872.1 
Other financing liabilities, at fair value (a)
3835.5 835.5 846.9 846.9 
Mortgage loan financing facilities (b) (c)
3$1,577.4 $1,584.6 $1,528.2 $1,535.3 
MSR financing facilities (b) (c)
3$1,136.0 $1,126.7 $957.9 $947.6 
Senior notes (b) (c)
2$488.0 $480.0 $487.4 $495.0 
Derivative financial instrument assets (liabilities), net     
Interest rate lock commitments (IRLCs) (a) 3$9.4 $9.4 $(0.5)$(0.5)
Other derivatives (a)
1(0.2)(0.2)(11.7)(11.7)
MSRs (a) 3$2,547.4 $2,547.4 $2,466.3 $2,466.3 
(a)Measured at fair value on a recurring basis in our financial statements.
(b)Disclosed, but not measured at fair value in our financial statements. 
(c)The carrying values are net of unamortized debt issuance costs and discount. See Note 13 – Borrowings for additional information.
(d)The newly originated portfolio of GSE and forward Ginnie Mae loans held for sale pending securitization with the Agencies is classified as Level 2; all other loans are classified as Level 3.
The following tables present a reconciliation of the changes in fair value of certain Level 3 assets and liabilities that we measure at fair value on a recurring basis (refer to the respective notes for other Level 3 assets and liabilities):
Three Months Ended March 31,
20252024
Loans Held for Sale - Fair ValueIRLCsLoans Held for Sale - Fair ValueIRLCs
Beginning balance$472.9 $(0.5)$203.1 $5.6 
Purchases, issuances, sales and settlements 
Purchases and other134.9 — 145.1 — 
Issuances (1)— 32.7 — 17.2 
Sales(60.4)— (38.0)— 
Settlements
(30.5)— (22.1)— 
Transfers from (to):
Loans held for sale, at fair value (1)— (47.3)— (5.8)
Loans held for investment, at fair value3.1 — 1.0 — 
Receivables, net(20.5)— (10.6)— 
REO (Other assets)(12.3)— (3.0)— 
Advances (incl. capitalization upon Ginnie Mae modification)
4.8 — 2.1 — 
Net additions (disposition/derecognition)
19.0 (14.6)74.5 11.4 
Included in earnings:
Change in fair value (1)4.7 24.6 6.4 (12.0)
Ending balance$496.6 $9.4 $284.0 $5.0 
(1)IRLC activity (issuances and transfers) represent changes in fair value included in earnings. This activity is presented on a gross basis in the table for disclosure purposes. Total net change in fair value included in earnings attributed to IRLCs is a gain (loss) of $9.9 million and $(0.6) million for the three months ended March 31, 2025 and 2024, respectively. See Note 16 – Derivative Financial Instruments and Hedging Activities.
The significant unobservable assumptions that we make to estimate the fair value of certain assets and liabilities classified as Level 3 and measured at fair value on a recurring basis are provided below.
Loans Held for Sale
Repurchased Ginnie Mae forward and reverse loans are classified as Level 3 within the valuation hierarchy. We repurchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications, strategic EBO and loan resolution activity as part of our contractual obligations as the servicer of the loans. The fair value of the forward mortgage loans we purchased from Ginnie Mae guaranteed securitizations is estimated using both observable and unobservable inputs, including estimated default, prepayment, and discount rates. Significant unobservable inputs in estimating fair value include the estimated default rate and, for reverse loans the prepayment rate and liquidation timeline.
Loans Held for Investment - Reverse Mortgages
Reverse mortgage loans held for investment are carried at fair value and classified as Level 3 within the valuation hierarchy. These loans are not actively traded, and quoted market prices are not available. We measure these loans at fair value based on the expected future cash flows discounted over the expected life of the loans at a rate commensurate with the risk of the estimated cash flows, including future draw commitments for HECM loans. We engage third-party valuation experts in the determination of fair value. Significant unobservable assumptions include conditional prepayment rate and discount rate. The conditional prepayment rate assumption displayed in the table below is inclusive of voluntary (repayment or payoff) and involuntary (inactive/delinquent status and default) prepayments. The discount rate assumption is primarily based on an assessment of current market yields on reverse mortgage loan and tail securitizations, expected duration of the asset and current market interest rates.
Significant unobservable assumptionsMarch 31,
2025		December 31,
2024
Life in years
Range
0.4 to 7.6
0.4 to 7.6
Weighted average 4.44.2 
Conditional prepayment rate (CPR), including voluntary and involuntary prepayments (a)
Range
13.2% to 32.0%
13.1% to 31.6%
Weighted average 20.3 %21.3 %
Discount rate5.0 %5.4 %
(a) Annualized rate of lifetime projected prepayments as a percentage of the UPB at the beginning of any given period.
Significant changes in any of these assumptions in isolation could result in a significant change in fair value. The effects of changes in the assumptions used to value the securitized loans held for investment, excluding future draw commitments, are partially offset by the effects of changes in the assumptions used to value the HMBS-related borrowings that are associated with these loans.
MSRs
MSRs are carried at fair value and classified within Level 3 of the valuation hierarchy. The fair value is equal to the fair value mark provided by the third-party valuation experts, without adjustment, except in the event we have a potential or completed sale, including transactions where we have executed letters of intent, in which case the fair value of the MSRs is recorded at the estimated sale price.
We engage third-party valuation experts who generally utilize: (a) transactions involving instruments with similar collateral and risk profiles, adjusted as necessary based on specific characteristics of the asset or liability being valued; and/or (b) industry-standard modeling, such as a discounted cash flow model and prepayment model, in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, generally the bulk market, incorporating available industry survey results and client feedback, and including risk premiums and liquidity adjustments. While interest rates are a key value driver, MSR fair value may change for other market-driven factors, including but not limited to the supply and demand of the market or the required yield or perceived value by investors of such MSRs. While the models and related assumptions used by the valuation experts are proprietary to them, we understand the methodologies and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts. We evaluate the reasonableness of our third-party experts’ assumptions using historical experience adjusted for prevailing market conditions and benchmarks of assumptions and value estimates. We believe that the procedures executed by the valuation experts, supported by our verification and analytical procedures, provide reasonable assurance that the prices used in our consolidated financial statements comply with the accounting guidance for fair value measurements and disclosures and reflect the assumptions that a market participant would use.
A change in the valuation inputs or assumptions may result in a significantly higher or lower fair value measurement. Changes in market interest rates predominantly impact the fair value of Agency MSRs via prepayment speeds by altering the borrower refinance incentive and the non-Agency MSRs due to the impact on advance funding costs. In addition, changes in market interest rates impact float income. The significant unobservable assumptions used in the valuation of these MSRs include prepayment speeds, delinquency rates, cost to service and discount rates.
Significant unobservable assumptionsMarch 31, 2025December 31, 2024
AgencyNon-AgencyAgencyNon-Agency
Weighted average prepayment speed6.7 %7.7%6.4 %7.8 %
Weighted average lifetime delinquency rate1.2 %10.8%1.2 %10.4 %
Weighted average discount rate9.6 %10.9%10.0 %10.9 %
Weighted average cost to service (in dollars)$71 $194$71 $193 
Because the mortgages underlying these MSRs permit the borrowers to prepay the loans, the value of the MSRs generally tends to diminish in periods of declining interest rates, an improving housing market or expanded product availability (as prepayments increase) and increase in periods of rising interest rates, a deteriorating housing market or reduced product availability (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs as of March 31, 2025 given hypothetical increases in lifetime prepayments and yield assumptions:
Adverse change in fair value10%20%
Change in weighted average prepayment speeds (in percentage points)0.8 1.6 
Change in fair value due to change in weighted average prepayment speeds$(66.3)$(130.4)
Change in weighted average discount rate (in percentage points)1.0 1.9 
Change in fair value due to change in weighted average discount rate $(86.5)$(166.1)
Financing Liabilities
HMBS-Related Borrowings
HMBS-related borrowings are carried at fair value and classified as Level 3 within the valuation hierarchy. These borrowings are not actively traded, and therefore, quoted market prices are not available. We determine fair value using a discounted cash flow approach, by discounting the projected recovery of principal and interest over the estimated life of the borrowing at a market rate commensurate with the risk of the estimated cash flows.
We engage third-party valuation experts to support our valuation and provide observations and assumptions related to market activities. The fair value is equal to the fair value mark provided by a third-party valuation expert. We evaluate the reasonableness of our fair value estimate and assumptions using historical experience, or cash flow backtesting, adjusted for prevailing market conditions and benchmarks of assumptions and value estimates.
Significant unobservable assumptions include yield spread and discount rate. The yield spread and discount rate assumption for these liabilities are primarily based on an assessment of current market yields for newly issued HMBS, expected duration and current market interest rates.
Significant unobservable assumptionsMarch 31,
2025		December 31,
2024
Life in years
Range
0.4 to 7.6
0.4 to 7.6
Weighted average 4.44.2 
Conditional prepayment rate
Range
13.2% to 32.0%
13.1% to 31.6%
Weighted average20.3 %21.3 %
Discount rate5.0 %5.3 %
Significant changes in any of these assumptions in isolation could result in a significant change in fair value. The effects of changes in the assumptions used to value the HMBS-related borrowings are partially offset by the effects of changes in the assumptions used to value the associated pledged loans held for investment, excluding future draw commitments.
Pledged MSR Liabilities
Pledged MSR liabilities are carried at fair value and classified as Level 3 within the valuation hierarchy. We determine the fair value of the pledged MSR liability following a similar approach as for the associated transferred MSRs. Fair value of the pledged MSR liability in connection with the MSR capital partner transactions (including MAV) is determined using the fair value mark provided by third-party valuation expert, consistent with the associated MSR, using the same methodology and assumptions, while considering cash flows contractually retained by PHH and expected life of subservicing agreement, when applicable.
Significant unobservable assumptionsMarch 31,
2025		December 31,
2024
Weighted average prepayment speed5.5 %5.4 %
Weighted average delinquency rate3.1 %3.0 %
Weighted average subservicing life (in years)4.74.7
Weighted average discount rate10.0 %10.3 %
Weighted average cost to service (in dollars)$133 $133 
Significant changes in these assumptions in isolation would result in a significant change in fair value.
ESS Financing Liability
The Excess Servicing Spread (ESS) financing liability is carried at fair value and classified as Level 3 within the valuation hierarchy. The ESS financing liability consists of the obligation to remit to a third party a specified percentage of future servicing fee collections on reference pools of mortgage loans, which we are entitled to as owner of the related MSRs. The fair value represents the net present value of the expected servicing spread cash flows, consistent with the valuation model and behavioral projections of the underlying MSR, as applicable. The fair value of the ESS financing liability is determined using a third-party valuation expert. The significant unobservable assumptions used in the valuation of the ESS financing liability include prepayment speeds, delinquency rates, and discount rates. The discount rate is initially determined based on the expected cash flows and the proceeds from each issuance, and is subsequently updated, at each issuance level, to incorporate discount rate assumption updates for the underlying MSR or other factors, as provided by third-party valuation expert. At March 31, 2025 and December 31, 2024, the weighted average discount rate of the ESS financing liability was 10.0% and 10.0%, respectively. Refer to MSRs above for a description of other significant unobservable assumptions.
Derivative Financial Instruments
IRLCs are classified as Level 3 assets as fallout rates were determined to be significant unobservable assumptions.