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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________________________________________________________
 FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______                    
Commission file number: 001-14667
NSM-20200630_G1.JPG
________________________________________________________________________________________________________
Mr. Cooper Group Inc.
(Exact name of registrant as specified in its charter)
Delaware   91-1653725
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
8950 Cypress Waters Blvd, Coppell, TX
  75019
(Address of principal executive offices)   (Zip Code)
(469) 549-2000
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, $0.01 par value per share COOP The Nasdaq Stock Market
____________________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12(b)-2 of the Exchange Act.
Large Accelerated Filer ¨ Accelerated Filer x
Non-Accelerated Filer ¨ Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x
Number of shares of common stock, $0.01 par value, outstanding as of July 24, 2020 was 92,021,981.



MR. COOPER GROUP INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
 
    Page
PART I
Item 1.
3
Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019
3
Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2020 and 2019
4
Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended June 30, 2020 and 2019
6
Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2020 and 2019
7
9
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


PART I. Financial Information

Item 1. Financial Statements
MR. COOPER GROUP INC.
CONSOLIDATED BALANCE SHEETS
(millions of dollars, except share data)
June 30, 2020 December 31, 2019
  (unaudited)  
Assets
Cash and cash equivalents $ 1,041    $ 329   
Restricted cash 260    283   
Mortgage servicing rights, $2,757 and $3,496 at fair value, respectively
2,763    3,502   
Advances and other receivables, net of reserves of $216 and $175, respectively
668    988   
Reverse mortgage interests, net of purchase discount of $127 and $114, respectively
5,709    6,279   
Mortgage loans held for sale at fair value 3,179    4,077   
Property and equipment, net of accumulated depreciation of $75 and $55, respectively
115    112   
Deferred tax assets, net 1,391    1,345   
Other assets 2,174    1,390   
Total assets $ 17,300    $ 18,305   
Liabilities and Stockholders’ Equity
Unsecured senior notes, net $ 2,261    $ 2,366   
Advance facilities, net 475    422   
Warehouse facilities, net 4,031    4,575   
Payables and other liabilities 2,460    2,016   
MSR related liabilities - nonrecourse at fair value 1,173    1,348   
Mortgage servicing liabilities 48    61   
Other nonrecourse debt, net 4,707    5,286   
Total liabilities 15,155    16,074   
Commitments and contingencies (Note 16)
Preferred stock at $0.00001 - 10 million shares authorized, 1 million shares issued and outstanding, respectively; aggregate liquidation preference of ten dollars, respectively
—    —   
Common stock at $0.01 par value - 300 million shares authorized, 92.0 million and 91.1 million shares issued, respectively
   
Additional paid-in-capital 1,114    1,109   
Retained earnings 1,034    1,122   
Total Mr. Cooper stockholders’ equity 2,149    2,232   
Non-controlling interests (4)   (1)  
Total stockholders’ equity 2,145    2,231   
Total liabilities and stockholders’ equity $ 17,300    $ 18,305   

See accompanying notes to the consolidated financial statements (unaudited).
3


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(millions of dollars, except for earnings per share data)
  Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Revenues:
Service related, net $ 12    $ 137    $ (41)   $ 221   
Net gain on mortgage loans held for sale 618    262    949    428   
Total revenues 630    399    908    649   
Expenses:
Salaries, wages and benefits 248    238    494    453   
General and administrative 171    254    369    482   
Total expenses 419    492    863    935   
Interest income 76    162    194    296   
Interest expense (177)   (187)   (369)   (376)  
Other income, net —        16   
Total other expenses, net (101)   (24)   (174)   (64)  
Income (loss) before income tax expense (benefit) 110    (117)   (129)   (350)  
Less: Income tax expense (benefit) 37    (29)   (31)   (76)  
Net income (loss) 73    (88)   (98)   (274)  
Less: Net loss attributable to non-controlling interests —    (1)   (3)   (1)  
Net income (loss) attributable to Mr. Cooper 73    (87)   (95)   (273)  
Less: Undistributed earnings attributable to participating stockholders   —    —    —   
Net income (loss) attributable to common stockholders $ 72    $ (87)   $ (95)   $ (273)  
Net income (loss) per common share attributable to Mr. Cooper:
Basic $ 0.78    $ (0.96)   $ (1.04)   $ (3.00)  
Diluted $ 0.77    $ (0.96)   $ (1.04)   $ (3.00)  

See accompanying notes to the consolidated financial statements (unaudited).
4


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred Stock Common Stock
Shares
(in thousands)
Amount Shares
(in thousands)
Amount Additional Paid-in Capital Retained Earnings Total Mr. Cooper Stockholders’ Equity Non-controlling Interests Total
Equity
Balance at March 31, 2019 1,000    $ —    91,042    $   $ 1,095    $ 662    $ 1,758    $   $ 1,761   
Shares issued under incentive compensation plan —    —    19    —    —    —    —    —    —   
Share-based compensation —    —    —    —      —      —     
Net loss —    —    —    —    —    (87)   (87)   (1)   (88)  
Balance at June 30, 2019 1,000    $ —    91,061    $   $ 1,100    $ 575    $ 1,676    $   $ 1,678   
Balance at March 31, 2020 1,000    $ —    91,970    $   $ 1,108    $ 961    $ 2,070    $ (4)   $ 2,066   
Shares issued under incentive compensation plan —    —    52    —    —    —    —    —    —   
Share-based compensation —    —    —    —      —      —     
Net income —    —    —    —    —    73    73    —    73   
Balance at June 30, 2020 1,000    $ —    92,022    $   $ 1,114    $ 1,034    $ 2,149    $ (4)   $ 2,145   

See accompanying notes to the consolidated financial statements (unaudited).

5


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(millions of dollars, except share data)
Preferred Stock Common Stock
Shares
(in thousands)
Amount Shares
(in thousands)
Amount Additional Paid-in Capital Retained Earnings Total Mr. Cooper Stockholders’ Equity Non-controlling Interests Total
Equity
Balance at January 1, 2019 1,000    $ —    90,821    $   $ 1,093    $ 848    $ 1,942    $   $ 1,945   
Shares issued / (surrendered) under incentive compensation plan —    —    240    —    (2)   —    (2)   —    (2)  
Share-based compensation —    —    —    —      —      —     
Net loss —    —    —    —    —    (273)   (273)   (1)   (274)  
Balance at June 30, 2019 1,000    $ —    91,061    $   $ 1,100    $ 575    $ 1,676    $   $ 1,678   
Balance at January 1, 2020 1,000    $ —    91,118    $   $ 1,109    $ 1,122    $ 2,232    $ (1)   $ 2,231   
Shares issued / (surrendered) under incentive compensation plan —    —    904    —    (5)   —    (5)   —    (5)  
Share-based compensation —    —    —    —    10    —    10    —    10   
Cumulative effect adjustments pursuant to the adoption of ASU 2016-13 —    —    —    —    —        —     
Net loss —    —    —    —    —    (95)   (95)   (3)   (98)  
Balance at June 30, 2020 1,000    $ —    92,022    $   $ 1,114    $ 1,034    $ 2,149    $ (4)   $ 2,145   

See accompanying notes to the consolidated financial statements (unaudited).
6


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(millions of dollars)
Six Months Ended June 30,
  2020 2019
Operating Activities
Net loss $ (98)   $ (274)  
Adjustments to reconcile net loss to net cash attributable to operating activities:
Deferred tax benefit (49)   (76)  
Net gain on mortgage loans held for sale (949)   (428)  
Interest income on reverse mortgage loans (117)   (167)  
Provision for servicing and non-servicing reserves 11    30   
Fair value changes and amortization/accretion of mortgage servicing rights/liabilities 999    695   
Fair value changes in excess spread financing (101)   (74)  
Fair value changes in mortgage servicing rights financing liability 12    11   
Fair value changes in mortgage loans held for investment —    (3)  
Amortization of premiums, net of discount accretion 34    (25)  
Depreciation and amortization for property and equipment and intangible assets 37    45   
Share-based compensation 10     
Other loss   —   
Repurchases of forward loan assets out of Ginnie Mae securitizations (2,092)   (715)  
Mortgage loans originated and purchased for sale, net of fees (23,110)   (15,727)  
Sales proceeds and loan payment proceeds for mortgage loans held for sale and held for investment 26,606    15,429   
Changes in assets and liabilities:
Advances and other receivables 313    249   
Reverse mortgage interests 751    1,056   
Other assets (616)   (118)  
Payables and other liabilities 417    31   
Net cash attributable to operating activities 2,066    (52)  
Investing Activities
Acquisitions, net of cash acquired —    (85)  
Property and equipment additions, net of disposals (26)   (27)  
Purchase of forward mortgage servicing rights, net of liabilities incurred (31)   (409)  
Proceeds on sale of forward and reverse mortgage servicing rights 43    279   
Net cash attributable to investing activities (14)   (242)  
Continued on following page. See accompanying notes to the consolidated financial statements (unaudited). 
7


MR. COOPER GROUP INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(millions of dollars)
Six Months Ended June 30,
  2020 2019
Financing Activities
(Decrease) increase in warehouse facilities (544)   1,173   
Increase (decrease) in advance facilities 58    (40)  
Repayment of notes payable —    (294)  
Proceeds from HECM securitizations —    398   
Proceeds from sale of HECM securitizations —    20   
Repayment of HECM securitizations (168)   (434)  
Proceeds from issuance of participating interest financing in reverse mortgage interests 99    156   
Repayment of participating interest financing in reverse mortgage interests (598)   (1,004)  
Proceeds from the issuance of excess spread financing 24    437   
Settlements and repayments of excess spread financing (110)   (119)  
Issuance of unsecured senior debt 600    —   
Repayment of nonrecourse debt – legacy assets —    (6)  
Redemption and repayment of unsecured senior notes (698)   —   
Repayment of finance lease liability (1)   (2)  
Surrender of shares relating to stock vesting (5)   (2)  
Debt financing costs (20)   (1)  
Net cash attributable to financing activities (1,363)   282   
Net increase (decrease) in cash, cash equivalents, and restricted cash 689    (12)  
Cash, cash equivalents, and restricted cash - beginning of period 612    561   
Cash, cash equivalents, and restricted cash - end of period(1)
$ 1,301    $ 549   
Supplemental Disclosures of Cash Activities
Cash paid for interest expense $ 89    $ 74   
Net cash paid (refunded) for income taxes $   $ (1)  

(1)The following table provides a reconciliation of cash, cash equivalents and restricted cash to amount reported within the consolidated balance sheets.
June 30, 2020 June 30, 2019
Cash and cash equivalents $ 1,041    $ 245   
Restricted cash 260    304   
Total cash, cash equivalents, and restricted cash $ 1,301    $ 549   

See accompanying notes to the consolidated financial statements (unaudited). 
8


MR COOPER GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(millions of dollars, unless otherwise stated)

1. Nature of Business and Basis of Presentation

Nature of Business
Mr. Cooper Group Inc., collectively with its consolidated subsidiaries, (“Mr. Cooper”, the “Company”, “we”, “us” or “our”) provides servicing, origination and transaction-based services related to single family residences throughout the United States with operations under its primary brands: Mr. Cooper® and Xome®. Mr. Cooper is one of the largest home loan originators and servicers in the country focused on delivering a variety of servicing and lending products, services and technologies. Xome provides real estate services including real estate brokerage, title, closing, valuation and field services to lenders, investors and consumers. The Company’s corporate website is located at www.mrcoopergroup.com. The Company has provided a glossary of terms, which defines certain industry-specific and other terms that are used herein, in the MD&A section of this Form 10-Q.

Mr. Cooper, which was previously known as WMIH Corp. (“WMIH”), is a corporation duly organized and existing under the laws of the state of Delaware since May 11, 2015. On July 31, 2018, Wand Merger Corporation (“Merger Sub”), a wholly-owned subsidiary of WMIH merged with and into Nationstar Mortgage Holdings Inc. (“Nationstar”), with Nationstar continuing as a wholly-owned subsidiary of WMIH (the “Merger”). Prior to the Merger, WMIH had limited operations other than its reinsurance business that operated in runoff mode. As a result of the Merger, shares of Nationstar common stock were delisted from the New York Stock Exchange. Following the Merger closing, the combined company traded on NASDAQ under the ticker symbol “WMIH” until October 10, 2018, when WMIH changed its name to “Mr. Cooper Group Inc.” and its ticker symbol to “COOP”.

Basis of Presentation
The consolidated interim financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the SEC. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Reports on Form 10-K for the year ended December 31, 2019.

The interim consolidated financial statements are unaudited; however, in the opinion of management, all adjustments, consisting of normal recurring items, considered necessary for a fair presentation of the results of the interim periods have been included. Dollar amounts are reported in millions, except per share data and other key metrics, unless otherwise noted.

The Company evaluated subsequent events through the date these interim consolidated financial statements were issued.

Basis of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, other entities in which the Company has a controlling financial interest and those variable interest entities (“VIE”) where the Company’s wholly-owned subsidiaries are the primary beneficiaries. Assets and liabilities of VIEs and their respective results of operations are consolidated from the date that the Company became the primary beneficiary through the date the Company ceases to be the primary beneficiary. The Company applies the equity method of accounting to investments where it is able to exercise significant influence, but not control, over the policies and procedures of the entity and owns less than 50% of the voting interests. Investments in certain companies over which the Company does not exert significant influence are accounted for as cost method investments. Intercompany balances and transactions on consolidated entities have been eliminated. Business combinations are included in the consolidated financial statements from their respective dates of acquisition.

Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates due to factors such as adverse changes in the economy, changes in interest rates, secondary market pricing for loans held for sale and derivatives, strength of underwriting and servicing practices, changes in prepayment assumptions, declines in home prices or discrete events adversely affecting specific borrowers, uncertainties in the economy from the COVID-19 pandemic, and such differences could be material.

9


Recent Accounting Guidance Adopted
Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326), (“ASU 2016-13”) requires expected credit losses for financial instruments held at the reporting date to be measured based on historical experience, current conditions and reasonable and supportable forecasts, which is referred to as the current expected credit loss (“CECL”) methodology. The update eliminates the initial recognition of credit losses on an incurred basis in current GAAP and instead reflects an entity’s current estimate of all expected credit losses over the life of the asset. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new standard will reflect management’s best estimate of all expected credit losses for the Company’s financial assets that are recognized at amortized cost. The guidance was effective for the Company as of January 1, 2020, with a cumulative-effect adjustment to retained earnings as of that date.

Based upon management’s scoping analysis, the Company determined that reverse mortgage interests, net of reserves, advances and other receivables, net of reserves, and certain financial instruments included in other assets are within the scope of ASU 2016-13. Certain financial instruments within these respective line items have been determined to have limited expected credit-related losses due to the contractual servicing agreements with agencies and loan product guarantees. For advances and other receivables, net, the Company determined that the majority of estimated losses are due to servicing operational errors and credit-related losses are not significant because of the contractual relationships with the agencies. For reverse mortgage interests the Company determined that the guarantee from Federal Housing Administration (“FHA”) on Home Equity Conversion Mortgage (“HECM“) loan products limits credit-related losses to an immaterial amount with substantially all losses related to servicing operational errors. For other assets, primarily trade receivables, the Company determined that these are short-term in nature (less than one year), and the estimated credit-related losses over the life of these receivables are similar to those resulting from the Company’s existing loss reserve process. For each of the aforementioned financial instruments carried at amortized cost, the Company enhanced its processes to consider and include the requirements of ASU 2016-13, as applicable, into the determination of credit-related losses.

On January 1, 2020, the Company adopted ASU 2016-13 using the modified retrospective method for the above-mentioned financial assets. Results for reporting periods after January 1, 2020 are presented under ASU 2016-13 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded transition adjustments aggregating to a net increase of $9, or $7 after tax, to retained earnings and a reduction of $7 to the advances and other receivables reserve and a $2 reduction in the other assets reserves, as of January 1, 2020 for the cumulative effect of adopting ASU 2016-13.

In connection with adoption of ASU 2016-13, the Company updated its accounting policies as follows:

For certain financial instruments included in advances and other receivables, net, and certain trade receivables and accrued revenues included in other assets that within the scope of ASU 2016-13, the reserve methodology was revised to consider CECL losses. The revised CECL methodology considers expected lifetime loss rates calculated from historical data using a weighted average life to determine the current expected credit loss required. Due to the nature of the financial instrument, reverse mortgage interests, net of reserves, and advances and other receivables had limited impact from the adoption of CECL to the reserve methodology. See Note 4, Advances and Other Receivables, Net, Note 5, Reverse Mortgage Interests, Net, and Note 7, Other Assets, for additional information.

Factors that influenced management’s current estimate of expected credit losses for certain advances and other receivables and certain trade receivables and accrued revenues included the following: historical collection and loss rates, passage of time, weighted average life of receivables, and various qualitative factors including current economic conditions.

Factors that influenced management’s current estimate of expected credit related losses for certain reverse mortgage interests included the following: historical collection and loss rates, foreclosure timelines, and values of underlying collateral.

Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”) removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 fair value measurement methodologies, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. It also adds a requirement to disclose changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 measurements. For certain unobservable inputs, entities may disclose other quantitative information in lieu of the weighted average if the other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. The Company adopted ASU 2018-13 on January 1, 2020. The guidance does not have a material impact to the disclosures currently provided by the Company.
10




2. Acquisitions

Acquisition of Pacific Union Financial, LLC
On February 1, 2019, the Company completed the acquisition of all the limited liability units of Pacific Union Financial, LLC (“Pacific Union”), a California limited liability company. Pacific Union was a privately held company that was engaged in the origination, as well as servicing of residential mortgage loans, and operated throughout the United States. The acquisition allows the Company to expand its servicing portfolio and increase its mortgage lending volume and capabilities.

The acquisition has been accounted for in accordance with Accounting Standards Codification 805, Business Combinations, using the acquisition method of accounting. Under the acquisition method of accounting, the Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The determination of fair value estimates requires management to make certain estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and may require adjustments. The final purchase price was $116, paid in cash. Based on the allocation of fair value, goodwill of $40 was recorded, which represents the excess of the purchase price over the estimated fair value of tangible and intangible assets acquired, net of the liabilities assumed. The goodwill is primarily attributable to the assembled workforce and synergies with the Company’s current operations. $28 and $12 of the goodwill is assigned to the Originations and Servicing segments, respectively, based on expected cash flows, and is expected to be deductible for tax purposes.

Final Estimated Fair Value of Net Assets Acquired:
Cash and cash equivalents $ 37   
Restricted cash  
Mortgage servicing rights 271   
Advances and other receivables 84   
Mortgage loans held for sale 536   
Mortgage loans held for investment  
Property and equipment  
Other assets 483   
Fair value of assets acquired 1,422   
Notes payable(1)
294   
Advance facilities 13   
Warehouse facilities 393   
Payables and other liabilities 530   
Other nonrecourse debt 129   
Fair value of liabilities assumed 1,359   
Total fair value of net tangible assets acquired 63   
Intangible assets:
Customer relationships(2)
13   
Goodwill 40   
Final purchase price $ 116   

(1)Notes payable was subsequently paid off in February 2019 after the consummation of the acquisition.
(2)The estimated fair values for customer relationships were measured using the excess earnings method and were determined to have a remaining useful life of 10 years.

The Company incurred total acquisition costs of $2 during the three months ended June 30, 2019, of which $1 is included in salaries, wages and benefits expense and $1 in general and administrative expense in the Company’s consolidated statements of operations. The Company incurred total acquisition costs of $4 during the six months ended June 30, 2019, of which $2 is included in salaries, wages and benefits expense and $2 in general and administrative expense in the Company’s consolidated statements of operations. The acquisition costs were primarily related to legal, accounting and consulting services. There were no acquisition costs incurred by the Company during the six months ended June 30, 2020.
11



For the three and six months ended June 30, 2019, the operations contributed by this acquisition generated total revenues of $79 and $118 and income before income tax of $36 and $50, respectively, which are reported in the Company’s consolidated statements of operations.

The following unaudited pro forma financial information presents the combined results of operations for the three and six months ended June 30, 2019, as if the acquisition had occurred on January 1, 2019:
Three Months Ended June 30, 2019 Six Months Ended June 30, 2019
Pro forma financial information (unaudited) (unaudited)
Pro forma total revenues $ 399    $ 668   
Pro forma net loss $ (87)   $ (271)  


3. Mortgage Servicing Rights and Related Liabilities

The following table sets forth the carrying value of the Company’s mortgage servicing rights (“MSRs”) and the related liabilities. In estimating the fair value of all servicing rights and related liabilities, the impact of the COVID-19 pandemic was considered in the determination of key assumptions.
MSRs and Related Liabilities June 30, 2020 December 31, 2019
Forward MSRs - fair value $ 2,757    $ 3,496   
Reverse MSRs - amortized cost    
Mortgage servicing rights $ 2,763    $ 3,502   
Mortgage servicing liabilities - amortized cost $ 48    $ 61   
Excess spread financing - fair value $ 1,124    $ 1,311   
Mortgage servicing rights financing - fair value 49    37   
MSR related liabilities - nonrecourse at fair value $ 1,173    $ 1,348   

Mortgage Servicing Rights
The Company owns and records at fair value the rights to service traditional residential mortgage (“forward”) loans for others, either as a result of purchase transactions or from the retained servicing associated with the sales and securitizations of loans originated. MSRs are comprised of servicing rights of both agency and non-agency loans.

12


The following table sets forth the activities of forward MSRs:
Six Months Ended June 30,
Forward MSRs - Fair Value 2020 2019
Fair value - beginning of period $ 3,496    $ 3,665   
Additions:
Servicing retained from mortgage loans sold 249    169   
Purchases of servicing rights(1)
24    689   
Dispositions:
Sales of servicing assets —    (294)  
Changes in fair value:
Changes in valuation inputs or assumptions used in the valuation model (717)   (542)  
Other changes in fair value (295)   (182)  
Fair value - end of period $ 2,757    $ 3,505   

(1)Purchases of servicing rights during the six months ended June 30, 2019 includes $271 of mortgage servicing rights that were acquired from Pacific Union. See Note 2, Acquisitions, for further discussion. In addition, in January 2019, the Company entered into a subservicing contract for $24 billion in mortgages, which were subsequently purchased in May 2019, resulting in additional $253 servicing rights in the second quarter of 2019.

From time to time, the Company sells its ownership interest in certain MSRs and is retained as the subservicer for the sold assets. The Company has evaluated the sale accounting requirements related to these transactions, including the Company’s continued involvement as the subservicer, and concluded that these transactions qualify for sale accounting treatment. During the six months ended June 30, 2020 and 2019, the Company sold $71 and $22,932 in unpaid principal balance (“UPB”) of forward MSRs, of which none and $20,560 were retained by the Company as subservicer, respectively.

MSRs measured at fair value are primarily segregated between credit sensitive and interest sensitive pools (referred to herein as “acquisition pools”). Credit sensitive pools are primarily impacted by borrower performance under specified repayment terms, which most directly impacts involuntary prepayments and delinquency rates. Interest sensitive pools are primarily impacted by changes in forecasted interest rates, which in turn impact voluntary prepayment speeds. The Company assesses whether acquired portfolios are more credit sensitive or interest sensitive in nature on the date of acquisition, and no subsequent changes are made. Numerous factors are considered in making this assessment, including loan-to-value ratios, FICO scores, percentage of portfolio previously modified, portfolio seasoning and similar criteria.

Credit sensitive portfolios generally consist of higher delinquency, single-family non-conforming residential forward mortgage loans serviced for agency and non-agency investors. Due to the Company’s focus on recapture and modifications, significant amounts of the credit sensitive portfolio have been re-underwritten and, therefore, behave more like the interest sensitive portfolio. Interest sensitive portfolios generally consist of lower delinquency, single-family conforming residential forward mortgage loans for agency investors.

MSRs measured at fair value are also segregated between investor type into agency and non-agency pools (referred to herein as “investor pools”) based upon contractual servicing agreements with investors at the respective balance sheet date to evaluate the MSR portfolio and fair value of the portfolio.

13


The following table provides a breakdown of UPB and fair value for the Company’s forward MSRs:
June 30, 2020 December 31, 2019
Forward MSRs - UPB and fair value breakdown UPB Fair Value UPB Fair Value
Acquisition Pools
Credit sensitive $ 131,105    $ 1,307    $ 147,895    $ 1,613   
Interest sensitive 146,870    1,450    148,887    1,883   
Total $ 277,975    $ 2,757    $ 296,782    $ 3,496   
Investor Pools
Agency(1)
$ 228,680    $ 2,308    $ 240,688    $ 2,944   
Non-agency(2)
49,295    449    56,094    552   
Total $ 277,975    $ 2,757    $ 296,782    $ 3,496   

(1)Agency investors primarily consist of government sponsored enterprises (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) and the Federal Home Loan Mortgage Corp (“Freddie Mac” or “FHLMC”), and the Government National Mortgage Association (“Ginnie Mae” or “GNMA”).
(2)Non-agency investors consist of investors in private-label securitizations.

The Company used the following key weighted-average inputs and assumptions in estimating the fair value of forward MSRs:
Forward MSRs - Key inputs and assumptions June 30, 2020 December 31, 2019
Total MSR Portfolio
Discount rate 9.5  % 9.7  %
Prepayment speeds 14.2  % 13.1  %
Average life 5.3 years 5.8 years
Acquisition Pools:
Credit Sensitive
Discount rate 9.9  % 10.4  %
Prepayment speeds 12.6  % 12.7  %
Average life 5.6 years 6.0 years
Interest Sensitive
Discount rate 9.0  % 9.1  %
Prepayment speeds 15.8  % 13.5  %
Average life 4.9 years 5.7 years
Investor Pools:
Agency
Discount rate 8.9  % 9.0  %
Prepayment speeds 14.4  % 13.0  %
Average life 5.2 years 5.8 years
Non-agency
Discount rate 12.0  % 12.6  %
Prepayment speeds 13.4  % 13.8  %
Average life 5.6 years 6.2 years

14


The following table shows the hypothetical effect on the fair value of the Company’s forward MSRs when applying certain unfavorable variations of key assumptions to these assets for the dates indicated:
Discount Rate
Total Prepayment Speeds
Forward MSRs - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2020
Mortgage servicing rights $ (104)   $ (201)   $ (175)   $ (335)  
December 31, 2019
Mortgage servicing rights $ (127)   $ (245)   $ (165)   $ (317)  

These hypothetical sensitivities should be evaluated with care. The effect on fair value of a 10% adverse change in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects.

Reverse Mortgage Servicing Rights and Liabilities - Amortized Cost
The Company services certain HECM reverse mortgage loans with an unpaid principal balance of $20,758 and $22,725 as of June 30, 2020 and December 31, 2019, respectively. The following table sets forth the activities of reverse MSRs and mortgage servicing liabilities (“MSL”):
Six Months Ended June 30,
2020 2019
Reverse MSRs and Liabilities - Amortized Cost Assets Liabilities Assets Liabilities
Balance - beginning of period $   $ 61    $ 11    $ 71   
Amortization/accretion —    (13)   (1)   (28)  
Adjustments(1)
—    —    (4)   37   
Balance - end of the period $   $ 48    $   $ 80   
Fair value - end of period $   $ 12    $   $ 44   

(1)Reverse MSR and MSL net adjustments recorded by the Company during the six months ended June 30, 2019 primarily relate to the fair value adjustments for reverse MSR and MSL assumed from the Merger resulting from the revised cost to service assumption used in the valuation of reverse MSR and MSL during the measurement period.

Management evaluates reverse MSRs and MSLs each reporting period for impairment. Based on management’s assessment at June 30, 2020, no impairment or increased obligation was needed.

Excess Spread Financing - Fair Value
In order to finance the acquisition of certain MSRs on various Portfolios, the Company has entered into sale and assignment agreements with third parties and sold to these entities the right to receive a specified percentage of the excess cash flow generated from the portfolios in excess of a fixed base servicing fee per loan. The Company retains all the base servicing fee, ancillary income and interest float earnings on principal along with interest payments and escrows, and also incurs costs to service the specified pool. The Company is the legal owner and the servicer of the portfolios and provides all servicing and advancing functions.

In connection with the above transactions, the Company entered into recapture agreement obligations with third parties that require the Company to transfer the new loan or a replacement loan of similar economic characteristics into the respective portfolio if the Company recaptures any loan in the portfolio. The new or replacement loan will be governed by the same terms set forth in the sale and assignment agreement described above. Accordingly, a recapture assumption is included within excess spread valuation.

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The Company used the following weighted-average assumptions in the Company’s valuation of excess spread financing:
Excess Spread Financing Assumptions June 30, 2020 December 31, 2019
Discount rate 12.0  % 11.6  %
Prepayment speeds 13.4  % 12.6  %
Recapture rate 18.7  % 20.1  %
Average life 5.4 years 5.8 years
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:
Discount Rate
Prepayment Speeds
Excess Spread Financing - Hypothetical Sensitivities
100 bps
Adverse
Change
200 bps
Adverse
Change
10%
Adverse
Change
20%
Adverse
Change
June 30, 2020
Excess spread financing $ 38    $ 78    $ 47    $ 97   
December 31, 2019
Excess spread financing $ 46    $ 95    $ 46    $ 96   

These hypothetical sensitivities should be evaluated with care. The effect on fair value of a 10% variation in assumptions generally cannot be determined because the relationship of the change in assumptions to the fair value may not be linear. Additionally, the impact of a variation in a particular assumption on the fair value is calculated while holding other assumptions constant. In reality, changes in one factor may lead to changes in other factors, which could impact the above hypothetical effects. Also, a positive change in the above assumptions would not necessarily correlate with the corresponding decrease in the net carrying amount of the excess spread financing. Excess spread financing’s cash flow assumptions that are utilized in determining fair value are based on the related cash flow assumptions used in the financed MSRs. Any fair value change recognized in the financed MSRs attributable to related cash flows assumptions would inherently have an inverse impact on the carrying amount of the related excess spread financing.

Mortgage Servicing Rights Financing - Fair Value
From December 2013 through June 2014, the Company entered into agreements to sell a contractually specified base servicing fee component of certain MSRs and servicing advances under specified terms to a joint venture capitalized by third-party investors. The purpose of this transaction was to facilitate the financing of advances for private label mortgages. The Company continues to be the named servicer, and, for accounting purposes, ownership of the MSR resides with the Company. Accordingly, the Company records the MSR and an MSR financing liability associated with this transaction in the consolidated balance sheets. The MSR financing liability reflects the incremental costs of this transaction relative to the market participant assumptions contained in the MSR valuation. The Company had MSR financing liability of $49 and $37 as of June 30, 2020 and December 31, 2019, respectively.

The following table sets forth the weighted-average assumptions used in the valuation of the mortgage servicing rights financing liability:
Mortgage Servicing Rights Financing Assumptions June 30, 2020 December 31, 2019
Advance financing rates 4.3  % 3.5  %
Annual advance recovery rates 18.6  % 18.8  %

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Servicing Segment Revenues
The following table sets forth the items comprising total revenues for the Servicing segment:
Three Months Ended June 30, Six Months Ended June 30,
Total Revenues - Servicing 2020 2019 2020 2019
Contractually specified servicing fees(1)
$ 285    $ 307    $ 582    $ 588   
Other service-related income(1)
62    32    111    82   
Incentive and modification income(1)
  10    18    17   
Late fees(1)
20    27    47    52   
Reverse servicing fees     13    17   
Mark-to-market adjustments(2)
(261)   (231)   (644)   (524)  
Counterparty revenue share(3)
(88)   (70)   (164)   (118)  
Amortization, net of accretion(4)
(102)   (56)   (178)   (79)  
Total revenues - Servicing $ (69)   $ 27    $ (215)   $ 35   

(1)The Company recognizes revenue on an earned basis for services performed. Amounts include subservicing related revenues.
(2)Mark-to-market (“MTM”) adjustments include fair value adjustments on MSR, excess spread financing and MSR financing liabilities. The amount of MSR MTM includes 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. The impact of negative modeled cash flows was $3 and $17 for the three months ended June 30, 2020 and 2019 and $13 and $28 for the six months ended June 30, 2020 and 2019, respectively.
(3)Counterparty revenue share represents the excess servicing fee that the Company pays to the counterparties under the excess spread financing arrangements and the payments made associated with MSR financing arrangements.
(4)Amortization is net of excess spread accretion of $79 and $59 and MSL accretion of $5 and $11 for the three months ended June 30, 2020 and 2019, respectively. For the six months ended June 30, 2020 and 2019, amortization is net of excess spread accretion of $147 and $95 and MSL accretion of $13 and $29, respectively.


4. Advances and Other Receivables, Net

Advances and other receivables, net, consists of the following:
Advances and Other Receivables, Net June 30, 2020 December 31, 2019
Servicing advances, net of $117 and $131 purchase discount, respectively
$ 695    $ 970   
Receivables from agencies, investors and prior servicers, net of $21 and $21 purchase discount, respectively
189    193   
Reserves (216)   (175)  
Total advances and other receivables, net $ 668    $ 988   

The Company, as loan servicer, is contractually responsible to advance funds on behalf of the borrower and investor primarily for loan principal and interest, property taxes and hazard insurance and foreclosure costs. Advances are primarily recovered through reimbursement from the investor, proceeds from sale of loan collateral, mortgage insurance claims or the borrower. Reserves for advances and other receivables on loans liquidated or purchased out of the MSR portfolio are established within advances and other receivables.

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The following table sets forth the activities of the servicing reserves for advances and other receivables:
Three Months Ended June 30, Six Months Ended June 30,
Reserves for Advances and Other Receivables 2020 2019 2020 2019
Balance - beginning of period $ 193    $ 71    $ 168    $ 47   
Provision and other additions(1)
29    37    59    67   
Write-offs (6)   (10)   (11)   (16)  
Balance - end of period $ 216    $ 98    $ 216    $ 98   

(1)The Company recorded a provision of $3 and $17 through the MTM adjustments in revenues - service related, net, in the consolidated statements of operations for the three months ended June 30, 2020 and 2019, respectively, and $13 and $28 for the six months ended June 30, 2020 and 2019, respectively, for inactive and liquidated loans that are no longer part of the MSR portfolio. Other additions represent reclassifications of required reserves provisioned within other balance sheet accounts as associated serviced loans become inactive or liquidate.

Purchase Discount for Advances and Other Receivables
In connection with the acquisition of Pacific Union in February 2019, the Company recorded the acquired advances and other receivables at estimated fair value as of the acquisition date, which resulted in a purchase discount of $19. Refer to Note 2, Acquisitions, for discussion of the Pacific Union acquisition. In 2018, the Company recorded the acquired advances and other receivables in connection with the Merger at estimated fair value as of the acquisition date, which resulted in a purchase discount of $302.

As of June 30, 2020, a total of $183 purchase discount has been utilized, with $138 purchase discount remaining.

The following tables set forth the activities of the purchase discounts for advances and other receivables:
Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
Purchase Discount for Advances and Other Receivables Servicing Advances Receivables from Agencies, Investors and Prior Servicers Servicing Advances Receivables from Agencies, Investors and Prior Servicers
Balance - beginning of period $ 125    $ 21    $ 169    $ 48   
Utilization of purchase discounts (8)   —    (13)   —   
Balance - end of period $ 117    $ 21    $ 156    $ 48   

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
Purchase Discount for Advances and Other Receivables Servicing Advances Receivables from Agencies, Investors and Prior Servicers Servicing Advances Receivables from Agencies, Investors and Prior Servicers
Balance - beginning of period $ 131    $ 21    $ 205    $ 48   
Addition from acquisition —    —    19    —   
Utilization of purchase discounts (14)   —    (68)   —   
Balance - end of period $ 117    $ 21    $ 156    $ 48   

Credit Loss for Advances and Other Receivables
As described in Note 1, Nature of Business and Basis of Presentation, advances and other receivables are within the scope of ASU 2016-13, and the Company modified its accounting policy regarding its assessment of reserves for credit-related losses in accordance with CECL framework. During the three and six months ended June 30, 2020, the Company increased the CECL reserve by $8 and $14, respectively. As of June 30, 2020, the total CECL reserve was $31, of which $14 and $17 was recorded in reserves and purchase discount for advances and other receivables, respectively.

Based upon the Company’s application of ASU 2016-13, the Company determined that the credit-related risk associated with applicable financial instruments typically increase with the passage of time. The CECL reserve methodology considers these financial instruments collectible to a point in time of 39 months. Any projected remaining balance at the end of the collection period is considered a loss and factors into the overall CECL loss rate required.

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5. Reverse Mortgage Interests, Net

Reverse mortgage interests, net, consists of the following:
Reverse Mortgage Interests, Net June 30, 2020 December 31, 2019
Participating interests in HECM mortgage-backed securities (“HMBS”) $ 3,873    $ 4,282   
Other interests securitized 825    994   
Unsecuritized interests 1,138    1,117   
Purchase discount, net (127)   (114)  
Total reverse mortgage interests, net $ 5,709    $ 6,279   

Participating Interests in HMBS
Participating interests in HMBS consist of the Company’s reverse mortgage interests in HECM loans which have been transferred to GNMA and subsequently securitized through the issuance of HMBS. The Company does not own these loans, but due to HMBS program buyout requirements, such interests are consolidated in Company’s consolidated balance sheets. The Company does not originate reverse mortgages, but during the six months ended June 30, 2020 and 2019, a total of $95 and $149 in UPB associated with new draws on existing loans was transferred to GNMA and securitized by the Company, respectively.

In March 2019, the Company entered into an agreement with Fannie Mae for the transfer of reverse mortgage loans. As a result, $61 was transferred from Fannie Mae and securitized into GNMA HMBS during the six months ended June 30, 2019. There was no such activity during the six months ended June 30, 2020.

Other Interests Securitized
Other interests securitized consist of reverse mortgage interests that no longer meet HMBS program eligibility criteria primarily because they have reached 98% of their Max Claim Amount (“MCA”), which is established at origination and in accordance with HMBS program guidelines, requiring a repurchase of loans from the respective HMBS trust. These reverse mortgage interests have subsequently been transferred to private securitization trusts and are accounted for as a secured borrowing. No such securitizations occurred during the six months ended June 30, 2020. During the six months ended June 30, 2019, the Company securitized a total of $398 UPB through Trust 2019-1 and a total of $249 UPB from Trust 2017-2 was called and the related debt was extinguished. The Company sold $20 UPB of Trust 2018-3 during the six months ended June 30, 2019. Refer to Other Nonrecourse Debt in Note 9, Indebtedness for additional information.

Unsecuritized Interests
Unsecuritized interests in reverse mortgages consist of the following:
Unsecuritized interests June 30, 2020 December 31, 2019
Repurchased HECM loans (exceeds 98% MCA) $ 804    $ 789   
HECM related receivables(1)
244    250   
Funded borrower draws not yet securitized 53    64   
Real estate owned (“REO”) related receivables 37    14   
Total unsecuritized interests
$ 1,138    $ 1,117   

(1)HECM related receivables consist primarily of receivables from FNMA for corporate advances and service fees and claims receivables from the U.S. Department of Housing and Urban Development (“HUD”) on reverse mortgage interests.

Unsecuritized interests include repurchased HECM loans for which the Company is required to repurchase from the HMBS pool when the outstanding principal balance of the HECM loan is equal to or greater than 98% of the MCA established at origination and in accordance with HMBS program guidelines. These unsecuritized interests are primarily financed through available warehouse lines. The Company repurchased a total of $686 and $1,457 of HECM loans out of GNMA HMBS securitizations during the six months ended June 30, 2020 and 2019, respectively, of which $186 and $371 were subsequently assigned to a third party in accordance with applicable servicing agreements, respectively. To the extent a loan is not subject to applicable servicing agreements and assigned to a third party, the loan is either subject to assignment to HUD, per contractual obligations with GNMA, liquidated via a payoff from the borrower or liquidated via a foreclosure according to the terms of the underlying mortgage. The Company assigned a total of $461 and $983 of HECM loans to HUD during the six months ended June 30, 2020 and 2019, respectively.

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Purchase Discount, net, for Reverse Mortgage Interests
In connection with the Merger, the Company recorded the acquired reverse mortgage interests at estimated fair value as of the acquisition date, which resulted in a net purchase discount of $256 associated with financial and operational losses on reverse mortgage interests associated with servicing the loans through foreclosure and collateral liquidation. The premium and discount are amortized and accreted, respectively, based on the effective yield method, whereby the Company updates its prepayment assumptions for actual prepayments on a quarterly basis. Consistent with the Company’s accounting policy, the Company calculates reserve requirements on the reverse mortgage interest portfolio each reporting period and compares such calculated reserve requirements against the remaining net purchase discount. If the calculated reserve requirements exceed the remaining net purchase discount, the Company will record an additional reserve and associated provision to general and administrative expense. No additional reserves were required to be recorded as of June 30, 2020.

The following table sets forth the activities of the purchase discounts, net, for reverse mortgage interests:
Three Months Ended June 30, Six Months Ended June 30,
Purchase discount, net, for reverse mortgage interests(1)
2020 2019 2020 2019
Balance - beginning of period $ (129)   $ (171)   $ (114)   $ (164)  
Adjustments(2)
—    —    —    (24)  
Utilization of purchase discounts(3)
  12    19    40   
Amortization, net of accretion (7)   (4)   (32)   (15)  
Balance - end of period $ (127)   $ (163)   $ (127)   $ (163)  

(1)Net position as certain items are in a premium/(discount) position, based on the characteristics of underlying tranches of loans.
(2)Adjustments during the six months ended June 30, 2019 due to revised cost to service assumption utilized in the valuation of reverse mortgage assets and liabilities acquired from the Merger.
(3)Utilization of purchase discounts on liquidated loans, for which the remaining receivable was written-off.

Credit Loss for Reverse Mortgage Interests
As described in Note 1, Nature of Business and Basis of Presentation, reverse mortgage interests are within the scope of ASU 2016-13, requiring an assessment of reserves regarding credit-related losses in accordance with the CECL framework. Upon applying ASU 2016-13, the Company determined that credit-related losses are immaterial given the government insured nature of the HECM loan product. Any expected credit-related losses are contemplated in the Company’s existing reserve methodology due to the nature of this financial instrument. Accordingly, no cumulative effect adjustment was required upon adoption of ASU 2016-13 on January 1, 2020 and no additional CECL reserve was recorded as of June 30, 2020.

The credit-risk characteristics of reverse mortgage interests do not vary with time as the financial instruments have no contractual life or financial profile as the primary counterparty is the government agency insuring the loans.

Reverse Mortgage Interest Income
The Company accrues interest income for its participating interest in reverse mortgages based on the stated rates underlying HECM loans, in accordance with FHA guidelines. Total interest earned on the Company’s reverse mortgage interests was $55 and $85 for the three months ended June 30, 2020 and 2019, respectively, and $117 and $167 for the six months ended June 30, 2020 and 2019, respectively.


6. Mortgage Loans Held for Sale

The Company maintains a strategy of originating and purchasing residential mortgage loan products primarily for the purpose of selling to GSEs or other third-party investors in the secondary market on a servicing-retained basis. The Company purchases closed loans through its correspondent channel and assists customers currently in the Company’s servicing portfolio with refinancing of loans or new home purchases through its direct-to-consumer channel. Generally, all newly originated mortgage loans held for sale are securitized and transferred to GSEs or delivered to third-party purchasers shortly after origination on a servicing-retained basis.

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Mortgage loans held for sale are recorded at fair value as set forth below:
Mortgage Loans Held for Sale June 30, 2020 December 31, 2019
Mortgage loans held for sale – UPB $ 3,033    $ 3,949   
Mark-to-market adjustment(1)
146    128   
Total mortgage loans held for sale $ 3,179    $ 4,077   

(1)The mark-to-market adjustment is recorded in net gain on mortgage loans held for sale in the consolidated statements of operations.

The following table sets forth the activities of mortgage loans held for sale:
Six Months Ended June 30,
Mortgage Loans Held for Sale 2020 2019
Balance - beginning of period $ 4,077    $ 1,631   
Loans sold (26,149)   (15,203)