Company: TWO-PC
Filing Date: 2025-04-29
Form Type: 10-Q
Source: 0001465740-25-000104
Chunk: 24

Company: TWO HARBORS INVESTMENT CORP.
Filing Date: 2025-04-29
Form: 10-Q
Item: Item 1
Chunk 24
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 service:$65.02 $65.02 Impact on fair value of 10% adverse change$(36,590)$(36,191)Impact on fair value of 20% adverse change$(73,179)$(72,381)These assumptions and sensitivities are hypothetical and should be considered with caution. Changes in fair value based on 10% and 20% variations in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of MSR is calculated without changing any other assumptions. In reality, changes in one factor may result in changes in another (e.g., increased market interest rates may result in lower prepayments and increased credit losses) that could magnify or counteract the sensitivities. Further, these sensitivities show only the change in the asset balances and do not show any expected change in the fair value of the instruments used to manage the interest rates and prepayment risks associated with these assets.Risk Mitigation ActivitiesThe primary risks associated with the Company’s MSR are changes in interest rates, mortgage spreads and prepayments. The Company economically hedges interest rate and mortgage spread risk primarily with its Agency RMBS portfolio. Prepayment risk is carefully monitored and partially mitigated through the Company’s ability to retain the MSR, in certain circumstances, through recapture if the underlying loan is refinanced.Mortgage Servicing Income and CostsThe following table presents the components of servicing income recorded on the Company’s consolidated statements of comprehensive income (loss) for the three months ended March 31, 2025 and 2024:Three Months EndedMarch 31,(in thousands)20252024Servicing fee income$126,171 $134,320 Ancillary and other fee income5,094 3,857 Float income25,594 28,156 Total$156,859 $166,333 As previously discussed, RoundPoint handles substantially all servicing functions for the mortgage loans underlying the Company’s MSR. For the remaining portion of the Company’s serviced mortgage assets, the Company contracts with appropriately licensed third-party subservicers to handle the servicing functions in the name of the subservicer. All third-party subservicing costs and other servicing expenses directly related to the Company’s MSR portfolio are included within the servicing costs line item on the Company’s consolidated statements of comprehensive income (loss). All servicing-related general and administrative expenses incurred by RoundPoint are