Mortgage servicing rights sold

[Table of Contents](#i36695dc5143241f795c32e47bf5f4b3d_7)CBRE GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)Mortgage Servicing Rights (MSRs)In connection with the origination and sale of mortgage loans with servicing rights retained, we record servicing assets or liabilities based on the fair value of the mortgage servicing rights on the date the loans are sold. Our MSRs are initially recorded at fair value. Subsequent to the initial recording, MSRs are amortized and carried at the lower of amortized cost or fair value in other intangible assets in the accompanying consolidated balance sheets. They are amortized in proportion to and over the estimated period that net servicing income is expected to be received based on projections and timing of estimated future net cash flows.Our initial recording of MSRs at their fair value resulted in net gains, as the fair value of servicing contracts that result in MSR assets exceeded the fair value of servicing contracts that result in MSR liabilities. The net assets and net gains are presented in the accompanying consolidated financial statements. The amount of MSRs recognized during the years ended December 31, 2021 and 2020 was as follows (dollars in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2021 |  | 2020 |
| Beginning balance, mortgage servicing rights | $ | 556,931  |  |  | $ | 483,492  |  |
| Mortgage servicing rights recognized | 193,835  |  |  | 207,827  |  |
| Mortgage servicing rights sold | —  |  |  | (122) |  |
| Amortization expense | (172,250) |  |  | (134,266) |  |
|  |  |  |  |
| Ending balance, mortgage servicing rights | $ | 578,516  |  |  | $ | 556,931  |  |

MSRs do not actively trade in an open market with readily available observable prices; therefore, fair value is determined based on certain assumptions and judgments, including the estimation of the present value of future cash flows realized from servicing the underlying mortgage loans. Management’s assumptions include the benefits of servicing (servicing fee income and interest on escrow deposits), inflation, the cost of servicing, prepayment rates, delinquencies, discount rates and the estimated life of servicing cash flows. The assumptions used are subject to change based on management’s judgments and estimates of changes in future cash flows and interest rates, among other things. The key assumptions used during the years ended December 31, 2021, 2020 and 2019 in measuring fair value were as follows:

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2021 |  | 2020 |  | 2019 |
| Discount rate | 12.62  | % |  | 11.73  | % |  | 10.12  | % |
| Conditional prepayment rate | 9.78  | % |  | 9.80  | % |  | 10.34  | % |

The estimated fair value of our MSRs was $891.0 million and $650.6 million as of December 31, 2021 and 2020, respectively. Impairment is evaluated through a comparison of the carrying amount and fair value of the MSRs, and recognized with the establishment of a valuation allowance. We did not incur any impairment charges related to our MSRs during the years ended December 31, 2021, 2020 or 2019. No valuation allowance was created previously and we did not record a valuation allowance for MSRs in 2021 or 2020.Included in revenue in the accompanying consolidated statements of operations are contractually specified servicing fees from loans serviced for others of $288.0 million, $212.9 million and $191.8 million for the years ended December 31, 2021, 2020 and 2019, respectively, and includes prepayment fees/late fees/ancillary income earned from loans serviced for others of $41.7 million, $11.0 million and $14.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.77
