Document_And_Entity_Informatio
Document And Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Oct. 31, 2013 | |
Document and Entity Information [Abstract] | ' | ' |
Entity Registrant Name | 'OCWEN FINANCIAL CORP | ' |
Entity Central Index Key | '0000873860 | ' |
Trading Symbol | 'ocn | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 135,822,932 |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONSOLIDATED_BALANCE_SHEETS_un
CONSOLIDATED BALANCE SHEETS (unaudited) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Assets | ' | ' |
Cash | $357,486 | $220,130 |
Loans held for sale, at fair value | 335,102 | 426,480 |
Advances | 946,287 | 184,463 |
Match funded advances | 533,725 | 3,049,244 |
Mortgage servicing rights, at amortized cost | 1,736,943 | 678,937 |
Mortgage servicing rights, at fair value | 96,938 | 85,213 |
Receivables, net | 223,404 | 137,713 |
Deferred tax assets, net | 93,343 | 92,136 |
Goodwill and intangibles | 407,620 | 412,866 |
Premises and equipment, net | 56,837 | 33,247 |
Debt service accounts | 45,462 | 88,748 |
Other assets | 478,533 | 273,578 |
Total assets | 5,311,680 | 5,682,755 |
Liabilities, Mezzanine Equity and Stockholders' Equity Liabilities | ' | ' |
Match funded liabilities | 363,012 | 2,532,745 |
Other borrowings | 2,592,591 | 1,096,679 |
Other liabilities | 554,708 | 288,537 |
Total liabilities | 3,510,311 | 3,917,961 |
Commitments and Contingencies (Note 25) | ' | ' |
Mezzanine Equity | ' | ' |
Series A Perpetual Convertible Preferred stock, $.01 par value; 200,000 shares authorized; 62,000 and 162,000 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively; redemption value $62,000 plus accrued and unpaid dividends at September 30, 2013 | 59,945 | 153,372 |
Stockholders' Equity | ' | ' |
Common stock, $.01 par value; 200,000,000 shares authorized; 135,822,932 and 135,637,932 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively | 1,358 | 1,356 |
Additional paid-in capital | 864,723 | 911,942 |
Retained earnings | 882,412 | 704,565 |
Accumulated other comprehensive loss, net of income taxes | -7,069 | -6,441 |
Total stockholders' equity | 1,741,424 | 1,611,422 |
Total liabilities, mezzanine equity and stockholders' equity | $5,311,680 | $5,682,755 |
CONSOLIDATED_BALANCE_SHEETS_un1
CONSOLIDATED BALANCE SHEETS (unaudited) (Parentheticals) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, except Share data, unless otherwise specified | ||
Statement Of Financial Position [Abstract] | ' | ' |
Convertible preferred stock series A, par value (in dollars per share) | $0.01 | $0.01 |
Convertible preferred stock series A, shares authorized | 200,000 | 200,000 |
Convertible preferred stock series A, shares issued | 62,000 | 162,000 |
Convertible preferred stock series A, shares outstanding | 62,000 | 162,000 |
Convertible preferred stock series A, redemption value (in dollars) | $62,000 | ' |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 135,822,932 | 135,637,932 |
Common stock, shares outstanding | 135,822,932 | 135,637,932 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Revenue | ' | ' | ' | ' |
Servicing and subservicing fees | $483,267 | $223,011 | $1,333,392 | $578,435 |
Gain on loans held for sale, net | 28,262 | ' | 72,912 | ' |
Other revenues | 19,711 | 9,689 | 76,014 | 30,178 |
Total revenue | 531,240 | 232,700 | 1,482,318 | 608,613 |
Operating expenses | ' | ' | ' | ' |
Compensation and benefits | 118,054 | 29,759 | 330,679 | 90,546 |
Amortization of servicing rights | 79,183 | 20,150 | 197,435 | 53,561 |
Servicing and origination | 34,236 | 9,838 | 89,740 | 18,988 |
Technology and communications | 38,809 | 11,608 | 102,698 | 31,999 |
Professional services | 19,090 | 5,241 | 99,228 | 19,743 |
Occupancy and equipment | 30,786 | 10,899 | 74,631 | 36,484 |
Other operating expenses | 26,102 | 5,298 | 66,007 | 13,489 |
Total operating expenses | 346,260 | 92,793 | 960,418 | 264,810 |
Income from operations | 184,980 | 139,907 | 521,900 | 343,803 |
Other income (expense) | ' | ' | ' | ' |
Interest income | 5,379 | 2,084 | 17,330 | 6,434 |
Interest expense | -110,055 | -58,417 | -303,339 | -163,660 |
Gain (loss) on debt redemption | 1,282 | -653 | -12,556 | -653 |
Other, net | -5,311 | -2,175 | -8,215 | -4,895 |
Other expense, net | -108,705 | -59,161 | -306,780 | -162,774 |
Income before income taxes | 76,275 | 80,746 | 215,120 | 181,029 |
Income tax expense | 9,273 | 29,346 | 26,250 | 65,447 |
Net income | 67,002 | 51,400 | 188,870 | 115,582 |
Preferred stock dividends | -1,446 | ' | -4,450 | ' |
Deemed dividend related to beneficial conversion feature of preferred stock | -4,401 | ' | -6,573 | ' |
Net income attributable to Ocwen common stockholders | $61,155 | $51,400 | $177,847 | $115,582 |
Earnings per share attributable to Ocwen common stockholders | ' | ' | ' | ' |
Basic (in dollars per share) | $0.45 | $0.38 | $1.31 | $0.87 |
Diluted (in dollars per share) | $0.44 | $0.37 | $1.27 | $0.84 |
Weighted average common shares outstanding | ' | ' | ' | ' |
Basic (in shares) | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 |
Diluted (in shares) | 140,057,195 | 138,702,881 | 139,747,490 | 138,301,865 |
CONSOLIDATED_STATEMENTS_OF_COM
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Statement Of Other Comprehensive Income [Abstract] | ' | ' | ' | ' | ||||
Net income | $67,002 | $51,400 | $188,870 | $115,582 | ||||
Other comprehensive income (loss), net of income taxes: | ' | ' | ' | ' | ||||
Unrealized foreign currency translation income (loss) arising during the period | 30 | -1 | 707 | -1 | ||||
Change in deferred loss on cash flow hedges arising during the period | ' | [1] | -1,743 | [1] | -7,537 | [1] | -5,476 | [1] |
Reclassification adjustment for losses on cash flow hedges included in net income | 4,714 | [2] | 1,947 | [2] | 6,198 | [2] | 6,749 | [2] |
Net change in deferred loss on cash flow hedges | 4,714 | 204 | -1,339 | 1,273 | ||||
Other | 1 | 1 | 4 | 4 | ||||
Total other comprehensive income, net of income taxes | 4,745 | 204 | -628 | 1,276 | ||||
Comprehensive income | $71,747 | $51,604 | $188,242 | $116,858 | ||||
[1] | Net of income tax benefit of $0.9 million for the three months ended September 30, 2012 and $4.8 million and $3.1 million for the nine months ended September 30, 2013 and 2012, respectively. | |||||||
[2] | Net of income tax expense of $3.1 million and $1.1 million for the three months ended September 30, 2013 and 2012, respectively, and $3.9 million and $3.8 million for the nine months ended September 30, 2013 and 2012, respectively. |
CONSOLIDATED_STATEMENTS_OF_COM1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) (Parentheticals) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Statement Of Other Comprehensive Income [Abstract] | ' | ' | ' | ' |
Other comprehensive income (loss), Unrealized gain (loss) on derivatives, Income tax benefit (expense) | ' | $0.90 | $4.80 | $3.10 |
Other comprehensive income (loss), Reclassification adjustment on derivatives, Income tax benefit (expense) | $3.10 | $1.10 | $3.90 | $3.80 |
CONSOLIDATED_STATEMENTS_OF_CHA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) (USD $) | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss, Net of Taxes | Total |
In Thousands, except Share data, unless otherwise specified | |||||
Balance at at Dec. 30, 2011 | $1,299 | $826,121 | $523,787 | ($7,896) | $1,343,311 |
Balance at (in shares) at Dec. 30, 2011 | 129,899,288 | ' | ' | ' | ' |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ' | ' | ' | ' | ' |
Net income | ' | ' | 115,582 | ' | 115,582 |
Conversion of 3.25% Convertible Notes to common stock | 46 | 56,364 | ' | ' | 56,410 |
Conversion of 3.25% Convertible Notes (in shares) | 4,635,159 | ' | ' | ' | ' |
Exercise of common stock options | 5 | 2,058 | ' | ' | 2,063 |
Exercise of common stock options (in shares) | 462,041 | ' | ' | ' | ' |
Equity-based compensation | ' | 4,572 | ' | ' | 4,572 |
Equity-based compensation (in shares) | 8,877 | ' | ' | ' | ' |
Total other comprehensive income, net of income taxes | ' | ' | ' | 1,276 | 1,276 |
Balance at at Sep. 30, 2012 | 1,350 | 889,115 | 639,369 | -6,620 | 1,523,214 |
Balance at (in shares) at Sep. 30, 2012 | 135,005,365 | ' | ' | ' | ' |
Balance at at Dec. 31, 2012 | 1,356 | 911,942 | 704,565 | -6,441 | 1,611,422 |
Balance at (in shares) at Dec. 31, 2012 | 135,637,932 | ' | ' | ' | 135,637,932 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ' | ' | ' | ' | ' |
Net income | ' | ' | 188,870 | ' | 188,870 |
Preferred stock dividends ($27.92 per share) | ' | ' | -4,450 | ' | -4,450 |
Deemed dividend related to beneficial conversion feature of preferred stock | ' | ' | -6,573 | ' | -6,573 |
Conversion of Series A preferred stock | 31 | 99,969 | ' | ' | 100,000 |
Conversion of Series A preferred stock (in shares) | 3,145,640 | ' | ' | ' | ' |
Repurchase of common stock | -31 | -157,849 | ' | ' | -157,880 |
Repurchase of common stock (in shares) | -3,145,640 | ' | ' | ' | ' |
Exercise of common stock options | 2 | -188 | ' | ' | -186 |
Exercise of common stock options (in shares) | 172,969 | ' | ' | ' | ' |
Equity-based compensation | ' | 10,849 | ' | ' | 10,849 |
Equity-based compensation (in shares) | 12,031 | ' | ' | ' | ' |
Total other comprehensive income, net of income taxes | ' | ' | ' | -628 | -628 |
Balance at at Sep. 30, 2013 | $1,358 | $864,723 | $882,412 | ($7,069) | $1,741,424 |
Balance at (in shares) at Sep. 30, 2013 | 135,822,932 | ' | ' | ' | 135,822,932 |
CONSOLIDATED_STATEMENTS_OF_CHA1
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited) (Parentheticals) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Statement Of Stockholders' Equity [Abstract] | ' | ' |
Stated percentage of convertible notes | ' | 3.25% |
Preferred stock dividends per share | $27.92 | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operating activities | ' | ' |
Net income | $188,870 | $115,582 |
Adjustments to reconcile net income to net cash provided by operating activities | ' | ' |
Amortization of mortgage servicing rights | 197,435 | 53,561 |
Amortization of debt discount | 1,082 | 2,679 |
Amortization of debt issuance costs - senior secured term loans | 3,264 | 3,050 |
Depreciation | 17,153 | 3,896 |
Gain on sales of loans | -72,912 | ' |
Realized and unrealized losses on derivative financial instruments, net | 12,896 | 3,900 |
Loss on extinguishment of debt | 12,556 | 653 |
Origination and purchase of loans held for sale | -7,072,260 | ' |
Proceeds from sale and collection of loans held for sale | 7,006,883 | 1,136 |
Changes in assets and liabilities: | ' | ' |
Decrease in advances and match funded advances | 424,008 | 1,213,917 |
Decrease in receivables and other assets, net | 265,554 | 3,184 |
Increase in servicer liabilities | 13,046 | 14,474 |
Increase in other liabilities | 14,737 | 7,911 |
Other, net | 8,143 | 10,208 |
Net cash provided by operating activities | 1,020,455 | 1,434,151 |
Cash flows from investing activities | ' | ' |
Cash paid to acquire Liberty Home Equity Solutions, Inc. | -26,568 | ' |
Purchase of mortgage servicing rights, net | -676,750 | -175,508 |
Acquisition of advances in connection with the purchase of mortgage servicing rights | -445,478 | -1,914,687 |
Origination of loans held for investment | -274,081 | ' |
Principal payments received on loans held for investment | 2,164 | ' |
Proceeds from sale of MSRs | 21,511 | ' |
Proceeds from sale of advance financing subsidiary and special purpose entity | ' | 76,334 |
Proceeds from sale of match funded advances | 3,492,489 | 1,084,309 |
Proceeds from sale of diversified fee businesses to Altisource Portfolio Solutions, S.A | 215,700 | ' |
Net cash acquired in acquisition of Correspondent One S.A. | 22,108 | ' |
Distributions of capital from unconsolidated entities | 1,300 | 2,839 |
Additions to premises and equipment | -24,475 | -16,596 |
Purchase of real estate | ' | -6,501 |
Other | 2,947 | 5,009 |
Net cash provided by (used in) investing activities | 50,037 | -944,801 |
Cash flows from financing activities | ' | ' |
Net repayment of match funded liabilities | -2,169,732 | -352,963 |
Proceeds from other borrowings | 7,935,374 | 29,784 |
Repayment of other borrowings | -7,182,275 | -191,238 |
Payment of debt issuance costs - senior secured term loan | -25,547 | ' |
Proceeds from sale of mortgage servicing rights accounted for as a financing | 404,509 | 184,205 |
Proceeds from sale of loans accounted for as a financing | 272,652 | ' |
Redemption of 10.875% Capital Securities | ' | -26,829 |
Repurchase of common stock | -157,880 | ' |
Proceeds from exercise of common stock options | 947 | 1,969 |
Payment of preferred stock dividends | -4,534 | ' |
Other | -6,650 | -8,009 |
Net cash used in financing activities | -933,136 | -363,081 |
Net increase in cash | 137,356 | 126,269 |
Cash at beginning of period | 220,130 | 144,234 |
Cash at end of period | 357,486 | 270,503 |
Supplemental non-cash investing and financing activities | ' | ' |
Conversion of Series A preferred stock to common stock | 100,000 | ' |
Conversion of 3.25% Convertible Notes to common stock | ' | 56,410 |
ResCap Servicing Operations | ' | ' |
Cash flows from investing activities | ' | ' |
Cash paid to acquire ResCap Servicing Operations (a component of Residential Capital, LLC) | -2,260,830 | ' |
Fair value of assets acquired | ' | ' |
Advances | -1,722,379 | ' |
Mortgage servicing rights | -391,853 | ' |
Premises and equipment | -16,423 | ' |
Goodwill | -201,810 | ' |
Receivables and other assets | -2,989 | ' |
Fair value of asset acquired, total | -2,335,454 | ' |
Fair value of liabilities assumed | ' | ' |
Accrued expenses and other liabilities | 74,624 | ' |
Total consideration | -2,260,830 | ' |
Amount due to seller for purchase price adjustments | ' | ' |
Cash paid | -2,260,830 | ' |
Less cash acquired | ' | ' |
Net cash paid | ($2,260,830) | ' |
CONSOLIDATED_STATEMENTS_OF_CAS1
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Parentheticals) | 9 Months Ended |
Sep. 30, 2012 | |
Statement Of Cash Flows [Abstract] | ' |
Redemption of capital securities | 10.88% |
Conversion of convertible notes | 3.25% |
NOTE_1_DESCRIPTION_OF_BUSINESS
NOTE 1 DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | ||
Sep. 30, 2013 | |||
Accounting Policies [Abstract] | ' | ||
DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ' | ||
NOTE 1 | DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | ||
Organization | |||
Ocwen Financial Corporation (NYSE: OCN) (Ocwen, OCN, “we”, or “us”) is a financial services holding company which, through its subsidiaries, is engaged in the servicing and origination of mortgage loans. Ocwen is headquartered in Atlanta, Georgia with offices throughout the United States and in the United States Virgin Islands (USVI) with support operations in India and Uruguay. Ocwen is a Florida corporation organized in February 1988. Ocwen owned all of the common stock of one of its primary operating subsidiaries, Ocwen Mortgage Servicing, Inc. (OMS), and directly or indirectly owned all of the outstanding stock of its other primary operating subsidiaries: Ocwen Loan Servicing, LLC (OLS), Ocwen Financial Solutions Private Limited, Homeward Residential, Inc. (Homeward) and Liberty Home Equity Solutions, Inc. (Liberty) (formerly known as Genworth Financial Home Equity Access, Inc.). | |||
We are licensed to service mortgage loans and to originate mortgage loans in all jurisdictions in which we operate. | |||
We purchase existing mortgage servicing rights (MSRs) from market participants and generate new servicing rights through our origination activities. We perform primary and master servicer activities on behalf of investors and other servicers, including the Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) and Government National Mortgage Association (Ginnie Mae) (collectively, the GSEs). We service prime and non-prime mortgages including mortgages included in private label mortgage-backed securities. As primary servicer, we may make certain payments of property taxes and insurance premiums, default and property maintenance payments, as well as advances of principal and interest payments before collecting them from borrowers. As master servicer, we collect mortgage payments from primary servicers and distribute the funds to investors in the mortgage-backed securities. To the extent that the primary servicer does not advance the scheduled principal and interest, as master servicer we are responsible for advancing the shortfall subject to certain limitations. | |||
We originate, purchase, sell and securitize prime forward and reverse mortgages. These loans are insured or guaranteed by the Federal Housing Authority (FHA) or the Department of Veterans Affairs (VA) or conform to the underwriting standards of Fannie Mae or Freddie Mac. The GSEs guarantee these securitizations. | |||
We are actively engaged in identifying and completing asset and other acquisitions in connection with our growth strategy. This could involve the acquisition of domestic and international servicing and/or origination platforms or related assets. See Note 4 – Business Acquisitions for additional information. | |||
On June 13, 2013, OLS entered into a mortgage servicing rights purchase and sale agreement (Purchase Agreement) with OneWest Bank, FSB, a federal savings bank (the Seller), pursuant to which OLS agreed to purchase MSRs and related servicing advance receivables (the OneWest MSR Transaction). No operations, entities or other assets were acquired in the transaction. Contemporaneously with the execution of the Purchase Agreement, Ocwen executed a guarantee pursuant to which it agreed to guarantee the obligations and performance of OLS under the Purchase Agreement. As part of the OneWest MSR Transaction, each of the Seller and OLS have agreed to indemnification provisions for the benefit of the other party. | |||
The OneWest MSR Transaction is closing in stages, and we expect that the majority of loans will be boarded onto our primary servicing platform by December 31, 2013. The GSE loans were boarded during August and September, and we expect to board the majority of the private label securities in November. Each closing is subject to, among other things, receipt of certain investor and third party consents and customary closing conditions. In the event that all of the closings have not been completed by January 31, 2014, the unsettled component of the transaction would be subject to termination in accordance with the terms of the Purchase Agreement. | |||
On various dates beginning on April 1, 2013 and continuing through August 31, 2013, the date on which our purchase obligation terminated, we completed the acquisition of Fannie Mae and Freddie Mac MSRs and related advances from Ally Bank (Ally MSR Transaction), a wholly-owned subsidiary of Ally Financial Inc. (Ally), the indirect parent of Residential Capital, LLC (ResCap). Prior to the closing, we subserviced the related MSRs on behalf of Ally Bank. We assumed certain origination representation and warranty obligations in connection with the Ally MSR Transaction. No operations, entities or other assets were acquired in the transaction. | |||
On April 1, 2013, we completed the acquisition of Liberty (the Liberty Acquisition) through a stock purchase agreement. Liberty is engaged in the origination, purchase, sale and securitization of reverse mortgage loans, both retail and wholesale. | |||
On February 15, 2013, we completed the acquisition of certain assets and operations of ResCap in connection with the asset sale by ResCap and certain of its subsidiaries pursuant to a plan under Chapter 11 of the Bankruptcy Code (the ResCap Acquisition). We purchased MSRs related to private label, Freddie Mac and Ginnie Mae residential forward mortgage loans and certain master and subservicing agreements. The ResCap Acquisition included advances and elements of the servicing platform related to the acquired MSRs. Under the terms of the ResCap Acquisition, we are obligated to acquire certain servicing rights and subservicing agreements that were not settled as part of the initial closing on February 15, 2013 as a result of objections raised in connection with the sale. We completed subsequent settlements as objections were resolved on July 1 and September 1, 2013. We expect to have additional settlements through December 31, 2013 in connection with the ResCap Acquisition. | |||
On December 27, 2012, we completed the merger by and among Ocwen, O&H Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Ocwen, Homeward Residential Holdings, Inc. (Homeward Holding) and WL Ross & Co. LLC, a Delaware limited liability company as shareholder representative. Pursuant to the merger, O&H Acquisition Corp. merged with and into Homeward Holding with Homeward Holding continuing as the surviving corporation and becoming a wholly-owned subsidiary of Ocwen (the Homeward Acquisition). Homeward primarily engages in the origination, purchase, sale and securitization of prime loans and the servicing of residential forward mortgage loans. | |||
Basis of Presentation | |||
The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions of the Securities and Exchange Commission (SEC) to Form 10-Q and SEC Regulation S-X, Article 10, Rule 10-01 for interim financial statements. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP) for complete financial statements. In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation. The results of operations and other data for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2013. The unaudited consolidated financial statements presented herein should be read in conjunction with the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. | |||
The preparation of financial statements in conformity with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates. Material estimates that are particularly significant in the near or medium term relate to fair value measurements, the provision for potential losses that may arise from litigation proceedings, representation and warranty and other indemnification obligations, the amortization of MSRs and the valuation of goodwill and deferred tax assets. | |||
Principles of Consolidation | |||
Our financial statements include the accounts of Ocwen, its majority-owned subsidiaries and any variable interest entity (VIE) where we have determined that we are the primary beneficiary. We apply the equity method of accounting to investments when the entity is not a VIE, and we are able to exercise significant influence, but not control, over the policies and procedures of the entity but own 50% or less of the voting securities. We have eliminated intercompany accounts and transactions in consolidation. | |||
Reclassification | |||
Within the revenue section of the Consolidated Statement of Operations for the three and nine months ended September 30, 2012, we reclassified Process management fees of $8.9 million and $27.6 million to Other revenues. In addition, certain other insignificant amounts in the Consolidated Statements of Operations and Cash Flows for prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on our consolidated financial position, cash flows or results of operations. | |||
Significant Accounting Policies | |||
Transfers of Financial Assets | |||
We securitize, sell and service forward and reverse residential mortgage loans. Securitization transactions typically involve the use of VIEs and are accounted for either as sales or as secured financings. We typically retain economic interests in the securitized assets in the form of servicing rights and obligations. In order to efficiently finance our assets and operations and create liquidity, we may sell servicing advances, MSRs and the right to receive servicing fees, excluding ancillary income, relating to certain of our MSRs (Rights to MSRs). | |||
In order to determine whether or not a VIE is required to be consolidated, we consider our ongoing involvement with the VIE. In circumstances where we have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive benefits that could be significant, we would conclude that we would consolidate the entity, which precludes us from recording an accounting sale in connection with the transfer of the financial assets. In the case of a consolidated VIE, we continue to record the underlying residential mortgage loans or servicing advances, and we record the securitized debt on our consolidated balance sheet. | |||
In the case of transfers where either one or both of the power or economic criteria above are not met, we evaluate whether we achieve a sale for accounting purposes. In order to achieve a sale, the transferred assets must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond our control. If we fail any of these three criteria, the accounting is consistent with a secured financing as described in the preceding paragraph. Subsequent to the determination that a transaction does not meet the accounting sale criteria, we may determine that we meet the criteria. In the event we subsequently meet the accounting sale criteria, we derecognize the transferred assets and related liabilities. | |||
In the case of transfers of MSRs and Rights to MSRs where we retain the right to subservice, we defer the related gain or loss and amortize the balance over the life of the subservicing agreement. | |||
Gains or losses on off-balance sheet securitizations take into consideration any retained interests, including servicing rights and representation and warranty obligations, both of which are initially recorded at fair value at the date of sale in Gain on loans held for sale, net, in our Consolidated Statements of Operations. | |||
Recent Accounting Pronouncements | |||
Accounting Standards Update (ASU) 2011-11, (Accounting Standards Codification (ASC) 210, Balance Sheet): Disclosures about Offsetting Assets and Liabilities and ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU contains new disclosure requirements regarding the nature of an entity’s rights of offset and related arrangements associated with financial and derivative instruments. ASU 2013-01 clarified the scope of transactions that are subject to ASU 2011-11. The new disclosures also provide information about gross and net exposures. Retrospective application is required for all comparative periods presented. Our adoption of these standards on January 1, 2013 did not have a material impact on our unaudited consolidated financial statements, as the requirements relate to disclosures only. | |||
ASU 2013-02 (ASC 220, Comprehensive Income): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (which amends ASC 220, Comprehensive Income). ASC 2013-02 contains new requirements related to the presentation and disclosure of items that are reclassified out of accumulated other comprehensive income. The ASU is required to be applied prospectively. Adoption of this standard on January 1, 2013 did not have a material impact on our unaudited consolidated financial statements, as the requirements relate to disclosures only. | |||
ASU 2013-04 (ASC 405, Liabilities): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, a consensus of the FASB Emerging Issues Task Force (EITF). On February 28, 2013, the FASB issued ASU 2013-04. The ASU requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following: | |||
a. | The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and | ||
b. | Any additional amount the reporting entity expects to pay on behalf of its co-obligors. | ||
Required disclosures include a description of the joint-and-several arrangement and the total outstanding amount of the obligation for all joint parties. The ASU permits entities to aggregate disclosures (as opposed to providing separate disclosures for each joint-and-several obligation). The ASU is effective for all prior periods in fiscal years beginning on or after December 15, 2013 (and interim reporting periods within those years). The ASU should be applied retrospectively to obligations with joint-and-several liabilities existing at the beginning of an entity’s fiscal year of adoption. Entities that elect to use hindsight in measuring their obligations during the comparative periods must disclose that fact. Early adoption is permitted. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial condition or results of operations. | |||
ASU 2013-05 (ASC 830, Foreign Currency Matters): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, a consensus of the FASB Emerging Issues Task Force. On March 4, 2013, the FASB issued ASU 2013-05, which requires that the entire amount of a cumulative translation adjustment (CTA) related to an entity’s investment in a foreign entity should be released when there has been a: | |||
● | sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, | ||
● | loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated), or | ||
● | step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity). | ||
The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The ASU is effective for fiscal years (and interim periods within those fiscal years) beginning on or after December 15, 2013. The ASU should be applied prospectively from the beginning of the fiscal year of adoption. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial condition or results of operations. | |||
ASU 2013-10 (ASC 815, Derivatives and Hedging): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). On July 17, 2013, the FASB issued ASU 2013-10, which permits the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to interest rates on direct Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (LIBOR). The ASU also removes the restriction on using different benchmark rates for similar hedges. The ASU is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Because we terminated our remaining interest rate swap agreements on May 31, 2013, our adoption of this standard did not have a material impact on our consolidated financial condition or results of operations. | |||
ASU 2013-11 (ASC 740, Income Taxes): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). On July 18, 2013, the FASB issued ASU 2013-11, which clarifies that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. | |||
The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The ASU should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial condition or results of operations. |
NOTE_2_SECURITIZATIONS_AND_VAR
NOTE 2 SECURITIZATIONS AND VARIABLE INTEREST ENTITIES | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Asset Sales and Financing [Abstract] | ' | ||||||||
SECURITIZATIONS AND VARIABLE INTEREST ENTITIES | ' | ||||||||
NOTE 2 | SECURITIZATIONS AND VARIABLE INTEREST ENTITIES | ||||||||
We securitize, sell and service forward and reverse residential mortgage loans and regularly transfer financial assets in connection with asset-backed financing arrangements. We have aggregated these securitizations and asset-backed financing arrangements into two groups: (1) securitizations of residential mortgage loans and (2) financings of advances on loans serviced for others. | |||||||||
We have determined that the SPEs created in connection with our match funded financing facilities are VIEs of which we are the primary beneficiary. We also determined that we were the primary beneficiary for certain residential mortgage loan securitization trusts which were de-recognized at December 31, 2012, upon sale of our retained interest to a third party. | |||||||||
Securitizations of Residential Mortgage Loans | |||||||||
Currently, we securitize forward and reverse residential mortgage loans involving the GSEs. We retain the right to service these loans and receive servicing fees based upon the securitized loan balances and certain ancillary fees, all of which are reported in servicing and subservicing fees on the Consolidated Statements of Operations. In prior years, we securitized residential mortgage loans through “private label” securitization trusts. We continued to be involved with the securitization trusts, typically by acting as the servicer or sub-servicer for the loans held by the trust and by retaining a beneficial ownership interest in the securitization trust. The beneficial interests that we held consisted of both subordinate and residual securities that were either retained at the time of the securitization or subsequently acquired. We also acquired residual and subordinated interests in trusts where we were not the transferor but were the servicer. | |||||||||
In December 2012, we sold the beneficial interests that we held in the four consolidated securitization trusts and deconsolidated these securitization trusts. All assets and liabilities associated with the trusts were derecognized. We have no obligation to provide financial support to unconsolidated securitization trusts and have provided no such support. The beneficial owners of the trusts can look only to the assets of the securitization trusts for satisfaction of the debt issued by the securitization trusts and have no recourse against the assets of Ocwen. The general creditors of Ocwen have no claim on the assets of the trusts. | |||||||||
Transfers of Forward Loans | |||||||||
As part of our origination activities, we sell or securitize forward loans that we originate or that we purchase from third parties, generally in the form of mortgage-backed securities guaranteed by the GSEs. Securitization usually occurs within 30 days of loan closing or purchase. We retain servicing rights associated with the transferred loans and receive a servicing fee for services provided. We act only as a fiduciary and do not have a variable interest in the securitization trusts. As a result, we account for these transactions as sales upon transfer. | |||||||||
We elected to measure loans held for sale at fair value. We report interest income on loans held for sale in other income (expense). We report the gain or loss on the transfer of the loans held for sale in Gain on loans held for sale, net in the Consolidated Statements of Operations. We also include in Gain on loans held for sale, net changes in fair value of loans and the gain or loss on the related derivatives. See Note 19 – Derivative Financial Instruments and Hedging Activities for information on these derivative financial instruments. We include all changes in loans held for sale and related derivative balances in operating activities in the Consolidated Statements of Cash Flows. | |||||||||
The following table presents a summary of cash flows received from and paid to securitization trusts related to transfers accounted for as sales that were outstanding during the periods ended September 30, 2013: | |||||||||
Three Months | Nine Months | ||||||||
Proceeds received from securitizations | $ | 1,776,309 | $ | 6,240,459 | |||||
Servicing fees collected | 6,317 | 13,125 | |||||||
Purchases of previously transferred assets, net of claims reimbursed | (358 | ) | (358 | ) | |||||
$ | 1,782,268 | $ | 6,253,226 | ||||||
In connection with these transfers, we recorded MSRs of $16.3 million and $63.2 million for the three and nine months ended September 30, 2013. We initially record the MSRs at fair value and subsequently account for them at amortized cost. See Note 9 – Mortgage Servicing for information relating to MSRs. | |||||||||
Certain guarantees arise from agreements associated with the transfers of loans. Under these agreements, we may be obligated to repurchase the loans, or otherwise indemnify or reimburse the investor or insurer, for losses incurred due to material breach of contractual representations and warranties. See Note 16 – Other Liabilities for further information. | |||||||||
The following table presents the carrying amounts of our assets that relate to our continuing involvement with forward loans that we have transferred with servicing rights retained since the Homeward Acquisition as well as our maximum exposure to loss including the unpaid principal balance of the transferred loans: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Carrying value of assets: | |||||||||
Mortgage servicing rights, at amortized cost | $ | 53,562 | $ | — | |||||
Mortgage servicing rights, at fair value | 2,751 | 2,908 | |||||||
Advances and match funded advances | 16,254 | — | |||||||
Unpaid principal balance of loans transferred (1) | 6,125,869 | 238,010 | |||||||
Maximum exposure to loss | $ | 6,198,436 | $ | 240,918 | |||||
-1 | The UPB of the loans transferred is the maximum exposure to loss under our standard representations and warranties obligations. | ||||||||
At September 30, 2013, only 1.0% of the transferred residential loans that we serviced were 60 days or more past due. During the three and nine months ended September 30, 2013, there were no charge-offs, net of recoveries, associated with these transferred loans. | |||||||||
Transfers of Reverse Mortgages | |||||||||
We are an approved issuer of Ginnie Mae Home Equity Conversion Mortgage-Backed Securities (HMBS) that are guaranteed by Ginnie Mae. With the acquisition of Liberty, we have begun to originate Home Equity Conversion Mortgages (HECMs or reverse mortgages) that are insured by the FHA. We then pool the loans into HMBS that we sell into the secondary market with servicing rights retained. Based upon the structure of the Ginnie Mae securitization program, we have determined that loan transfers in the HMBS program do not meet the definition of a participating interest because of the servicing requirements in the product that require the Issuer/Servicer to absorb some level of interest rate risk, cash flow timing risk and incidental credit risk. As a result, HECMs do not qualify for sale accounting, and we, therefore, account for these transfers as secured borrowings. Under this accounting treatment, the HECMs remain on our Consolidated Balance Sheet as loans held for investment (Loans – Restricted for Securitization Investors) in Other assets. We record the proceeds from the transfer of assets as secured borrowings (Secured borrowing – owed to securitization investors) in Other borrowings and recognize no gain or loss on the transfer. Holders of participating interests in the HMBS have no recourse against Ocwen, except for standard representations and warranties and our contractual obligation to service the HECMs and the HMBS, and have no recourse against the assets of Ocwen. | |||||||||
We have elected to measure the HECMS and HMBS-related borrowings at fair value. The changes in fair value of the HECMs and HMBS-related borrowings are included in other revenues in our Consolidated Statement of Operations. Included in net fair value gains on the HECMs and related HMBS borrowings are the interest income that we expect to be collected on the HECMs and the interest expense that we expect to be paid on the HMBS-related borrowings. We report originations and payments of HECMs in investing activities in the Consolidated Statements of Cash Flows. We report net fair value gains on HECMs and the related HMBS borrowings as an adjustment to the net cash provided by or used in operating activities in the Consolidated Statements of Cash Flows. Proceeds from securitizations of HECMs and payments on HMBS-related borrowings are included in financing activities in the Consolidated Statements of Cash Flows. | |||||||||
We had HMBS-related borrowings of $284.3 million and $290.9 million of HECMs pledged as collateral to the pools at September 30, 2013. | |||||||||
Financings of Advances on Loans Serviced for Others | |||||||||
Match funded advances on loans serviced for others result from our transfers of residential loan servicing advances to SPEs in exchange for cash. We consolidate these SPEs because the transfers do not qualify for sales accounting treatment or because Ocwen is the primary beneficiary of the SPE. | |||||||||
These SPEs issue debt supported by collections on the transferred advances. We made these transfers under the terms of our advance facility agreements. We classify the transferred advances on our Consolidated Balance Sheet as Match funded advances and the related liabilities as Match funded liabilities. The SPEs use collections of the pledged advances to repay principal and interest and to pay the expenses of the SPE. Holders of the debt issued by these entities can look only to the assets of the SPE for satisfaction of the debt and have no recourse against Ocwen. However, Ocwen and OLS have guaranteed the payment of the obligations under the securitization documents of one of the entities. The maximum amount payable under the guarantee is limited to 10% of the notes outstanding at the end of the facility’s revolving period in December 2014. The entity to which this guarantee applies had $37.6 million of notes outstanding at September 30, 2013. Ocwen and OLS had previously guaranteed the payment of obligations under the securitization documents of one additional entity; however, in July 2013, the notes outstanding under this facility were repaid, and the facility was terminated. The assets and liabilities of the advance financing SPEs are comprised solely of Match funded advances, Debt service accounts, Match funded liabilities and amounts due to affiliates. Amounts due to affiliates are eliminated in consolidation. | |||||||||
See Note 8 – Match Funded Advances, Note 12 – Debt Service Accounts and Note 14 – Match Funded Liabilities for additional information. |
NOTE_3_TRANSFERS_OF_FINANCIAL_
NOTE 3 TRANSFERS OF FINANCIAL ASSETS | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Asset Sales and Financing [Abstract] | ' | ||||||||
TRANSFERS OF FINANCIAL ASSETS | ' | ||||||||
NOTE 3 | TRANSFERS OF FINANCIAL ASSETS | ||||||||
In order to efficiently finance our assets and operations and create liquidity, we periodically sell MSRs, Rights to MSRs and servicing advances to market participants, including Home Loan Servicing Solutions, Ltd. and its wholly owned subsidiary, HLSS Holdings, LLC (collectively HLSS). We typically retain the right to subservice loans when we sell MSRs and rights to MSRs. To the extent applicable, HLSS may also acquire advance SPEs and the related match funded liabilities (together with the purchase of Rights to MSRs and servicing advances, the HLSS Transactions). During the nine months ended September 30, 2013 and 2012, we completed HLSS Transactions relating to the Rights to MSRs for $109.8 billion and $48.2 billion of UPB, respectively. | |||||||||
As part of the HLSS Transactions, we retain legal ownership of the MSRs and continue to service the related mortgage loans. We are obligated to transfer legal ownership of the MSRs to HLSS upon obtaining all required third party consents. At that time, we would subservice the MSRs pursuant to our subservicing agreement, as amended, with HLSS. See Note 23 – Related Party Transactions for additional information. | |||||||||
The following table provides a summary of the assets and liabilities sold to HLSS in connection with the HLSS Transactions during the nine months ended September 30: | |||||||||
2013 | 2012 | ||||||||
Sale of MSRs accounted for as a financing | $ | 388,472 | $ | 184,269 | |||||
Sale of match funded advances | 3,489,907 | 1,088,505 | |||||||
Sale of advance SPEs: | |||||||||
Match funded advances | — | 413,374 | |||||||
Debt service account | — | 14,786 | |||||||
Prepaid lender fees and debt issuance costs | — | 5,422 | |||||||
Other prepaid expenses | — | 1,928 | |||||||
Match funded liabilities | — | (358,335 | ) | ||||||
Accrued interest payable and other accrued expenses | — | (841 | ) | ||||||
Net assets of advance SPEs | — | 76,334 | |||||||
Sales price, as adjusted | 3,878,379 | 1,349,108 | |||||||
Amount due to (from) HLSS for post-closing adjustments at September 30 | — | (4,260 | ) | ||||||
3,878,379 | 1,344,848 | ||||||||
Amount received from (paid to) HLSS as settlement of post-closing adjustments outstanding at the end of the previous year | 1,410 | — | |||||||
Total cash received | $ | 3,879,789 | $ | 1,344,848 | |||||
Because we retained legal title to the MSRs, the sales of Rights to MSRs are accounted for as financings. To the extent that we obtain all third party consents, legal title will transfer to HLSS, at which point we will derecognize the related MSRs. Upon derecognition, any resulting gain or loss will be deferred and amortized over the expected life of the related subservicing agreement. Until such time, we continue to recognize the full amount of servicing revenue and amortization of the MSRs. | |||||||||
The related advance sales meet the requirements for sale accounting under GAAP. When HLSS acquired advance SPEs from Ocwen, we derecognized the consolidated assets and liabilities of the Advance SPEs at the time of the sale. In subsequent sales of advances, HLSS acquired the advances directly and the transferred financial assets were accounted for as a sale and were derecognized from our financial statements. We have also evaluated our relationship with the financing SPEs to which HLSS has transferred the servicing advances that it has acquired from us and have determined that we are not required to consolidate these SPEs. |
NOTE_4_BUSINESS_ACQUISITIONS
NOTE 4 BUSINESS ACQUISITIONS | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Business Combinations [Abstract] | ' | ||||||||||||||||||||||||
BUSINESS ACQUISITIONS | ' | ||||||||||||||||||||||||
Note 4 | Business Acquisitions | ||||||||||||||||||||||||
We completed the Liberty, Correspondent One S.A. (Correspondent One), ResCap and Homeward acquisitions as part of our ongoing strategy to expand our residential origination and servicing businesses. We accounted for these transactions using the acquisition method which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. In a business combination, the initial allocation of the purchase price is considered preliminary and, therefore, subject to change until the end of the measurement period (up to one year from the acquisition date). Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined business. | |||||||||||||||||||||||||
The pro forma consolidated results presented below for each business acquisition are not indicative of what our consolidated net earnings would have been had we completed the acquisitions on the dates indicated because of differences in servicing practices and cost structure between Ocwen and each acquiree. In addition, the pro forma consolidated results do not purport to project our combined future results nor do they reflect the expected realization of any cost savings associated with the acquisitions. | |||||||||||||||||||||||||
The ResCap acquisition was treated as an asset acquisition for U.S. tax purposes. We expect the opening tax basis for the acquired assets and liabilities to be the fair value as shown in the purchase price allocation table below. We expect MSRs and goodwill to be treated as intangible assets acquired in connection with the purchase of a trade or business and, as such, amortized over 15 years for U.S. tax purposes. The acquisitions of Liberty and Homeward were treated as stock purchases for U.S. tax purposes. | |||||||||||||||||||||||||
Purchase Price Allocation | |||||||||||||||||||||||||
The following table summarizes the fair values of assets acquired and liabilities assumed as part of the ResCap and Homeward Acquisitions: | |||||||||||||||||||||||||
ResCap | Homeward | ||||||||||||||||||||||||
Purchase Price Allocation | March 31, | Adjustments | Revised | December 31, | Adjustments | Revised | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
Cash | $ | — | $ | — | $ | — | $ | 79,511 | $ | — | $ | 79,511 | |||||||||||||
Loans held for sale | — | — | — | 558,721 | — | 558,721 | |||||||||||||||||||
MSRs (2) | 393,891 | (2,038 | ) | 391,853 | -1 | 358,119 | 2,225 | 360,344 | |||||||||||||||||
Advances and match funded advances (2) | 1,622,348 | 100,031 | 1,722,379 | -1 | 2,266,882 | — | 2,266,882 | -1 | |||||||||||||||||
Deferred tax assets | — | — | — | 47,346 | — | 47,346 | -1 | ||||||||||||||||||
Premises and equipment | 22,398 | (5,975 | ) | 16,423 | -1 | 16,803 | (4,288 | ) | 12,515 | -1 | |||||||||||||||
Debt service accounts | — | — | — | 69,287 | — | 69,287 | |||||||||||||||||||
Investment in unconsolidated entities | — | — | — | 5,485 | — | 5,485 | -1 | ||||||||||||||||||
Receivables and other assets (3) | 2,989 | — | 2,989 | 56,886 | (29,746 | ) | 27,140 | ||||||||||||||||||
Match funded liabilities | — | — | — | (1,997,459 | ) | — | (1,997,459 | ) | |||||||||||||||||
Other borrowings | — | — | — | (864,969 | ) | — | (864,969 | ) | |||||||||||||||||
Other liabilities | |||||||||||||||||||||||||
Liability for indemnification obligations | (49,500 | ) | — | (49,500 | ) | (32,498 | ) | — | (32,498 | )(1) | |||||||||||||||
Liability for certain foreclosure matters (4) | — | — | — | — | (13,602 | ) | (13,602 | )(1) | |||||||||||||||||
Accrued bonuses | — | — | — | (35,201 | ) | — | (35,201 | ) | |||||||||||||||||
Checks held for escheat | — | — | — | (16,418 | ) | (35 | ) | (16,453 | )(1) | ||||||||||||||||
Other | (24,840 | ) | (284 | ) | (25,124 | ) | (47,614 | ) | 2,763 | (44,851 | )(1) | ||||||||||||||
Total identifiable net assets | 1,967,286 | 91,734 | 2,059,020 | 464,881 | (42,683 | ) | 422,198 | ||||||||||||||||||
Goodwill | 204,743 | (2,933 | ) | 201,810 | -1 | 300,843 | 41,783 | 342,626 | -1 | ||||||||||||||||
Total consideration | $ | 2,172,029 | $ | 88,801 | $ | 2,260,830 | $ | 765,724 | $ | (900 | ) | $ | 764,824 | ||||||||||||
-1 | Initial fair value estimate. | ||||||||||||||||||||||||
-2 | As of the acquisition date, the purchase of MSRs with a UPB of $9.0 billion from ResCap was not complete pending the receipt of certain consents and court approvals. During the third quarter we obtained the required consents and approvals for a portion of these MSRs and paid an additional purchase price of $93.3 million to acquire the MSRs and related advances. The purchase price allocation has been revised to include the resulting adjustments to MSRs, advances and goodwill. We anticipate there will be additional settlements in connection with the ResCap Acquisition in the fourth quarter of 2013. | ||||||||||||||||||||||||
-3 | The purchase price allocation has been revised to include a $29.7 million income tax liability, with an offsetting increase to goodwill. | ||||||||||||||||||||||||
-4 | See Note 16 - Other Liabilities. | ||||||||||||||||||||||||
The estimated fair values of the assets acquired and liabilities assumed at the acquisition date, as set forth in the table above, includes some amounts based on preliminary fair value estimates. The following factors led to certain balances having preliminary fair value estimates: | |||||||||||||||||||||||||
● | The complex nature of certain acquired assets and assumed liabilities prevents us from completing our valuations and reconciliations; | ||||||||||||||||||||||||
● | We engaged a third party specialist to assist in valuing certain assets and liabilities and this work is not yet complete; and | ||||||||||||||||||||||||
● | Underlying information such as unpaid principal balance (UPB) and other loan level details have not yet been boarded and reconciled onto our servicing platform, and therefore, we have not been able to fully validate and reconcile certain asset and liability balances correlated with UPB data. | ||||||||||||||||||||||||
Because the measurement period is still open, we expect that certain fair value estimates will change once we receive all information necessary to make a final fair value assessment. Any measurement period adjustments that we identify and determine to be material will be applied retrospectively to the period of acquisition, and depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected. We have adjusted the initial purchase price and purchase price allocations related to the Homeward and ResCap Acquisitions as indicated in the table above. These measurement period adjustments were applied retrospectively to the period of acquisition. The December 31, 2012 Consolidated Balance Sheet has been revised to reflect the adjustments attributable to the Homeward Acquisition. None of the adjustments had a material effect on earnings. | |||||||||||||||||||||||||
ResCap Acquisition | |||||||||||||||||||||||||
We completed the ResCap Acquisition on February 15, 2013. We acquired MSRs to “private label,” Freddie Mac and Ginnie Mae loans with a UPB of $103.8 billion and master servicing agreements with a UPB of $40.7 billion. We also assumed subservicing contracts with a UPB of $26.3 billion, including $9.0 billion we agreed to subservice on behalf of ResCap until we obtain certain consents and court approvals. We purchase these MSRs and assume the subservicing contracts from ResCap when such consents and approvals are obtained. As disclosed above, we completed the purchase of certain of these MSRs during the third quarter. We also acquired certain diversified fee-based business operations that included recovery, title and closing services. | |||||||||||||||||||||||||
To finance the ResCap Acquisition, we deployed $840.0 million from the proceeds of a new $1.3 billion senior secured term loan (SSTL) facility and borrowed an additional $1.2 billion pursuant to two new servicing advance facilities and one existing facility. We settled the third quarter closings from operating cash. Ocwen assumed certain limited liabilities as part of the transaction, including certain employee liabilities and certain business payables outstanding at the closing date. Under the agreement with ResCap, Ocwen generally did not assume any contingent obligations, including pending or threatened litigation, financial obligations in connection with any settlements, orders or similar agreements entered into by ResCap or obligations in connection with any representations or warranties associated with loans previously sold by ResCap except for litigation that may arise in the ordinary course of servicing mortgage loans relating to servicing agreements assumed by Ocwen. Ocwen assumed all liabilities related to servicing loans that are guaranteed by Ginnie Mae, whether arising prior to or after the closing date. | |||||||||||||||||||||||||
On April 12, 2013 in connection with the sale to Altisource Portfolio Solutions, S.A. (Altisource) of the diversified fee-based business acquired in connection with the ResCap Acquisition, Ocwen agreed to establish additional terms related to existing servicing arrangements between Altisource and Ocwen for mortgage servicing assets acquired from ResCap. The cash consideration paid by Altisource to Ocwen under the Agreement totaled $128.8 million. At the time of the closing, we derecognized goodwill of $128.8 million associated with the diversified fee-based business sold to Altisource. There were no other significant assets or liabilities associated with this business. See Note 22 – Business Segment Reporting for a discussion of the additional terms of the servicing arrangements. | |||||||||||||||||||||||||
Post-Acquisition Results of Operations | |||||||||||||||||||||||||
The following table presents the revenue and earnings of the ResCap Business operations that are included in our unaudited Consolidated Statements of Operations from the acquisition date of February 15, 2013 through September 30, 2013: | |||||||||||||||||||||||||
For the Periods Ended September 30, 2013: | Three Months | Nine Months | |||||||||||||||||||||||
Revenues | $ | 212,164 | $ | 508,589 | |||||||||||||||||||||
Net income | $ | 8,230 | $ | 81,362 | |||||||||||||||||||||
Pro Forma Results of Operations | |||||||||||||||||||||||||
The following table presents supplemental pro forma information for Ocwen as if the ResCap Acquisition occurred on January 1, 2012. Pro forma adjustments include: | |||||||||||||||||||||||||
● | conforming servicing revenues to the revenue recognition policies followed by Ocwen; | ||||||||||||||||||||||||
● | conforming the accounting for MSRs to the valuation and amortization policies of Ocwen; | ||||||||||||||||||||||||
● | adjusting interest expense to eliminate the pre-acquisition interest expense of ResCap and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2012; and | ||||||||||||||||||||||||
● | reporting acquisition-related charges for professional services as if they had been incurred in 2012 rather than 2013. | ||||||||||||||||||||||||
For the Periods Ended September 30: | Three Months | Nine Months | |||||||||||||||||||||||
2012 | 2013 | 2012 | |||||||||||||||||||||||
Revenues | $ | 374,751 | $ | 1,530,055 | $ | 1,027,102 | |||||||||||||||||||
Net income | $ | 2,696 | $ | 205,062 | $ | 21,921 | |||||||||||||||||||
Homeward Acquisition | |||||||||||||||||||||||||
We completed the Homeward Acquisition on December 27, 2012. We acquired the MSRs and subservicing for approximately 421,000 residential mortgage loans with a UPB of $77.0 billion. We also acquired Homeward’s loan origination platform and its diversified fee-based businesses, including property valuation, REO management, title, closing and advisory services. On March 29, 2013, Ocwen sold the Homeward diversified fee-based businesses to Altisource Solutions S.à r.l. and Altisource Portfolio Solutions, Inc., wholly-owned subsidiaries of Altisource, for an aggregate purchase price of $87.0 million in cash. Ocwen sold its investment in two subsidiaries of Homeward, Beltline Road Insurance Agency, Inc. and Power Default Services, Inc. As part of this transaction, Ocwen also agreed to sell certain designated assets used or usable in the business conducted by another Homeward subsidiary, Power Valuation Services, Inc., as well as certain designated intellectual property and information technology assets that are used or usable in the business conducted by the acquired subsidiaries or by Powerline Valuation Services, Inc. Altisource also assumed certain liabilities of the diversified fee-based business. The carrying value of the net assets sold, including allocated goodwill, approximated the sales price. The assets sold consisted of receivables and other assets of $9.4 million. The liabilities assumed by Altisource of $4.0 million consisted principally of deferred revenue. At the time of the sale, we derecognized goodwill of $81.6 million associated with the sold business. In connection with this transaction, Ocwen entered into amendments to certain of its services and intellectual property agreements with Altisource. See Note 23 – Related Party Transactions for a discussion of these amendments. | |||||||||||||||||||||||||
Pro Forma Results of Operations | |||||||||||||||||||||||||
The following table presents supplemental pro forma information for Ocwen as if the acquisition of Homeward occurred on January 1, 2011. Pro forma adjustments include: | |||||||||||||||||||||||||
● | conforming servicing revenues to the revenue recognition policy followed by Ocwen; | ||||||||||||||||||||||||
● | conforming the accounting for MSRs to the valuation and amortization policies of Ocwen; | ||||||||||||||||||||||||
● | reversing depreciation recognized by Homeward and reporting depreciation based on the estimated fair values and remaining lives of the acquired premises and equipment at the date of acquisition; | ||||||||||||||||||||||||
● | adjusting interest expense to eliminate the pre-acquisition interest expense of Homeward and to recognize interest expense as if the acquisition-related debt of Ocwen had been outstanding at January 1, 2011; and | ||||||||||||||||||||||||
● | reporting acquisition-related charges for professional services as if they had been incurred in 2011 rather than 2012. | ||||||||||||||||||||||||
For the Periods Ended September 30, 2012: | Three Months | Nine Months | |||||||||||||||||||||||
Revenues | $ | 346,037 | $ | 949,587 | |||||||||||||||||||||
Net income | $ | 57,013 | $ | 133,821 | |||||||||||||||||||||
Other Acquisitions | |||||||||||||||||||||||||
Correspondent One | |||||||||||||||||||||||||
On March 31, 2013, we increased our ownership in Correspondent One, an entity formed with Altisource in March 2011, from 49% to 100%. We acquired the shares of Correspondent One held by Altisource (49% interest) for $12.6 million and acquired the remaining shares held by an unrelated entity for $0.9 million. We accounted for this transaction as an acquisition and recognized the assets acquired and liabilities assumed at their fair values as of the acquisition date. The acquired net assets were $26.3 million and consisted primarily of cash ($23.0 million) and residential mortgage loans ($1.1 million). We remeasured our previously held investment, which we accounted for using the equity method, at fair value and recognized a loss of $0.4 million. We also recognized goodwill of $0.1 million. We began including the accounts of Correspondent One in our consolidated financial statements effective on the date of acquisition and have eliminated our investment in consolidation. Correspondent One facilitates the purchase of conforming and government-guaranteed residential mortgages from approved mortgage originators and resells the mortgages to secondary market investors. Correspondent One is not material to our financial condition, results of operations or cash flows. | |||||||||||||||||||||||||
Liberty | |||||||||||||||||||||||||
On April 1, 2013, we completed the Liberty Acquisition for $22.0 million in cash. In addition, and as part of the closing, Ocwen repaid Liberty’s $9.1 million existing outstanding debt to the sellers. We acquired approximately 420 reverse mortgage loans with a UPB of $55.2 million. We also acquired Liberty’s reverse mortgage origination platform. The acquired net assets were $31.1 million and consisted primarily of residential reverse mortgage loans ($60.0 million), receivables ($11.2 million), loans held for investment ($10.3 million), intangible assets ($3.2 million) and cash ($4.6 million) less amounts due under warehouse facilities ($46.3 million) and HMBS-related borrowings ($10.2 million). We did not recognize any goodwill in connection with this acquisition. The acquisition of Liberty did not have a material effect on our financial condition, results of operations or cash flows. |
NOTE_5_FAIR_VALUE_OF_FINANCIAL
NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | ' | ||||||||||||||||||||
NOTE 5 | FAIR VALUE OF FINANCIAL INSTRUMENTS | ||||||||||||||||||||
We estimate fair value 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. | |||||||||||||||||||||
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. | |||||||||||||||||||||
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. | |||||||||||||||||||||
Level 3: Unobservable inputs for the asset or liability. | |||||||||||||||||||||
We classify assets in their entirety based on the lowest level of input that is significant to the fair value measurement. | |||||||||||||||||||||
The carrying amounts and the estimated fair values of our financial instruments and our nonfinancial assets measured at fair value are as follows: | |||||||||||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||||||||||
Level | Carrying | Fair | Carrying | Fair | |||||||||||||||||
Value | Value | Value | Value | ||||||||||||||||||
Financial assets: | |||||||||||||||||||||
Loans held for sale, at fair value (1) | 2 | $ | 335,102 | $ | 335,102 | $ | 426,480 | $ | 426,480 | ||||||||||||
Loans held for sale, at lower of cost or fair value (2) | 3 | 86,753 | 86,753 | 82,866 | 82,866 | ||||||||||||||||
Loans – restricted for securitization investors, at fair value (1) | 3 | 290,853 | 290,853 | — | — | ||||||||||||||||
Advances and match funded advances (3) | 3 | 1,480,012 | 1,480,012 | 3,233,707 | 3,233,707 | ||||||||||||||||
Receivables, net (3) | 3 | 223,404 | 223,404 | 137,713 | 137,713 | ||||||||||||||||
Financial liabilities: | |||||||||||||||||||||
Match funded liabilities (3) | 3 | $ | 363,012 | $ | 363,012 | $ | 2,532,745 | $ | 2,533,278 | ||||||||||||
Other borrowings: | |||||||||||||||||||||
Senior secured term loan (3) | 3 | 1,287,821 | 1,278,273 | 305,997 | 310,822 | ||||||||||||||||
Secured borrowings – owed to securitization investors, at fair value (1) | 3 | 284,276 | 284,276 | — | — | ||||||||||||||||
Other (3) | 3 | 1,020,494 | 1,020,494 | 790,682 | 790,682 | ||||||||||||||||
Total Other borrowings | 2,592,591 | 2,583,043 | 1,096,679 | 1,101,504 | |||||||||||||||||
Derivative financial instruments (1): | |||||||||||||||||||||
Interest rate lock commitments (IRLCs) | 2 | $ | 13,491 | $ | 13,491 | $ | 5,781 | $ | 5,781 | ||||||||||||
Interest rate swaps | 3 | — | — | (10,836 | ) | (10,836 | ) | ||||||||||||||
Forward MBS trades | 1 | (12,185 | ) | (12,185 | ) | (1,719 | ) | (1,719 | ) | ||||||||||||
U.S. Treasury futures | 1 | — | — | (1,258 | ) | (1,258 | ) | ||||||||||||||
Interest rate caps | 3 | — | — | 168 | 168 | ||||||||||||||||
MSRs, at fair value (1) | 3 | $ | 96,938 | $ | 96,938 | $ | 85,213 | $ | 85,213 | ||||||||||||
-1 | Measured at fair value on a recurring basis. | ||||||||||||||||||||
-2 | Measured at fair value on a non-recurring basis. | ||||||||||||||||||||
-3 | Disclosed, but not carried, at fair value. | ||||||||||||||||||||
The following tables present a reconciliation of the changes in fair value of Level 3 assets that we measure at fair value on a recurring basis: | |||||||||||||||||||||
Loans – | Secured | Derivative | MSRs at | Total | |||||||||||||||||
restricted for | borrowings – | Financial | Fair | ||||||||||||||||||
securitization | owed to | Instruments | Value | ||||||||||||||||||
investors | securitization | ||||||||||||||||||||
investors | |||||||||||||||||||||
Three Months Ended September 30, 2013: | |||||||||||||||||||||
Beginning balance | $ | 76,649 | $ | (73,641 | ) | $ | 176 | $ | 97,163 | $ | 100,347 | ||||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Purchases | — | — | — | — | — | ||||||||||||||||
Issuances | 211,052 | (206,714 | ) | — | — | 4,338 | |||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||||
Settlements | (1,293 | ) | 1,021 | (176 | ) | — | (448 | ) | |||||||||||||
209,759 | (205,693 | ) | (176 | ) | — | 3,890 | |||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | 4,445 | (4,942 | ) | — | (225 | ) | (722 | ) | |||||||||||||
Included in Other comprehensive income (loss) | — | — | — | — | — | ||||||||||||||||
4,445 | (4,942 | ) | — | (225 | ) | (722 | ) | ||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | 290,853 | $ | (284,276 | ) | $ | — | $ | 96,938 | $ | 103,515 | ||||||||||
Three Months Ended September 30, 2012: | |||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | (14,905 | ) | $ | — | $ | (14,905 | ) | |||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Settlements | — | — | 102 | — | 102 | ||||||||||||||||
— | — | 102 | — | 102 | |||||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | — | — | 1,397 | — | 1,397 | ||||||||||||||||
Included in Other comprehensive income (loss) | — | — | (2,688 | ) | — | (2,688 | ) | ||||||||||||||
— | — | (1,291 | ) | — | (1,291 | ) | |||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | — | $ | — | $ | (16,094 | ) | $ | — | $ | (16,094 | ) | |||||||||
Loans – | Secured | Derivative | MSRs at | Total | |||||||||||||||||
restricted for | borrowings – | Financial | Fair | ||||||||||||||||||
securitization | owed to | Instruments | Value | ||||||||||||||||||
investors | securitization | ||||||||||||||||||||
investors | |||||||||||||||||||||
Nine Months Ended September 30, 2013: | |||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | (10,668 | ) | $ | 85,213 | $ | 74,545 | ||||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Purchases | 10,251 | (10,179 | ) | — | — | 72 | |||||||||||||||
Issuances | 274,081 | (272,652 | ) | — | — | 1,429 | |||||||||||||||
Sales | — | — | 24,156 | — | 24,156 | ||||||||||||||||
Settlements | (2,164 | ) | 1,888 | (1,242 | ) | — | (1,518 | ) | |||||||||||||
282,168 | (280,943 | ) | 22,914 | — | 24,139 | ||||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | 8,685 | (3,333 | ) | 117 | 11,725 | 17,194 | |||||||||||||||
Included in Other comprehensive income (loss) | — | — | (12,363 | ) | — | (12,363 | ) | ||||||||||||||
8,685 | (3,333 | ) | (12,246 | ) | 11,725 | 4,831 | |||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | 290,853 | $ | (284,276 | ) | $ | — | $ | 96,938 | $ | 103,515 | ||||||||||
Nine Months Ended September 30, 2012: | |||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | (16,676 | ) | $ | — | $ | (16,676 | ) | |||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Settlements | — | — | 2,524 | — | 2,524 | ||||||||||||||||
— | — | 2,524 | — | 2,524 | |||||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | — | — | 6,645 | — | 6,645 | ||||||||||||||||
Included in Other comprehensive income (loss) | — | — | (8,587 | ) | — | (8,587 | ) | ||||||||||||||
— | — | (1,942 | ) | — | (1,942 | ) | |||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | — | $ | — | $ | (16,094 | ) | $ | — | $ | (16,094 | ) | |||||||||
-1 | For derivative financial instruments held at September 30, 2012, total net losses were $1.3 million and $7.7 million for the three and nine months ended September 30, 2012, respectively. | ||||||||||||||||||||
The methodologies that we use and key assumptions that we make to estimate the fair value of financial instruments and other assets and liabilities measured at fair value on a recurring or non-recurring basis are described below: | |||||||||||||||||||||
Loans Held for Sale | |||||||||||||||||||||
We originate and purchase residential forward and reverse mortgage loans that we intend to sell to the GSEs. We also own residential mortgage loans that are not eligible to be sold to the GSEs due to delinquency or other factors. Residential forward and reverse mortgage loans that we intend to sell to the GSEs are carried at fair value as a result of a fair value election. Such loans are subject to changes in fair value due to fluctuations in interest rates from the closing date through the date of the sale of the loan into the secondary market. These loans are classified within Level 2 of the valuation hierarchy as the primary component of the price is obtained from observable values of mortgage forwards for loans of similar terms and characteristics. We have the ability to access this market, and it is the market into which conforming mortgage loans are typically sold. | |||||||||||||||||||||
We report all other loans held for sale at the lower of cost or fair value. Current market illiquidity has reduced the availability of observable pricing data for certain of these loans. When we enter into an agreement to sell a loan or pool of loans to an investor at a set price, we value the loan or loans at the commitment price. We base the fair value of uncommitted loans on the expected future cash flows discounted at a rate commensurate with the risk of the estimated cash flows. Assumptions used in the valuation of performing loans include historical default rates, re-performance rates on defaulted loans, loss severity on defaulted loans, average resolution timeline, average coupon rate and a discount rate. Significant assumptions used in the valuation of nonperforming loans include the current market value of the underlying collateral based on third party sources such as appraisals or broker price opinions, resolution timeline, estimated foreclosure and disposition costs that are based on historical experience and a discount rate. The assumptions we used in the valuation of these performing and non-performing loans at September 30, 2013 have not changed significantly from those we used in the December 31, 2012 valuations. | |||||||||||||||||||||
We repurchase certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolution activity as part of our servicing obligations. These are classified as loans held for sale at the lower of cost or fair value, in the case of modified loans, as we expect to redeliver (sell) the loans to new Ginnie Mae guaranteed securitizations. The fair value of these loans is estimated using published forward Ginnie Mae prices. Loans repurchased in connection with loan resolution activities are modified or otherwise remediated through loss mitigation activities or are reclassified to receivables. Because these loans are insured or guaranteed by the FHA or VA, the fair value of these loans represents the net recovery value taking into consideration the insured or guaranteed claim. | |||||||||||||||||||||
Loans – Restricted for Securitization Investors | |||||||||||||||||||||
These loans are not traded in an active, open market with readily observable prices. We base the fair value of transferred reverse mortgage loans that do not qualify as sales for accounting purposes 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. Significant assumptions included expected prepayment and delinquency rates and cumulative loss curves. The discount rate assumption for these assets is primarily based on an assessment of current market yields on newly originated reverse mortgage loans, expected duration of the asset, and current market interest rates. | |||||||||||||||||||||
The more significant assumptions used in the September 30, 2013 valuation of our Loans – Restricted for Securitization Investors include: | |||||||||||||||||||||
● | Life in years ranging from 2.97 to 23.52 (weighted average of 6.79); | ||||||||||||||||||||
● | Conditional repayment rate ranging from 4.80% to 38.40% (weighted average of 8.44%); and | ||||||||||||||||||||
● | Discount rate of 1.84%. | ||||||||||||||||||||
Significant increases or decreases in any of these assumptions in isolation would result in a significantly higher or lower fair value. | |||||||||||||||||||||
Mortgage Servicing Rights | |||||||||||||||||||||
Amortized Cost MSRs | |||||||||||||||||||||
We estimate the fair value of MSRs carried at amortized cost using a combination of internal models and data provided by third-party valuation experts. The most significant assumptions used in the valuation of MSRs are the speed at which mortgages prepay and delinquency experience. Other assumptions typically used in the valuation of MSRs are: | |||||||||||||||||||||
● | Cost of servicing | ||||||||||||||||||||
● | Discount rate | ||||||||||||||||||||
● | Interest rate used for computing the cost of financing servicing advances | ||||||||||||||||||||
● | Interest rate used for computing float earnings | ||||||||||||||||||||
● | Compensating interest expense | ||||||||||||||||||||
● | Collection rate of other ancillary fees | ||||||||||||||||||||
The significant components of the estimated future cash inflows for MSRs include servicing fees, late fees, float earnings and other ancillary fees. Significant cash outflows include the cost of servicing, the cost of financing servicing advances and compensating interest payments. | |||||||||||||||||||||
We perform an impairment analysis based on the difference between the carrying amount and fair value after grouping our loans into the applicable strata. As a result of the Homeward and ResCap Acquisitions, management has re-evaluated the portfolio and determined the appropriate strata are Agency and Non-Agency. The Agency stratum includes all GSE MSRs. The Non-Agency stratum includes all private label primary and master MSRs. | |||||||||||||||||||||
We estimate fair value using internal models and with the assistance of third-party valuation experts. Our internal models calculate the present value of expected future cash flows utilizing assumptions that we believe are used by market participants. We derived prepayment speeds and delinquency assumptions from historical experience adjusted for prevailing market conditions. We utilize a discount rate provided by third-party valuation experts, and we consider external market-based assumptions in determining the interest rate for the cost of financing advances, the interest rate for float earnings and the cost of servicing. | |||||||||||||||||||||
Third-party valuation experts 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, in arriving at their estimate of fair value. The prices provided by the valuation experts reflect their observations and assumptions related to market activity, including risk premiums and liquidity adjustments. The models and related assumptions used by the valuation experts are owned and managed by them and, in many cases, the significant inputs used in the valuation techniques are not reasonably available to us. However, we have an understanding of the processes and assumptions used to develop the prices based on our ongoing due diligence, which includes regular discussions with the valuation experts. We believe that the procedures executed by the valuation experts, combined with our internal verification and analytical procedures, provide 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. | |||||||||||||||||||||
The more significant assumptions used in the September 30, 2013 valuation of our MSRs carried at amortized cost include: | |||||||||||||||||||||
● | Prepayment speeds ranging from 7.39% to 19.23% (weighted average of 14.87%) depending on loan type; | ||||||||||||||||||||
● | Delinquency rates ranging from 6.55% to 29.42% (weighted average of 17.04%) depending on loan type; | ||||||||||||||||||||
● | Interest rate of 1-month LIBOR plus 3.75% for computing the cost of financing advances; | ||||||||||||||||||||
● | Interest rate of 1-month LIBOR for computing float earnings; and | ||||||||||||||||||||
● | Discount rates ranging from 11.33% to 17.13% (weighted average of 12.80%). | ||||||||||||||||||||
We perform an impairment analysis based on the difference between the carrying amount and fair value after grouping our loans into the applicable strata based on one or more of the predominant risk characteristics of the underlying loans. As a result of the Homeward and ResCap Acquisitions, management has re-evaluated the portfolio and determined the appropriate strata are Agency and Non-Agency. The Agency stratum includes all GSE MSRs. The Non-Agency stratum includes all private label primary and master MSRs. | |||||||||||||||||||||
Fair Value MSRs | |||||||||||||||||||||
MSRs carried at fair value are classified within Level 3 of the valuation hierarchy due to the use of third party valuation expert pricing without adjustment. The fair value of these MSRs is within the range of prices provided by the valuation experts, however, a change in the valuation inputs utilized by the valuation expert or a change in the best point price in the range might result in a significantly higher or lower fair value measurement. | |||||||||||||||||||||
The key assumptions (generally unobservable inputs) used in the valuation of these MSRs include: | |||||||||||||||||||||
● | Mortgage prepayment speeds; | ||||||||||||||||||||
● | Delinquency rates, and | ||||||||||||||||||||
● | Discount rates. | ||||||||||||||||||||
The primary assumptions used in the September 30, 2013 valuation include an 8.95% weighted average constant prepayment rate and a discount rate equal to 1-Month LIBOR plus 10.50%. | |||||||||||||||||||||
Advances | |||||||||||||||||||||
We value advances that we make on loans that we service for others at their net realizable value which generally approximates fair value because advances have no stated maturity, generally are realized within a relatively short period of time and do not bear interest. | |||||||||||||||||||||
Receivables | |||||||||||||||||||||
The carrying value of receivables generally approximates fair value because of the relatively short period of time between their origination and realization. | |||||||||||||||||||||
Secured Borrowings – Owed to Securitization Investors | |||||||||||||||||||||
We recognize the proceeds from the transfer of reverse mortgages as a secured borrowing that we account for at fair value. These borrowings are not actively traded and therefore quoted market prices are not available. We determine fair value by discounting the future principal and interest repayments over the estimated life of the borrowing at a market rate commensurate with the risk of the estimated cash flows. Significant assumptions include prepayments, discount rate and borrower mortality rates for reverse mortgages. The discount rate assumption for these liabilities is based on an assessment of current market yields for newly issued HMBS, expected duration and current market interest rates. | |||||||||||||||||||||
The more significant assumptions used in the September 30, 2013 valuation of our Secured Borrowings – Owed to Securitization Investors include: | |||||||||||||||||||||
● | Life in years ranging from 2.94 to 22.85 (weighted average of 6.15), | ||||||||||||||||||||
● | Conditional repayment rate ranging from 4.80% to 37.97% (weighted average of 8.44%) and | ||||||||||||||||||||
● | Discount rate of 1.17%. | ||||||||||||||||||||
Significant increases or decreases in any of these assumptions in isolation would result in a significantly higher or lower fair value. | |||||||||||||||||||||
Match Funded Liabilities and Other Borrowings | |||||||||||||||||||||
The carrying value of match funded liabilities and secured borrowings that bear interest at a rate that is adjusted regularly based on a market index approximates fair value. For other match funded or secured borrowings that bear interest at a fixed rate, we determine fair value by discounting the future principal and interest repayments at a market rate commensurate with the risk of the estimated cash flows. We estimate principal repayments of match funded liabilities during the amortization period based on our historical advance collection rates and taking into consideration any plans to refinance the notes. At September 30, 2013, the interest on all borrowings under match funded facilities was based on a variable rate adjusted regularly using a market index and therefore the carrying value approximates fair value. For the SSTL, we used a discount rate of 5.50% and the repayment schedule specified in the loan agreement to determine fair value. | |||||||||||||||||||||
Derivative Financial Instruments | |||||||||||||||||||||
We may execute interest rate swaps to hedge against the effects of changes in interest rates on our borrowings under advance funding facilities. These derivatives are not exchange-traded and, therefore, quoted market prices or other observable inputs are not available. Fair value is based on information provided by third-party pricing sources. Third-party valuations are derived from proprietary models based on inputs that include yield curves and contractual terms such as fixed interest rates and payment dates. Although we have not adjusted the information obtained from the third-party pricing sources, we review this information to ensure that it provides a reasonable basis for estimating fair value. Our review is designed to identify information that appears stale, information that has changed significantly from the prior period and other indicators that the information may not be accurate. For interest rate contracts, significant increases or decreases in the unobservable portion of the yield curves in isolation will result in substantial changes in the fair value measurement. We terminated our outstanding interest rates swaps on May 31, 2013. | |||||||||||||||||||||
In addition, we may use interest rate caps to minimize future interest rate exposures on variable rate debt issued on servicing advance facilities from increases in one-month LIBOR interest rates. The fair value for interest rate caps is based on counterparty market prices and adjusted for counterparty credit risk. | |||||||||||||||||||||
We enter into forward trades to provide an economic hedge against changes in the value of residential forward and reverse mortgage loans held for sale that we carry at fair value. Forward trades are primarily used to fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. Forward contracts are actively traded in the market and we obtained unadjusted market quotes for these derivatives, thus they are classified within Level 1 of the valuation hierarchy. | |||||||||||||||||||||
IRLCs represent an agreement to purchase loans from a third-party originator, or an agreement to extend credit to a mortgage applicant (locked pipeline), or an agreement to sell a loan to investors, whereby the interest rate is set prior to funding. IRLCs are classified within Level 2 of the valuation hierarchy as the primary component of the price is obtained from observable values of mortgage forwards for loans of similar terms and characteristics. Fair value amounts of IRLCs are adjusted for expected “fallout” (locked pipeline loans not expected to close), using models that consider cumulative historical fallout rates and other factors. | |||||||||||||||||||||
We previously entered into derivative contracts that included interest rate swaps, U.S. Treasury futures and forward contracts to hedge against the effects of changes in the value of the MSRs that we carry at fair value. Effective April 1, 2013, we modified our strategy for managing the risks of the underlying loan portfolios and no longer use derivative contracts to hedge against the effects of changes in the value of MSRs which we carry at fair value. The fair value of interest rate swaps were based upon projected short-term interest rates and volatility based on published market based sources, a Level 3 valuation. Because futures and forward contracts are actively traded in the market, they are classified within Level 1 of the valuation hierarchy. | |||||||||||||||||||||
See Note 19 – Derivative Financial Instruments and Hedging Activities for additional information regarding derivative financial instruments. |
NOTE_6_LOANS_HELD_FOR_SALE_AT_
NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Loans Held For Sale At Fair Value [Abstract] | ' | ||||||||||||||||
LOANS HELD FOR SALE, AT FAIR VALUE | ' | ||||||||||||||||
Note 6 | Loans Held for Sale, at Fair Value | ||||||||||||||||
Loans held for sale, at fair value, represent residential forward and reverse mortgage loans originated or purchased and held until sold to secondary market investors, such as GSEs or other third party investors. The following table summarizes the activity in the balance of Loans held for sale during the nine months ended September 30, 2013: | |||||||||||||||||
Balance at December 31, 2012 | $ | 426,480 | |||||||||||||||
Originations and purchases (1) | 5,988,501 | ||||||||||||||||
Proceeds from sale | (6,033,785 | ) | |||||||||||||||
Loss on sale of loans (2) | (46,962 | ) | |||||||||||||||
Other | 868 | ||||||||||||||||
Balance at September 30, 2013 | $ | 335,102 | |||||||||||||||
-1 | Purchases include $60.0 million of reverse mortgages acquired in the Liberty Acquisition. | ||||||||||||||||
-2 | Includes gains of $14.5 million and $20.6 million recorded during the three and nine months ended September 30, 2013, respectively, to adjust Loans – Restricted for Securitization Investors to fair value. | ||||||||||||||||
The following table summarizes the activity in Gain on loans held for sale, net, during the periods ended September 30: | |||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Gain on sales of loans (1) | $ | 4,622 | $ | — | $ | 36,156 | $ | — | |||||||||
Change in fair value of IRLCs | 18,912 | — | 5,918 | — | |||||||||||||
Change in fair value of loans held for sale | 14,362 | — | 1,452 | — | |||||||||||||
Gain (loss) on hedge instruments | (9,408 | ) | — | 30,989 | — | ||||||||||||
Other | (226 | ) | — | (1,603 | ) | — | |||||||||||
$ | 28,262 | $ | — | $ | 72,912 | $ | — | ||||||||||
-1 | Includes gains of $16.3 million and $63.2 million for the three and nine months ended September 30, 2013, respectively, representing the value assigned to MSRs retained on sales of loans. Also includes gains of $4.1 million and $20.3 million recorded during the three and nine months ended September 30, 2013, respectively, on sales of repurchased loans into Ginnie Mae guaranteed securitizations. These loans are classified as held for sale at the lower of cost or fair value. See Note 13 – Other Assets. |
NOTE_7_ADVANCES
NOTE 7 ADVANCES | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Advances [Abstract] | ' | ||||||||
ADVANCES | ' | ||||||||
NOTE 7 | ADVANCES | ||||||||
Advances, representing payments made on behalf of borrowers or on foreclosed properties, consisted of the following at the dates indicated: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Servicing: | |||||||||
Principal and interest | $ | 149,184 | $ | 83,617 | |||||
Taxes and insurance | 604,636 | 51,447 | |||||||
Foreclosures, bankruptcy and other | 183,861 | 41,296 | |||||||
937,681 | 176,360 | ||||||||
Other | 8,606 | 8,103 | |||||||
$ | 946,287 | $ | 184,463 |
NOTE_8_MATCH_FUNDED_ADVANCES
NOTE 8 MATCH FUNDED ADVANCES | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Match Funded Advances [Abstract] | ' | ||||||||
MATCH FUNDED ADVANCES | ' | ||||||||
Note 8 | Match Funded Advances | ||||||||
Match funded advances on residential mortgage loans that we service for others are comprised of the following at the dates indicated: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Principal and interest | $ | 235,766 | $ | 1,577,808 | |||||
Taxes and insurance | 218,952 | 1,148,486 | |||||||
Foreclosures, bankruptcy, real estate and other | 79,007 | 322,950 | |||||||
$ | 533,725 | $ | 3,049,244 |
NOTE_9_MORTGAGE_SERVICING
NOTE 9 MORTGAGE SERVICING | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Mortgage Servicing [Abstract] | ' | ||||||||||||||||
MORTGAGE SERVICING | ' | ||||||||||||||||
Note 9 | Mortgage Servicing | ||||||||||||||||
Mortgage Servicing Rights – Amortization Method | |||||||||||||||||
The following table summarizes our activity related to MSRs for the nine months ended September 30: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Balance at December 31 | $ | 678,937 | $ | 293,152 | |||||||||||||
Additions recognized in connection with business and asset acquisitions (1) | 1,208,222 | 181,949 | |||||||||||||||
Additions recognized on the sale of residential mortgage loans | 63,154 | — | |||||||||||||||
Sales (2) | (17,523 | ) | — | ||||||||||||||
Servicing transfers, adjustments and other | 2,052 | (88 | ) | ||||||||||||||
Amortization (3) | (197,899 | ) | (54,678 | ) | |||||||||||||
Balance at September 30 | $ | 1,736,943 | $ | 420,335 | |||||||||||||
Estimated fair value at September 30 | $ | 2,532,239 | $ | 488,499 | |||||||||||||
-1 | MSR recognized in connection with business and asset acquisitions during the first nine months of 2013 include: | ||||||||||||||||
● | MSRs of $391.9 million acquired in the ResCap Acquisition. See Note 4 – Business Acquisitions for additional information. | ||||||||||||||||
● | MSRs of $683.8 million acquired in the Ally MSR Transaction. The acquired MSRs relate to mortgage loans with a UPB of $87.5 billion owned by Freddie Mac and Fannie Mae. We also acquired servicing advances and other receivables of $73.6 million. We assumed the origination representation and warranty obligations of approximately $136.7 million in connection with a majority of the acquired MSRs. We had been subservicing these MSRs on behalf of Ally under a subservicing contract assumed by us in connection with the ResCap Acquisition. | ||||||||||||||||
● | MSRs of $127.0 million with a UPB of approximately $30.5 billion and related servicing advance receivables of $371.6 million acquired in the OneWest MSR Transaction. We expect the remainder of the transaction to close during the fourth quarter. The total estimated purchase price is approximately $2.4 billion with $432.2 million attributed to MSRs and $2.0 billion attributed to servicing advances. The total UPB to be acquired is estimated at $72.4 billion. No operations or other assets were purchased in the transaction. In October 2013, we closed the purchase of approximately $6.6 million of MSRs with a UPB of approximately $1.1 billion and approximately $37.1 million of servicing advances. On November 1, 2013, we closed the purchase of approximately $235.6 million of MSRs with a UPB of approximately $32.9 billion and approximately $1.3 billion of servicing advances. See Note 26 - Subsequent Events for additional information. | ||||||||||||||||
-2 | Cash proceeds from the sale were $21.5 million. These MSRs were sold with subservicing retained. The gain on the sale of $3.2 million has been deferred and will be recognized in earnings over the life of the subservicing contract. | ||||||||||||||||
-3 | Amortization of mortgage servicing rights is reported net of the amortization of servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations. | ||||||||||||||||
As disclosed in Note 3 – Transfers of Financial Assets, we sold certain Rights to MSRs during 2012 and 2013 as part of the HLSS Transactions. The carrying value of the related MSRs which have not been derecognized at September 30, 2013 was $465.8 million. | |||||||||||||||||
Mortgage Servicing Rights—Fair Value Measurement Method | |||||||||||||||||
This portfolio comprises servicing rights for which we elected the fair value option and includes prime forward mortgage loans for which we hedged the related market risks. We acquired these MSRs as part of the Homeward Acquisition. See Note 4 – Business Acquisitions for additional information. | |||||||||||||||||
The following table summarizes the activity related to our fair value MSRs for the nine months ended September 30, 2013: | |||||||||||||||||
Balance at December 31, 2012 | $ | 85,213 | |||||||||||||||
Changes in fair value: | |||||||||||||||||
Due to changes in market valuation assumptions | 19,800 | ||||||||||||||||
Realization of cash flows and other changes | (8,075 | ) | |||||||||||||||
Balance at September 30, 2013 | $ | 96,938 | |||||||||||||||
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 (as prepayments increase) and increase in periods of rising interest rates (as prepayments decrease). The following table summarizes the estimated change in the value of the MSRs that we carry at fair value as of September 30, 2013 given hypothetical instantaneous parallel shifts in the yield curve: | |||||||||||||||||
Adverse change in fair value | |||||||||||||||||
10% | 20% | ||||||||||||||||
Weighted average prepayment speeds | $ | (3,695 | ) | $ | (7,234 | ) | |||||||||||
Discount rate (Option-adjusted spread) | $ | (2,148 | ) | $ | (4,128 | ) | |||||||||||
The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates. | |||||||||||||||||
Servicing Revenue | |||||||||||||||||
The following table presents the components of servicing and subservicing fees for the periods ended September 30: | |||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Loan servicing and subservicing fees: | |||||||||||||||||
Servicing | $ | 335,884 | $ | 145,861 | $ | 887,500 | $ | 394,454 | |||||||||
Subservicing | 35,286 | 14,257 | 115,437 | 27,619 | |||||||||||||
371,170 | 160,118 | 1,002,937 | 422,073 | ||||||||||||||
Home Affordable Modification Program (HAMP) fees | 40,213 | 21,687 | 118,412 | 55,761 | |||||||||||||
Late charges | 30,445 | 16,370 | 85,930 | 52,891 | |||||||||||||
Loan collection fees | 8,387 | 4,102 | 22,524 | 11,271 | |||||||||||||
Custodial accounts (float earnings) | 743 | 942 | 4,533 | 2,393 | |||||||||||||
Other | 32,309 | 19,792 | 99,056 | 34,046 | |||||||||||||
$ | 483,267 | $ | 223,011 | $ | 1,333,392 | $ | 578,435 | ||||||||||
Portfolio of Assets Serviced | |||||||||||||||||
The following table presents the composition of our servicing and subservicing portfolios by type of asset serviced as measured by UPB. The servicing portfolio represents loans for which we own the MSRs while subservicing represents all other loans. | |||||||||||||||||
Residential | Commercial | Total | |||||||||||||||
UPB at September 30, 2013 | |||||||||||||||||
Servicing (1) | $ | 362,792,312 | $ | — | $ | 362,792,312 | |||||||||||
Subservicing | 72,027,114 | 495,312 | 72,522,426 | ||||||||||||||
$ | 434,819,426 | $ | 495,312 | $ | 435,314,738 | ||||||||||||
UPB at December 31, 2012 | |||||||||||||||||
Servicing (1) | $ | 175,762,161 | $ | — | $ | 175,762,161 | |||||||||||
Subservicing | 27,903,555 | 401,031 | 28,304,586 | ||||||||||||||
$ | 203,665,716 | $ | 401,031 | $ | 204,066,747 | ||||||||||||
-1 | Includes UPB of $177.1 billion and $79.4 billion at September 30, 2013 and December 31, 2012, respectively, for which the Rights to MSRs have been sold to HLSS. | ||||||||||||||||
Residential assets serviced consist principally of residential mortgage loans, but also include foreclosed real estate. Residential assets serviced also include small-balance commercial assets with a UPB of $2.5 billion and $2.1 billion at September 30, 2013 and December 31, 2012, respectively, that are managed using the REALServicing™ application. Commercial assets consist of large-balance foreclosed real estate. The UPB of assets serviced for others are not included on our unaudited Consolidated Balance Sheets. | |||||||||||||||||
Custodial accounts, which hold funds representing collections of principal and interest that we receive from borrowers, are held in escrow by an unaffiliated bank and are excluded from our unaudited Consolidated Balance Sheets. Custodial accounts amounted to $3.5 billion and $1.3 billion at September 30, 2013 and December 31, 2012, respectively. |
NOTE_10_RECEIVABLES
NOTE 10 RECEIVABLES | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Receivables [Abstract] | ' | ||||||||||||
RECEIVABLES | ' | ||||||||||||
Note 10 | Receivables | ||||||||||||
Receivables consisted of the following at the dates indicated: | |||||||||||||
Receivables | Allowance for | Net | |||||||||||
Losses | |||||||||||||
30-Sep-13 | |||||||||||||
Servicing (1) | $ | 155,076 | $ | (19,413 | ) | $ | 135,663 | ||||||
Due from related parties (2) | 35,383 | — | 35,383 | ||||||||||
Income taxes receivable | 23,955 | — | 23,955 | ||||||||||
Other | 30,372 | (1,969 | ) | 28,403 | |||||||||
$ | 244,786 | $ | (21,382 | ) | $ | 223,404 | |||||||
31-Dec-12 | |||||||||||||
Servicing (1) | $ | 84,870 | $ | (1,647 | ) | $ | 83,223 | ||||||
Income taxes receivable | 25,546 | — | 25,546 | ||||||||||
Due from related parties (2) | 12,361 | — | 12,361 | ||||||||||
Other | 18,577 | (1,994 | ) | 16,583 | |||||||||
$ | 141,354 | $ | (3,641 | ) | $ | 137,713 | |||||||
-1 | The receivable balances arise from our Servicing business and include reimbursable expenditures due from investors and amounts to be recovered from the custodial accounts of the trustees. The balances at September 30, 2013 also include $67.4 million of receivables and $16.2 million of allowance for losses related to defaulted FHA or VA insured loans repurchased from Ginnie Mae guaranteed securitizations. | ||||||||||||
-2 | See Note 23 – Related Party Transactions for additional information regarding transactions with Altisource and HLSS. |
NOTE_11_GOODWILL_AND_INTANGIBL
NOTE 11 GOODWILL AND INTANGIBLES | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||||||
GOODWILL AND INTANGIBLES | ' | ||||||||||||||||||||
NOTE 11 | GOODWILL AND INTANGIBLES | ||||||||||||||||||||
The following table provides a summary of activity in the carrying value of goodwill during the nine months ended September 30, 2013: | |||||||||||||||||||||
ResCap | Homeward | Litton | HomEq | Total | |||||||||||||||||
Acquisition | Acquisition | Acquisition | Acquisition | ||||||||||||||||||
Balance at December 31, 2012 | $ | — | $ | 342,626 | $ | 57,430 | $ | 12,810 | $ | 412,866 | |||||||||||
Derecognition of goodwill in connection with the sale of a business (1) (2) | (128,750 | ) | (81,607 | ) | — | — | (210,357 | ) | |||||||||||||
ResCap Acquisition (2) | 201,810 | — | — | — | 201,810 | ||||||||||||||||
Balance at September 30, 2013 | $ | 73,060 | $ | 261,019 | $ | 57,430 | $ | 12,810 | 404,319 | ||||||||||||
Liberty Acquisition (2) (3) | 3,200 | ||||||||||||||||||||
Correspondent One (2) | 101 | ||||||||||||||||||||
Balance at September 30, 2013 | $ | 407,620 | |||||||||||||||||||
-1 | On March 29, 2013, we sold the diversified fee-based business acquired in the Homeward Acquisition to Altisource and derecognized the assigned goodwill. On April 12, 2013, we sold the diversified fee-based business acquired in the ResCap Acquisition to Altisource and derecognized the assigned goodwill. | ||||||||||||||||||||
-2 | See Note 4 – Business Acquisitions for additional information regarding this transaction. | ||||||||||||||||||||
-3 | Acquired intangible asset related to licenses. The useful life is considered indefinite and therefore the intangible asset is not amortized. | ||||||||||||||||||||
For the ResCap Acquisition, the $73.1 million of remaining goodwill is assigned to the Servicing segment. For the Homeward Acquisition, $140.7 million of the remaining goodwill is assigned to the Servicing segment and $120.3 million is assigned to the Lending segment. The assignment of goodwill in the ResCap, Homeward and Liberty Acquisitions is preliminary pending the final purchase price allocation. For the Litton and HomEq Acquisitions, the entire balance of goodwill pertains to the Servicing segment. | |||||||||||||||||||||
We perform an annual impairment test of goodwill as of August 31 of each year. Based on our 2013 annual assessment, we determined that goodwill was not impaired. |
NOTE_12_DEBT_SERVICE_ACCOUNTS
NOTE 12 DEBT SERVICE ACCOUNTS | 9 Months Ended | ||
Sep. 30, 2013 | |||
Debt Service Accounts [Abstract] | ' | ||
DEBT SERVICE ACCOUNTS | ' | ||
Note 12 | Debt Service Accounts | ||
Under our advance funding facilities, we are contractually required to remit collections on pledged advances to the trustee within two days of receipt. The collected funds are not applied to reduce the related match funded debt until the payment dates specified in the indenture. The balances also include amounts that have been set aside from the proceeds of our match funded advance facilities and certain of our warehouse lines to provide for possible shortfalls in the funds available to pay certain expenses and interest. These funds are held in interest earning accounts in the name of the SPE created in connection with the match funded financing facility. The balance of such debt service accounts at September 30, 2013 and December 31, 2012 was $45.5 million and $88.7 million, respectively. |
NOTE_13_OTHER_ASSETS
NOTE 13 OTHER ASSETS | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Assets [Abstract] | ' | ||||||||
OTHER ASSETS | ' | ||||||||
Note 13 | Other Assets | ||||||||
Other assets consisted of the following at the dates indicated: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Loans – restricted for securitization investors, at fair value (1) | $ | 290,853 | $ | — | |||||
Loans held for sale, at lower of cost or fair value (2) | 86,753 | 82,866 | |||||||
Prepaid lender fees and debt issuance costs, net (3) | 25,197 | 14,389 | |||||||
Prepaid income taxes | 23,112 | 23,112 | |||||||
Derivatives, at fair value (4) | 12,849 | 10,795 | |||||||
Investment in unconsolidated entities (5) | 11,767 | 25,187 | |||||||
Real estate, net | 8,346 | 6,205 | |||||||
Interest earning collateral deposits (6) | 6,533 | 31,710 | |||||||
Acquisition deposits (7) | — | 57,000 | |||||||
Prepaid expenses and other | 13,123 | 22,314 | |||||||
$ | 478,533 | $ | 273,578 | ||||||
-1 | Loans sold into Ginnie Mae guaranteed securitizations that we include in our Consolidated Financial Statements because the transfers of reverse mortgage loans to the trusts did not qualify for sale accounting treatment. See Note 2 – Securitizations and Variable Interest Entities for additional information. | ||||||||
-2 | The carrying values at September 30, 2013 and December 31, 2012 are net of valuation allowances of $27.0 million and $14.7 million, respectively. The balances include non-performing subprime single-family residential loans that we do not intend to hold to maturity. The balance at September 30, 2013 includes $67.8 million of loans that we are required to repurchase from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolutions. The balance at December 31, 2012 includes non-performing mortgage loans with a carrying value of $65.4 million that we acquired in December 2012 and sold to Altisource Residential, LP in February 2013 for an insignificant gain. | ||||||||
-3 | These balances relate to match funded liabilities and other secured borrowings. | ||||||||
-4 | See Note 19 – Derivative Financial Instruments and Hedging Activities for additional information. | ||||||||
-5 | The balance at December 31, 2012 includes an investment of $13.4 million that represented our 49% equity interest in Correspondent One. As disclosed in Note 4 – Business Acquisitions, we increased our ownership to 100% on March 31, 2013. Effective on that date, we began including the accounts of Correspondent One in our consolidated financial statements and eliminated our current investment in consolidation. | ||||||||
-6 | These balances include $1.5 million and $25.8 million of cash collateral held by the counterparties to certain of our derivative agreements at September 30, 2013 and December 31, 2012, respectively. | ||||||||
-7 | The balance at December 31, 2012 represents an earnest money cash deposit we made in connection with the ResCap Acquisition. This deposit was subsequently applied towards the purchase price upon closing of the transaction on February 15, 2013. See Note 4 – Business Acquisitions for additional information. |
NOTE_14_MATCH_FUNDED_LIABILITI
NOTE 14 MATCH FUNDED LIABILITIES | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Match Funded Liabilities [Abstract] | ' | ||||||||||||||||||
MATCH FUNDED LIABILITIES | ' | ||||||||||||||||||
NOTE 14 | MATCH FUNDED LIABILITIES | ||||||||||||||||||
Match funded liabilities are comprised of the following at the dates indicated: | |||||||||||||||||||
Available | Balance Outstanding | ||||||||||||||||||
Maturity | Amortization | Borrowing | September 30, | December 31, | |||||||||||||||
Borrowing Type | Interest Rate | -1 | Date (1) | Capacity (2) | 2013 | 2012 | |||||||||||||
2011-Servicer Advance Revolving Trust 1 (3) | 2.23% | May-43 | May-13 | $ | — | $ | — | $ | 325,000 | ||||||||||
2011-Servicer Advance Revolving Trust 1 (3) | 3.37 – 5.92% | May-43 | May-13 | — | — | 525,000 | |||||||||||||
2012-Servicing Advance Revolving Trust 2 (3) | 3.27 – 6.90% | Sep. 2043 | Sept. 2013 | — | — | 250,000 | |||||||||||||
2012-Servicing Advance Revolving Trust 3 (3) | 2.98% | Mar. 2043 | Mar. 2013 | — | — | 248,999 | |||||||||||||
2012-Servicing Advance Revolving Trust 3 (3) | 3.72 – 7.04% | Mar. 2044 | Mar. 2014 | — | — | 299,278 | |||||||||||||
Total fixed rate | — | — | 1,648,277 | ||||||||||||||||
Advance Receivable Backed Notes (4) | 1-month | Apr. 2015 | Apr. 2014 | — | — | 205,016 | |||||||||||||
LIBOR (1ML) | |||||||||||||||||||
+ 285 bps | |||||||||||||||||||
Advance Receivable Backed Notes Series 2012-ADV1 (5) | Commercial | Dec. 2043 | Dec. 2013 | 18,959 | 81,041 | 232,712 | |||||||||||||
paper (CP) | |||||||||||||||||||
rate + 225 or | |||||||||||||||||||
335 bps | |||||||||||||||||||
Advance Receivable Backed Notes Series 2012-ADV1 | 1ML + 250 | Jun-16 | Jun-14 | — | 225,000 | 94,095 | |||||||||||||
bps | |||||||||||||||||||
Advance Receivable Backed Note | 1ML + 300 | Dec. 2015 | Dec. 2014 | 12,383 | 37,617 | 49,138 | |||||||||||||
bps | |||||||||||||||||||
2011-Servicing Advance Revolving Trust 1 (3) | 1ML + 300 | May-43 | May-13 | — | — | 204,633 | |||||||||||||
bps | |||||||||||||||||||
2012-Servicing Advance Revolving Trust 2 (3) | 1ML + 315 | Sep. 2043 | Sep. 2013 | — | — | 22,003 | |||||||||||||
bps | |||||||||||||||||||
2012-Servicing Advance Revolving Trust 3 (3) | 1ML + 300 | Mar. 2044 | Mar. 2014 | — | — | 40,626 | |||||||||||||
bps – 675 bps | |||||||||||||||||||
2012-Homeward Agency Advance Funding Trust 2012-1 (6) | 1ML + 300 | Nov. 2013 | Nov. 2013 | 5,646 | 19,354 | 16,094 | |||||||||||||
bps | |||||||||||||||||||
2012-Homeward DSF Advance Revolving Trust 2012-1 (3) | 1ML + 450 | Feb. 2013 | Feb. 2013 | — | — | 20,151 | |||||||||||||
bps | |||||||||||||||||||
Total variable rate | 36,988 | 363,012 | 884,468 | ||||||||||||||||
$ | 36,988 | $ | 363,012 | $ | 2,532,745 | ||||||||||||||
-1 | The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In two advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed. | ||||||||||||||||||
-2 | Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. At September 30, 2013, $0.1 million of the available borrowing capacity could be used based on the amount of eligible collateral. | ||||||||||||||||||
-3 | Facility was repaid in February 2013 from the proceeds of a new $1.4 billion bridge facility (Homeward Residential Bridge Loan Trust – 2013) with an amortization date of August 14, 2013. On July 1, 2013, we repaid the new bridge facility in full from proceeds received on the sale of servicing advances to HLSS. | ||||||||||||||||||
-4 | We repaid this facility in full in July 2013. | ||||||||||||||||||
-5 | On August 30, 2013, we amended this facility to reduce the maximum borrowing capacity to $100 million from $450 million. | ||||||||||||||||||
-6 | On October 21, 2013, we extended the maturity date of this facility to November 29, 2013 with two optional six-month extensions subject to lender approval. |
NOTE_15_OTHER_BORROWINGS
NOTE 15 OTHER BORROWINGS | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Other Borrowings [Abstract] | ' | ||||||||||||||||||
OTHER BORROWINGS | ' | ||||||||||||||||||
NOTE 15 | OTHER BORROWINGS | ||||||||||||||||||
Lines of credit and other secured and unsecured borrowings are comprised of the following at the dates indicated: | |||||||||||||||||||
Available | Balance Outstanding | ||||||||||||||||||
Borrowing | September 30, | December 31, | |||||||||||||||||
Borrowings | Collateral | Interest Rate | Maturity | Capacity | 2013 | 2012 | |||||||||||||
Servicing: | |||||||||||||||||||
SSTL (1) | -1 | 1ML + 550 bps; | Sept. 2016 | $ | — | $ | — | $ | 314,229 | ||||||||||
LIBOR floor of | |||||||||||||||||||
150 bps (1) | |||||||||||||||||||
SSTL (2) | -2 | -2 | Feb. 2018 | — | 1,293,500 | — | |||||||||||||
Senior unsecured term loan (3) | 1-Month Euro- | Mar. 2017 | — | — | 75,000 | ||||||||||||||
dollar rate + 675 | |||||||||||||||||||
bps with a | |||||||||||||||||||
Eurodollar floor | |||||||||||||||||||
of 150 bps | |||||||||||||||||||
Financing liability – MSRs pledged (4) | MSRs (4) | -4 | -4 | — | 643,595 | 303,705 | |||||||||||||
Financing liability – MSRs pledged (5) | MSRs (5) | -5 | -5 | — | — | 2,603 | |||||||||||||
Promissory note (6) | MSRs | 1ML + 350 bps | May-17 | — | 17,163 | 18,466 | |||||||||||||
Repurchase agreement | Loans held | 1 ML + 250 – 345 | Apr. 2014 | 47,878 | 52,122 | — | |||||||||||||
for sale | bps | ||||||||||||||||||
(LHFS) | |||||||||||||||||||
47,878 | 2,006,380 | 714,003 | |||||||||||||||||
Lending: | |||||||||||||||||||
Master repurchase agreement (7) | LHFS | 1ML + 175 bps | Mar. 2014 | 230,085 | 69,915 | 88,122 | |||||||||||||
Participation agreement (8) | LHFS | N/A | May-14 | — | 19,588 | 58,938 | |||||||||||||
Master repurchase agreement (9) | LHFS | 1ML + 175 to 275 | Aug. 2014 | 60,989 | 89,011 | 133,995 | |||||||||||||
bps | |||||||||||||||||||
Master repurchase agreement (10) | LHFS | 1ML + 175 to 200 | Sep. 2014 | 265,898 | 34,102 | 107,020 | |||||||||||||
bps | |||||||||||||||||||
Master repurchase agreement (11) | LHFS | 1ML + 275 bps | Nov. 2013 | 21,873 | 78,127 | — | |||||||||||||
Financing liability – MSRs pledged (5) | MSRs (5) | -5 | -5 | — | 10,403 | — | |||||||||||||
Mortgage warehouse agreement | LHFS | 1 ML + 275 bps; | Jun. 2014 | 56,755 | 3,245 | — | |||||||||||||
floor of 3.50% | |||||||||||||||||||
Secured borrowings - owed to securitization investors (12) | Loans held | 1ML + 220 bps | -12 | — | 284,276 | — | |||||||||||||
for | |||||||||||||||||||
investment | |||||||||||||||||||
635,600 | 588,667 | 388,075 | |||||||||||||||||
Corporate Items and Other | |||||||||||||||||||
Securities sold under an agreement to repurchase (13) | Ocwen Real | Class A-2 notes: | Monthly | — | 3,223 | 2,833 | |||||||||||||
Estate Asset | 1ML + 200 bps; | ||||||||||||||||||
Liquidating | Class A-3 notes: | ||||||||||||||||||
Trust 2007-1 | 1ML + 300 bps | ||||||||||||||||||
Notes | |||||||||||||||||||
683,478 | 2,598,270 | 1,104,911 | |||||||||||||||||
Discount (1)(2) | — | (5,679 | ) | (8,232 | ) | ||||||||||||||
$ | 683,478 | $ | 2,592,591 | $ | 1,096,679 | ||||||||||||||
-1 | In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment. | ||||||||||||||||||
-2 | On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are generally required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, and net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. However, for assets sales that are part of an HLSS Transaction, we have the option, within 180 days, either to invest the net cash proceeds in MSRs or related assets, such as advances, or to repay loan principal. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25%. To date we have elected option (b) to determine the interest rate. | ||||||||||||||||||
On September 23, 2013, we entered into Amendment No. 1 to the Senior Secured Term Loan Facility Agreement and Amendment No. 1 to the related Pledge and Security Agreement. These amendments: | |||||||||||||||||||
● | permit repurchases of all of the Preferred Stock, which may be converted to common stock prior to repurchase, and up to $1.5 billion of common stock, subject, in each case, to pro forma financial covenant compliance; | ||||||||||||||||||
● | eliminate the dollar cap on Junior Indebtedness (as defined in the SSTL) but retain the requirement for any such issuance to be subject to pro forma covenant compliance; | ||||||||||||||||||
● | include a value for whole loans (i.e., loans held for sale) in collateral value for purposes of calculating the loan-to-value ratio and include specified deferred servicing fees and the fair value of specified mortgage servicing rights in net worth for purposes of calculating the ratio of consolidated total debt to consolidated tangible net worth; and | ||||||||||||||||||
● | modify the applicable quarterly covenant levels for the corporate leverage ratio, ratio of consolidated total debt to consolidated tangible net worth and loan-to-value ratio. | ||||||||||||||||||
-3 | We repaid this loan in full in February 2013. | ||||||||||||||||||
-4 | As part of the HLSS Transactions, we transfer certain Rights to MSRs to HLSS. Because we have not yet transferred legal title to the MSRs, we account for these transfers as financings with the proceeds from the sale of the Rights to MSRs recorded as a financing liability. The financing liability is amortized using the interest method with the servicing income that is remitted to HLSS representing payments of principal and interest. The liability has no contractual maturity but is amortized over the estimated life of the transferred Rights to MSRs. See Note 3 –Transfers of Financial Assets for additional information. | ||||||||||||||||||
-5 | We sold MSRs for certain loans to an unrelated third party in December 2012 and June 2013; however, we are required to repurchase the MSRs for any loans that cannot be refinanced by the purchaser under the federal government’s Home Affordable Refinance Program (HARP). As a result, the sale is being accounted for as a financing. The financing liability is being amortized using the interest method with the servicing income that is remitted to the purchaser representing payments of principal and interest. In June 2013 and September 2013, we derecognized the liability from the December 2012 sale related to loans that had been refinanced under HARP and recognized a total gain of $4.5 million gain on the retirement of the financing liability. | ||||||||||||||||||
-6 | Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding. | ||||||||||||||||||
-7 | On March 19, 2013, the maturity date of the Master Repurchase Agreement was extended to March 18, 2014 and the maximum borrowing capacity was increased from $120.0 million to $300.0 million. | ||||||||||||||||||
-8 | Under this participation agreement, the lender provides financing on an uncommitted basis for up to $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. However, the transaction does not qualify for sales accounting treatment and is, therefore, accounted for as a financing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. In April 2013, we extended the participation agreement maturity date to May 31, 2014. | ||||||||||||||||||
-9 | On August 3, 2013, we extended the maturity date of this facility to August 2, 2014. | ||||||||||||||||||
-10 | On September 27, 2013, we extended the maturity date of this facility to September 26, 2014, | ||||||||||||||||||
-11 | On October 28, 2013, we extended the maturity date of this facility to November 12, 2013. | ||||||||||||||||||
-12 | This represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed securitization that we include in our consolidated financial statements because the transfers of reverse mortgage loans to the trusts did not qualify for sales accounting treatment. There are no maturity dates; the borrowings mature as the related loans are repaid. | ||||||||||||||||||
-13 | This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral. | ||||||||||||||||||
NOTE_16_OTHER_LIABILITIES
NOTE 16 OTHER LIABILITIES | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Liabilities [Abstract] | ' | ||||||||
OTHER LIABILITIES | ' | ||||||||
Note 16 | Other Liabilities | ||||||||
Other liabilities are comprised of the following at the dates indicated: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Liability for indemnification obligations (1) | $ | 206,074 | $ | 38,140 | |||||
Accrued expenses | 97,497 | 68,068 | |||||||
Liability for certain foreclosure matters (2) | 66,431 | 13,602 | |||||||
Payable to servicing and subservicing investors (3) | 27,063 | 9,973 | |||||||
Checks held for escheat | 24,965 | 33,259 | |||||||
Liability for selected tax items | 22,338 | 22,702 | |||||||
Due to related parties (4) | 16,535 | 45,034 | |||||||
Derivatives, at fair value (6) | 11,660 | 18,658 | |||||||
Servicing liabilities (5) | 11,568 | 9,830 | |||||||
Accrued interest payable | 9,455 | 5,410 | |||||||
Other | 61,122 | 23,861 | |||||||
$ | 554,708 | $ | 288,537 | ||||||
-1 | The balance includes origination representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines. These obligations were primarily assumed in connection with the Ally MSR Transaction, the ResCap Acquisition and the Homeward Acquisition. See Note 4 – Business Acquisitions, Note 9 – Mortgage Servicing and Note 25 – Commitments and Contingencies for additional information. | ||||||||
-2 | We recognized $52.8 million of expense in Professional services in the second quarter of 2013 to establish the liability. We recognized the remaining $13.6 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill. See Note 25 – Commitments and Contingencies for additional information. | ||||||||
-3 | The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements. | ||||||||
-4 | See Note 23 – Related Party Transactions for additional information. | ||||||||
-5 | During the nine months ended September 30, 2013 and 2012, amortization of servicing liabilities exceeded the amount of charges we recognized to increase our servicing liability obligations by $0.5 million and $1.1 million, respectively. Amortization of mortgage servicing rights is reported net of this amount in the unaudited Consolidated Statement of Operations. | ||||||||
-6 | See Note 19 – Derivative Financial Instruments and Hedging Activities for additional information. |
NOTE_17_MEZZANINE_EQUITY
NOTE 17 MEZZANINE EQUITY | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Equity [Abstract] | ' | ||||
MEZZANINE EQUITY | ' | ||||
Note 17 | Mezzanine Equity | ||||
Preferred Stock | |||||
On December 27, 2012, we issued 162,000 shares of Series A Perpetual Convertible Preferred Stock (the Preferred Shares) having a par value of $0.01 per share and paying dividends at a rate of 3.75% on the liquidation preference of $1,000 per share as part of the consideration for the Homeward Acquisition. The dividends are payable quarterly at the end of each calendar quarter. | |||||
The Preferred Shares are accounted for as equity and are classified as “mezzanine” equity in the unaudited Consolidated Balance Sheets. The conversion option of the Preferred Shares represents a Beneficial Conversion Feature (BCF) with an intrinsic value of $8.7 million which we accounted for as a discount on the Preferred Shares with an offsetting increase in additional paid in capital upon issuance. The BCF will be amortizing through the second anniversary of the issue date, the first date at which we can redeem the Preferred Shares. | |||||
We amortize the BCF discount on the Preferred Shares as a deemed dividend with an offsetting reduction in retained earnings. | |||||
The carrying value of our Preferred Shares reflects the following: | |||||
Initial issuance price on December 27, 2012 | $ | 162,000 | |||
Discount for beneficial conversion feature | (8,688 | ) | |||
Accretion of BCF discount (Deemed dividend) | 60 | ||||
Carrying value at December 31, 2012 | 153,372 | ||||
Conversion of 100,000 Preferred Shares (1) | (100,000 | ) | |||
Accretion of BCF discount (Deemed dividend) (2) | 6,573 | ||||
Carrying value at September 30, 2013 | $ | 59,945 | |||
-1 | On September 23, 2013, holders elected to convert 100,000 of the Preferred Shares into 3,145,640 shares of common stock. See Note 23 – Related Party Transactions for additional information. | ||||
-2 | Accretion includes a $3.5 million accelerated write-off of the unamortized discount related to the 100,000 Preferred Shares converted on September 23, 2013. |
NOTE_18_EQUITY
NOTE 18 EQUITY | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Equity [Abstract] | ' | ||||||||
EQUITY | ' | ||||||||
Note 18 | Equity | ||||||||
Common Stock | |||||||||
On September 23, 2013, Ocwen paid $157.9 million to repurchase from the holders of our Preferred Shares all 3,145,640 shares of common stock that were issued upon their election to convert 100,000 of the Preferred Shares into shares of common stock. See Note 23 – Related Party Transactions for additional information. | |||||||||
On October 31, 2013, we announced that our Board of Directors had authorized a share repurchase program for up to an aggregate of $500.0 million of our issued and outstanding shares of common stock. Repurchases may be made in open market transactions at prevailing market prices or in privately negotiated transactions. Unless we amend the share repurchase program or repurchase the full $500.0 million amount by an earlier date, the share repurchase program will continue through July 2016. No assurances can be given as to the amount of shares, if any, that we may repurchase in any given period. The repurchase of shares issued in connection with the conversion of Preferred Shares is not considered to be part of this repurchase program and, therefore, does not count against the $500.0 million aggregate value limit. | |||||||||
Accumulated Other Comprehensive Loss | |||||||||
The components of accumulated other comprehensive loss (AOCL), net of income taxes, were as follows at the dates indicated: | |||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Unrealized losses on cash flow hedges | $ | 7,649 | $ | 6,310 | |||||
Other | (580 | ) | 131 | ||||||
$ | 7,069 | $ | 6,441 |
NOTE_19_DERIVATIVE_FINANCIAL_I
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||||||||||||
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | ' | ||||||||||||||||||||
Note 19 | Derivative Financial Instruments and Hedging Activities | ||||||||||||||||||||
Because many of our current derivative agreements are not exchange-traded, we are exposed to credit loss in the event of nonperformance by the counterparty to the agreements. We control this risk through credit monitoring procedures including financial analysis, dollar limits and other monitoring procedures. The notional amount of our contracts does not represent our exposure to credit loss. | |||||||||||||||||||||
The following table summarizes the changes in the notional balance of our holdings of derivatives during the nine months ended September 30, 2013: | |||||||||||||||||||||
IRLCs | U.S. | Forward | Interest | Interest | |||||||||||||||||
Treasury | MBS | Rate Caps | Rate Swaps | ||||||||||||||||||
Futures | Trades | ||||||||||||||||||||
Balance at December 31, 2012 | $ | 1,112,519 | $ | 109,000 | $ | 1,638,979 | $ | 1,025,000 | $ | 1,495,955 | |||||||||||
Additions | 4,062,236 | 85,000 | 9,316,350 | — | 1,280,000 | ||||||||||||||||
Amortization | (228,806 | ) | — | (33,372 | ) | (24,000 | ) | — | |||||||||||||
Maturities | (3,709,513 | ) | — | (4,558,971 | ) | — | (295,604 | ) | |||||||||||||
Terminations | (549,877 | ) | (194,000 | ) | (5,627,670 | ) | (1,001,000 | ) | (2,480,351 | ) | |||||||||||
Balance at September 30, 2013 | $ | 686,559 | $ | — | $ | 735,316 | $ | — | $ | — | |||||||||||
Fair value of net derivative assets (liabilities) at: | |||||||||||||||||||||
30-Sep-13 | $ | 13,491 | $ | — | $ | (12,185 | ) | $ | — | $ | — | ||||||||||
31-Dec-12 | $ | 5,781 | $ | (1,258 | ) | $ | (1,719 | ) | $ | 168 | $ | (10,836 | ) | ||||||||
Maturity | Oct. 2013 – Jan. 2014 | — | Oct. 2013 – Nov. 2013 | — | — | ||||||||||||||||
Interest Rate Management | |||||||||||||||||||||
Match Funded Liabilities | |||||||||||||||||||||
We have previously entered into interest rate swaps in order to hedge against the effects of changes in interest rates on our borrowings under our advance funding facilities. These interest rate swap agreements required us to pay a fixed rate and receive a variable interest rate based on one-month LIBOR. At the time that we entered into the agreements, these swaps were designated as hedges for accounting purposes. As disclosed in Note 5 – Fair Value of Financial Instruments, we terminated these interest rate swaps on May 31, 2013 primarily because the custodial account float balances, which earn a variable rate of interest, are well in excess of variable rate borrowings under advance facilities. The earnings on these deposits reduce our exposure to changes in interest rates. We also purchased interest rate caps to minimize future interest rate exposure from increases in one-month LIBOR interest rates, as required by the certain of our advance financing arrangements. These caps were terminated with the payoff and termination of the related financing facilities. | |||||||||||||||||||||
Loans Held for Sale, at Fair Value | |||||||||||||||||||||
The mortgage loans held for sale that we carry at fair value are subject to interest rate and price risk from the loan funding date until the date the loan is sold into the secondary market. Generally, the fair value of a loan will decline in value when interest rates increase and will rise in value when interest rates decrease. To mitigate this risk, we enter into forward trades to provide an economic hedge against those changes in fair value on mortgage loans held for sale. Forward trades are primarily used to fix the forward sales price that will be realized upon the sale of mortgage loans into the secondary market. | |||||||||||||||||||||
Interest Rate Lock Commitments | |||||||||||||||||||||
IRLCs represent an agreement to purchase loans from a third-party originator or an agreement to extend credit to a mortgage applicant, whereby the interest rate is set prior to funding. The loan commitment binds us (subject to the loan approval process) to fund the loan at the specified rate, regardless of whether interest rates have changed between the commitment date and the loan funding date. As such, outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of the commitment through the loan funding date or expiration date. The borrower is not obligated to obtain the loan, thus we are subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. Our interest rate exposure on these derivative loan commitments is hedged with derivatives, including forward contracts. We enter into forward contracts with respect to fixed rate loan commitments. | |||||||||||||||||||||
MSRs at Fair Value | |||||||||||||||||||||
The MSRs which we measure at fair value are subject to interest rate risk as the mortgage loans underlying the MSRs permit the borrowers to prepay the loans. Therefore, the fair value of these MSRs generally tends to diminish in periods of declining interest rates (as prepayments increase) and increase in periods of rising interest rates (as prepayments decrease). Although the level of interest rates is a key driver of prepayment activity, there are other factors that influence prepayments, including home prices, underwriting standards and product characteristics. Effective April 1, 2013, we terminated our hedging program for fair value MSRs. Prior to their termination, we used economic hedges including interest rate swaps, U.S. Treasury futures and forward contracts to minimize the effects of loss in value of these MSRs associated with increased prepayment activity that generally results from declining interest rates. | |||||||||||||||||||||
Asset Acquisitions | |||||||||||||||||||||
In March 2013, we entered into an interest rate swap to hedge the impact on cash flows of changes in the purchase price to be paid for MSRs acquired in the Ally MSR Transaction. This purchase was forecasted to occur in stages with the purchase price subject to adjustment based on changes in the 10-year swap rate between the date of the MSR purchase agreement and the date of each closing. We entered into an interest rate swap with a notional amount sufficient to yield changes in the fair value of the interest rate swap in response to changes in the swap rate that were essentially equal to and offsetting to changes in the purchase price of the MSRs. We designated the swap as a hedge for accounting purposes. We completed the transaction in April 2013 and terminated the swap agreement at the same time. See Note 9 – Mortgage Servicing for additional information regarding the Ally MSR Transaction. | |||||||||||||||||||||
The following summarizes our use of derivatives at September 30, 2013 and the gains (losses) on those derivatives for the nine months then ended. None of these derivatives was designated as a hedge for accounting purposes at September 30, 2013: | |||||||||||||||||||||
Purpose | Expiration | Notional | Fair Value | Gains / | Consolidated | ||||||||||||||||
Date | Amount | -1 | (Losses) | Statement of | |||||||||||||||||
Operations | |||||||||||||||||||||
Caption | |||||||||||||||||||||
Interest rate risk of mortgage loans held for sale and IRLCs | |||||||||||||||||||||
Forward MBS trades | 2014 | $ | 735,316 | $ | (12,185 | ) | $ | 30,989 | Gain on loans held for sale, net and Other, net | ||||||||||||
IRLCs | 2013 | 686,559 | 13,491 | 5,918 | Gain on loans held for sale, net | ||||||||||||||||
Total derivatives | $ | 1,306 | $ | 36,907 | |||||||||||||||||
-1 | Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities on our unaudited Consolidated Balance Sheets. | ||||||||||||||||||||
Included in AOCL at September 30, 2013 and December 31, 2012, respectively, were $12.1 million and $9.9 million of deferred unrealized losses, before taxes of $4.5 million and $3.6 million, respectively, on interest rate swaps that we designated as cash flow hedges. Changes in the losses on cash flow hedges included in AOCL during the nine months ended September 30, 2013 were as follows: | |||||||||||||||||||||
Accumulated losses on cash flow hedges at December 31, 2012 | $ | 9,878 | |||||||||||||||||||
Additional net losses on cash flow hedges | 12,363 | ||||||||||||||||||||
Ineffectiveness of cash flow hedges reclassified to earnings | (657 | ) | |||||||||||||||||||
Losses on terminated hedging relationships amortized to earnings (1) | (9,434 | ) | |||||||||||||||||||
Accumulated losses on cash flow hedges at September 30, 2013 | $ | 12,150 | |||||||||||||||||||
-1 | Where the hedging relationship has been terminated but the hedged transaction is still forecast to occur, losses on the hedging relationship that are included in AOCL are amortized to earnings in the periods in which earnings are affected by the hedged transaction. Amortization in the third quarter included $4.1 million of accelerated amortization as a result of the early repayment and termination of four advance financing facilities as a result of the July 1, 2013 HLSS Transaction. | ||||||||||||||||||||
The statements of operations include the following related to derivative financial instruments for the periods ended September 30: | |||||||||||||||||||||
Three Months | Nine Months | ||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
Servicing and origination expense | |||||||||||||||||||||
Gains on economic hedges | $ | — | $ | — | $ | 1,017 | $ | — | |||||||||||||
Gain on loans held for sale, net | |||||||||||||||||||||
Gains on economic hedges | 9,608 | — | 36,907 | — | |||||||||||||||||
Other, net | |||||||||||||||||||||
Gains (losses) on economic hedges (1) | (103 | ) | 1,397 | (3,822 | ) | 6,645 | |||||||||||||||
Ineffectiveness of cash flow hedges | — | 47 | (657 | ) | 46 | ||||||||||||||||
Write-off of losses in AOCL for a discontinued hedge relationship | (7,780 | ) | (3,089 | ) | (9,434 | ) | (4,633 | ) | |||||||||||||
Write-off of losses in AOCL for hedge of a financing facility assumed by HLSS (See Note 3 –Transfers of Financial Assets) | — | — | — | (5,958 | ) | ||||||||||||||||
$ | 1,725 | $ | (1,645 | ) | $ | 24,011 | $ | (3,900 | ) | ||||||||||||
-1 | Includes a gain of $3.4 million recognized during the three months ended March 31, 2012 from the termination of foreign exchange forward contracts. |
NOTE_20_INTEREST_EXPENSE
NOTE 20 INTEREST EXPENSE | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Interest Expense [Abstract] | ' | ||||||||||||||||
INTEREST EXPENSE | ' | ||||||||||||||||
Note 20 | Interest Expense | ||||||||||||||||
The following table presents the components of interest expense for the periods ended September 30: | |||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Match funded liabilities | $ | 11,249 | $ | 32,359 | $ | 66,678 | $ | 99,394 | |||||||||
Other borrowings (1) | 95,496 | 24,877 | 228,198 | 60,160 | |||||||||||||
Debt securities: | |||||||||||||||||
3.25% Convertible Notes | — | — | — | 153 | |||||||||||||
10.875% Capital Trust Securities | — | 473 | — | 1,894 | |||||||||||||
Other | 3,310 | 708 | 8,463 | 2,059 | |||||||||||||
$ | 110,055 | $ | 58,417 | $ | 303,339 | $ | 163,660 | ||||||||||
-1 | Includes interest expense of $74.2 million and $14.0 million for the three months ended September 30, 2013 and 2012, respectively, and $168.6 million and $27.6 million for the nine months ended September 30, 2013 and 2012, respectively, related to financing liabilities recorded in connection with the HLSS Transactions. See Note 3 –Transfers of Financial Assets and Note 15 – Other Borrowings for additional information. |
NOTE_21_BASIC_AND_DILUTED_EARN
NOTE 21 BASIC AND DILUTED EARNINGS PER SHARE (EPS) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Earnings Per Share, Basic and Diluted [Abstract] | ' | ||||||||||||||||
BASIC AND DILUTED EARNINGS PER SHARE (EPS) | ' | ||||||||||||||||
Note 21 | Basic and Diluted Earnings Per Share (EPS) | ||||||||||||||||
Basic EPS excludes common stock equivalents and is calculated by dividing net income attributable to Ocwen common stockholders by the weighted average number of common shares outstanding during the year. We calculate diluted EPS by dividing net income attributable to Ocwen, as adjusted to add back preferred stock dividends and interest expense net of income tax on the Convertible Notes, by the weighted average number of common shares outstanding including the potential dilutive common shares related to outstanding stock options, restricted stock awards, the Preferred Shares and the Convertible Notes. The following is a reconciliation of the calculation of basic EPS to diluted EPS for the periods ended September 30: | |||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Basic EPS: | |||||||||||||||||
Net income attributable to Ocwen common stockholders | $ | 61,155 | $ | 51,400 | $ | 177,847 | $ | 115,582 | |||||||||
Weighted average shares of common stock | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 | |||||||||||||
Basic EPS | $ | 0.45 | $ | 0.38 | $ | 1.31 | $ | 0.87 | |||||||||
Diluted EPS: | |||||||||||||||||
Net income attributable to Ocwen common stockholders | $ | 61,155 | $ | 51,400 | $ | 177,847 | $ | 115,582 | |||||||||
Preferred stock dividends (1) | — | — | — | — | |||||||||||||
Interest expense on Convertible Notes, net of income tax (2) | — | — | — | 98 | |||||||||||||
Adjusted net income attributable to Ocwen | $ | 61,155 | $ | 51,400 | $ | 177,847 | $ | 115,680 | |||||||||
Weighted average shares of common stock | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 | |||||||||||||
Effect of dilutive elements: | |||||||||||||||||
Preferred Shares (1) | — | — | — | — | |||||||||||||
Convertible Notes (2) | — | — | — | 1,347,642 | |||||||||||||
Stock options | 4,263,965 | 3,769,099 | 4,030,297 | 3,468,156 | |||||||||||||
Common stock awards | 5,396 | 5,296 | 11,301 | 2,713 | |||||||||||||
Dilutive weighted average shares of common stock | 140,057,195 | 138,702,881 | 139,747,490 | 138,301,865 | |||||||||||||
Diluted EPS | $ | 0.44 | $ | 0.37 | $ | 1.27 | $ | 0.84 | |||||||||
Stock options excluded from the computation of diluted EPS: | |||||||||||||||||
Anti-dilutive (3) | — | 255,000 | — | 190,833 | |||||||||||||
Market-based (4) | 547,500 | 1,726,250 | 547,500 | 1,726,250 | |||||||||||||
-1 | The effect of our Preferred Shares on diluted EPS is computed using the if-converted method. For the three and nine months ended September 30, 2013, we assumed no conversion to common shares because the effect was anti-dilutive. | ||||||||||||||||
-2 | Prior to the redemption of the 3.25% Convertible Notes in March 2012, we also computed their effect on diluted EPS using the if-converted method. Interest expense and related amortization costs applicable to the Convertible Notes, net of income tax, were added back to net income. We assumed the conversion of the Convertible Notes into shares of common stock for purposes of computing diluted EPS unless the effect was anti-dilutive. We issued 4,635,159 shares of common stock upon conversion of $56.4 million of the Convertible Notes. | ||||||||||||||||
-3 | These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock. | ||||||||||||||||
-4 | Shares that are issuable upon the achievement of certain performance criteria related to OCN’s stock price and an annualized rate of return to investors. |
NOTE_22_BUSINESS_SEGMENT_REPOR
NOTE 22 BUSINESS SEGMENT REPORTING | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||||||
BUSINESS SEGMENT REPORTING | ' | ||||||||||||||||||||
Note 22 | Business Segment Reporting | ||||||||||||||||||||
Our business segments reflect the internal reporting that we use to evaluate operating performance of services and to assess the allocation of our resources. A brief description of our current business segments is as follows: | |||||||||||||||||||||
Servicing. This segment is primarily comprised of our core residential servicing business. We provide residential and commercial mortgage loan servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes both Agency and Non-Agency loans. Non-Agency loans include prime and subprime loans which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent. | |||||||||||||||||||||
Lending. The Lending segment is focused on originating and purchasing Agency-conforming residential forward and reverse mortgage loans mainly through correspondent lending arrangements. We also commenced a direct lending business to pursue refinancing opportunities from our existing portfolio, where permitted. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis. | |||||||||||||||||||||
Corporate Items and Other. Corporate Items and Other includes items of revenue and expense that are not directly related to a business, business activities that are individually insignificant, interest income on short-term investments of cash, corporate debt and certain corporate expenses. Business activities that are not considered to be of continuing significance include subprime loans held for sale (at lower of cost or fair value), investments in unconsolidated entities and affordable housing investment activities. Corporate Items and Other also included the diversified fee-based businesses that we acquired as part of the Homeward and ResCap Acquisitions and subsequently sold to Altisource. | |||||||||||||||||||||
We allocate interest income and expense to each business segment for funds raised or for funding of investments made, including interest earned on cash balances and short-term investments and interest incurred on corporate debt. We also allocate expenses generated by corporate support services to each business segment. | |||||||||||||||||||||
Financial information for our segments is as follows: | |||||||||||||||||||||
Servicing | Lending | Corporate | Corporate | Business | |||||||||||||||||
Items and | Eliminations | Segments | |||||||||||||||||||
Other | Consolidated | ||||||||||||||||||||
Results of Operations | |||||||||||||||||||||
Three Months Ended September 30, 2013: | |||||||||||||||||||||
Revenue | $ | 496,302 | $ | 33,539 | $ | 1,801 | $ | (402 | ) | $ | 531,240 | ||||||||||
Operating expenses (1) | 305,654 | 29,504 | 11,143 | (41 | ) | 346,260 | |||||||||||||||
Income (loss) from operations | 190,648 | 4,035 | (9,342 | ) | (361 | ) | 184,980 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | 859 | 3,066 | 1,454 | — | 5,379 | ||||||||||||||||
Interest expense (1) | (106,848 | ) | (3,279 | ) | 72 | — | (110,055 | ) | |||||||||||||
Other | (6,631 | ) | 1,843 | 398 | 361 | (4,029 | ) | ||||||||||||||
Other income (expense), net | (112,620 | ) | 1,630 | 1,924 | 361 | (108,705 | ) | ||||||||||||||
Income (loss) before income taxes | $ | 78,028 | $ | 5,665 | $ | (7,418 | ) | $ | — | $ | 76,275 | ||||||||||
Three Months Ended September 30, 2012: | |||||||||||||||||||||
Revenue | $ | 232,104 | $ | — | $ | 873 | $ | (277 | ) | $ | 232,700 | ||||||||||
Operating expenses (1) | 88,743 | — | 4,162 | (112 | ) | 92,793 | |||||||||||||||
Income (loss) from operations | 143,361 | — | (3,289 | ) | (165 | ) | 139,907 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | — | — | 2,084 | — | 2,084 | ||||||||||||||||
Interest expense (1) | (58,144 | ) | — | (273 | ) | — | (58,417 | ) | |||||||||||||
Other | (963 | ) | — | (2,030 | ) | 165 | (2,828 | ) | |||||||||||||
Other income (expense), net | (59,107 | ) | — | (219 | ) | 165 | (59,161 | ) | |||||||||||||
Income (loss) before income taxes | $ | 84,254 | $ | — | $ | (3,508 | ) | $ | — | $ | 80,746 | ||||||||||
Servicing | Lending | Corporate | Corporate | Business | |||||||||||||||||
Items and | Eliminations | Segments | |||||||||||||||||||
Other | Consolidated | ||||||||||||||||||||
Nine Months Ended September 30, 2013: | |||||||||||||||||||||
Revenue | $ | 1,381,872 | $ | 81,180 | $ | 19,758 | $ | (492 | ) | $ | 1,482,318 | ||||||||||
Operating expenses (1) | 795,645 | 69,543 | 95,361 | (131 | ) | 960,418 | |||||||||||||||
Income (loss) from operations | 586,227 | 11,637 | (75,603 | ) | (361 | ) | 521,900 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | 1,382 | 12,432 | 3,516 | — | 17,330 | ||||||||||||||||
Interest expense (1) | (293,381 | ) | (10,108 | ) | 150 | — | (303,339 | ) | |||||||||||||
Other | (30,961 | ) | 6,852 | 2,977 | 361 | (20,771 | ) | ||||||||||||||
Other income (expense), net | (322,960 | ) | 9,176 | 6,643 | 361 | (306,780 | ) | ||||||||||||||
Income (loss) before income taxes | $ | 263,267 | $ | 20,813 | $ | (68,960 | ) | $ | — | $ | 215,120 | ||||||||||
Nine Months Ended September 30, 2012: | |||||||||||||||||||||
Revenue | $ | 606,689 | $ | — | $ | 2,736 | $ | (812 | ) | $ | 608,613 | ||||||||||
Operating expenses (1) | 252,542 | — | 12,659 | (391 | ) | 264,810 | |||||||||||||||
Income (loss) from operations | 354,147 | — | (9,923 | ) | (421 | ) | 343,803 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | — | — | 6,434 | — | 6,434 | ||||||||||||||||
Interest expense (1) | (162,810 | ) | — | (850 | ) | — | (163,660 | ) | |||||||||||||
Other | (204 | ) | — | (5,765 | ) | 421 | (5,548 | ) | |||||||||||||
Other income (expense), net | (163,014 | ) | — | (181 | ) | 421 | (162,774 | ) | |||||||||||||
Income (loss) before income taxes | $ | 191,133 | $ | $ | (10,104 | ) | $ | — | $ | 181,029 | |||||||||||
Total Assets | |||||||||||||||||||||
30-Sep-13 | $ | 3,925,510 | $ | 778,777 | $ | 607,393 | $ | — | $ | 5,311,680 | |||||||||||
31-Dec-12 | $ | 4,498,043 | $ | 550,569 | $ | 634,143 | $ | — | $ | 5,682,755 | |||||||||||
30-Sep-12 | $ | 3,611,768 | $ | — | $ | 544,248 | $ | — | $ | 4,156,016 | |||||||||||
-1 | Depreciation and amortization expense are as follows: | ||||||||||||||||||||
Servicing | Lending | Corporate | Business | ||||||||||||||||||
Items and | Segments | ||||||||||||||||||||
Other | Consolidated | ||||||||||||||||||||
Three Months Ended September 30, 2013: | |||||||||||||||||||||
Depreciation expense | $ | 3,589 | $ | 135 | $ | 2,973 | $ | 6,697 | |||||||||||||
Amortization of MSRs | 79,035 | 148 | — | 79,183 | |||||||||||||||||
Amortization of debt discount | 330 | — | — | 330 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 1,178 | — | — | 1,178 | |||||||||||||||||
Three Months Ended September 30, 2012: | |||||||||||||||||||||
Depreciation expense | $ | 395 | $ | — | $ | 1,564 | $ | 1,959 | |||||||||||||
Amortization of MSRs | 20,150 | — | — | 20,150 | |||||||||||||||||
Amortization of debt discount | 1,199 | — | — | 1,199 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 1,207 | — | — | 1,207 | |||||||||||||||||
Nine Months Ended September 30, 2013: | |||||||||||||||||||||
Depreciation expense | $ | 9,968 | $ | 209 | $ | 6,976 | $ | 17,153 | |||||||||||||
Amortization of MSRs | 197,287 | 148 | — | 197,435 | |||||||||||||||||
Amortization of debt discount | 1,082 | — | — | 1,082 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 3,264 | — | — | 3,264 | |||||||||||||||||
Nine Months Ended September 30, 2012: | |||||||||||||||||||||
Depreciation expense | $ | 1,069 | $ | — | $ | 2,827 | $ | 3,896 | |||||||||||||
Amortization of MSRs | 53,561 | — | — | 53,561 | |||||||||||||||||
Amortization of debt discount | 2,679 | — | — | 2,679 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 3,050 | — | — | 3,050 |
NOTE_23_RELATED_PARTY_TRANSACT
NOTE 23 RELATED PARTY TRANSACTIONS | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Related Party Transactions [Abstract] | ' | ||||||||||||||||
RELATED PARTY TRANSACTIONS | ' | ||||||||||||||||
NOTE 23 | RELATED PARTY TRANSACTIONS | ||||||||||||||||
Relationship with Executive Chairman of the Board of Directors | |||||||||||||||||
Ocwen’s Executive Chairman of the Board of Directors, William C. Erbey, also serves as Chairman of the Board of Altisource, HLSS, Altisource Residential Corporation (Residential) and Altisource Asset Management Corporation (AAMC). As a result, he has obligations to Ocwen as well as to Altisource, HLSS, Residential and AAMC. As of September 30, 2013, Mr. Erbey owned or controlled approximately 13% of the common stock of Ocwen, approximately 23% of the common stock of Altisource, approximately 1% of the common stock of HLSS and approximately 9% of the common stock of AAMC. Mr. Erbey’s percentage interest in Residential declined to 4% as a result of an additional public offering by Residential that closed on October 1, 2013. | |||||||||||||||||
Relationship with Altisource | |||||||||||||||||
Under the Services Agreement, Altisource provides various business process outsourcing services, such as valuation services and property preservation and inspection services, among other things. Altisource also provides certain technology products and support services to Ocwen under the Technology Products Services Agreement and the Data Center and Disaster Recovery Services Agreement. In addition, under the Data Access and Services Agreement, Ocwen has agreed to make available to Altisource certain data from Ocwen’s servicing portfolio in exchange for a per asset fee. Under the Support Services Agreement, Ocwen and Altisource provide to each other services in such areas as human resources, vendor management, corporate services, accounting, tax matters, risk management, law and consumer psychology. | |||||||||||||||||
In connection with the March 29, 2013 sale to Altisource of the diversified fee-based business acquired in connection with the Homeward Acquisition, Ocwen agreed to extend to August 31, 2025 the terms of the Services Agreement, the Technology Products Services Agreement, the Data Center and Disaster Recovery Services Agreement and the Intellectual Property Agreement with Altisource. In addition, Ocwen agreed to expand the terms of the Services Agreement to apply to the services as they relate to the Homeward servicing platform and further to establish Altisource as the exclusive provider of such services as they relate to the Homeward servicing platform. In addition, Ocwen agreed not to establish similar fee-based businesses (or establish relationships with other companies engaged in the line of similar fee-based businesses) that would directly or indirectly compete with diversified fee-based businesses as they relate to the Homeward servicing platform acquired by Altisource. | |||||||||||||||||
Certain services provided by Altisource under these contracts are charged to the borrower and/or loan investor. Accordingly, such services, while derived from our loan servicing portfolio, are not reported as expenses by Ocwen. These services include residential property valuation, residential property preservation and inspection services, title services and real estate sales. | |||||||||||||||||
Our business is currently dependent on many of the services and products provided under these long-term contracts which include renewal provisions. We believe the rates charged under these agreements are market rates as they are materially consistent with one or more of the following: the fees charged by Altisource to other customers for comparable services and the rates Ocwen pays to or observes from other service providers. | |||||||||||||||||
As disclosed in Note 4 – Business Acquisitions, on April 12, 2013 in connection with the sale to Altisource of the diversified fee-based business acquired in connection with the ResCap Acquisition, we agreed to establish additional terms related to existing servicing arrangements between Altisource and Ocwen for mortgage servicing assets acquired from ResCap. | |||||||||||||||||
The agreement provides that during the term of the existing servicing arrangements between Altisource and Ocwen (i) Altisource will be the exclusive provider, except as prohibited by applicable law, to Ocwen and all of its subsidiaries and affiliates, of certain services related to the ResCap business; (ii) Ocwen will not establish similar fee-based businesses that would directly or indirectly compete with Altisource services as they relate to the ResCap business; and (iii) Ocwen and all of its subsidiaries and affiliates will market and promote the utilization of Altisource’s services to their various third-party relationships. Additionally, the parties agreed to use commercially reasonable best efforts to ensure that the loans associated with the ResCap business are boarded onto Altisource’s mortgage servicing platform. The cash consideration paid by Altisource to Ocwen under the Agreement totaled $128.8 million. | |||||||||||||||||
Also as disclosed in Note 4 – Business Acquisitions, on March 31, 2013 we acquired from Altisource its 49% equity interest in Correspondent One. | |||||||||||||||||
On December 27, 2012, we entered into a senior unsecured term loan facility agreement with Altisource and borrowed $75.0 million. The proceeds of this loan were used to fund a portion of the Homeward Acquisition. Borrowings under the Unsecured Loan Agreement bear interest at a rate equal to the one-month Eurodollar Rate (1-Month LIBOR) plus 675 basis points with a Eurodollar Rate floor of 150 basis points. In February 2013, we repaid this loan in full. | |||||||||||||||||
Relationship with HLSS | |||||||||||||||||
Ocwen and HLSS Management entered into an agreement to provide to each other certain professional services including valuation analysis of potential MSR acquisitions, treasury management services and other similar services, legal, licensing and regulatory compliance support services, risk management services and other similar services. | |||||||||||||||||
As disclosed in Note 3 – Transfers of Financial Assets, Ocwen has sold to HLSS certain Rights to MSRs and related servicing advances. OLS also entered into a subservicing agreement with HLSS on February 10, 2012, which was amended on October 1, 2012 and again on September 30, 2013, under which it will subservice the MSRs after legal ownership of the MSRs has been transferred to HLSS. | |||||||||||||||||
Relationship with Residential | |||||||||||||||||
On December 21, 2012, OMS entered into a 15-year servicing agreement with Altisource Residential, L.P., the operating partnership of Residential, pursuant to which Ocwen will service residential mortgage loans acquired by Residential and provide loan modification, assisted deed-in-lieu, assisted deed-for-lease and other loss mitigation programs. | |||||||||||||||||
On February 14, 2013, OLS sold a pool of non-performing residential mortgage loans to Altisource Residential, L.P. pursuant to a Master Mortgage Loan Sale Agreement. The aggregate purchase price for the pool of loans was $64.4 million and the gain recognized by Ocwen on the sale was not significant. | |||||||||||||||||
Relationship with AAMC | |||||||||||||||||
On December 11, 2012, Mr. Erbey received 52,589 shares of AAMC restricted stock pursuant to the Altisource Asset Management Corporation 2012 Special Equity Incentive Plan and a Special Restricted Stock Award Agreement in his capacity as Chairman of the Board of AAMC and Altisource. | |||||||||||||||||
On December 11, 2012, Ronald M. Faris, our President and Chief Executive Officer and a director of Ocwen, received 29,216 shares of AAMC restricted stock pursuant to the Altisource Asset Management Corporation 2012 Special Equity Incentive Plan and a Special Restricted Stock Award Agreement, in connection with the services he provides AAMC through his employment with Ocwen. | |||||||||||||||||
Relationship with Former Owner of Homeward | |||||||||||||||||
As consideration for the Homeward Acquisition, Ocwen paid an aggregate purchase price of $766.0 million, of which $604.0 million was paid in cash and $162.0 million was paid in 162,000 Preferred Shares issued to certain private equity firms ultimately controlled by WL Ross & Co. LLC (the Funds), that pay a dividend of 3.75% per annum on a quarterly basis. Each Preferred Share, together with any accrued and unpaid dividends, may be converted at the option of the holder into shares of Ocwen common stock at a conversion price equal to $31.79. Mr. Ross is the Chairman and Chief Executive Officer of WL Ross & Co. LLC and Invesco Private Capital, Inc. and the managing member of El Vedado, LLC, each of which directly or indirectly controls the Funds. Mr. Ross became a director of Ocwen in March 2013. On September 23, 2013, the Funds exercised their right to convert 100,000 of the Preferred Shares into 3,145,640 of common stock. On the same date, Ocwen repurchased the shares of common stock from the Funds for $157.9 million. | |||||||||||||||||
The following table summarizes our revenues and expenses related to the various service agreements with Altisource and its subsidiaries and HLSS for the periods September 30, and amounts receivable from or payable to at the dates indicated: | |||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Revenues and Expenses: | |||||||||||||||||
Altisource: | |||||||||||||||||
Revenues | $ | 5,185 | $ | 4,156 | $ | 15,390 | $ | 12,229 | |||||||||
Expenses | 13,153 | 6,826 | 36,650 | 20,537 | |||||||||||||
HLSS: | |||||||||||||||||
Revenues | $ | 20 | $ | 125 | $ | 172 | $ | 165 | |||||||||
Expenses | 386 | 780 | 1,615 | 1,773 | |||||||||||||
September 30, | December 31, | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Net Receivable (payable) | |||||||||||||||||
Altisource | $ | (3,489 | ) | $ | (5,971 | ) | |||||||||||
HLSS | 22,337 | (25,524 | ) | ||||||||||||||
$ | 18,848 | $ | (31,495 | ) | |||||||||||||
NOTE_24_REGULATORY_REQUIREMENT
NOTE 24 REGULATORY REQUIREMENTS | 9 Months Ended | |
Sep. 30, 2013 | ||
Regulatory Requirements [Abstract] | ' | |
REGULATORY REQUIREMENTS | ' | |
Note 24 | Regulatory Requirements | |
Our business is subject to extensive regulation by federal, state and local governmental authorities, including the CFPB, the Federal Trade Commission (FTC), the SEC and various state agencies that license, audit and conduct examinations of our mortgage originations, servicing and collection activities in a number of states. The CFPB asserts supervisory authority (including the authority to conduct examinations) over Ocwen and its affiliates, including Homeward. From time to time, we also receive requests from federal, state and local agencies for records, documents and information relating to our policies, procedures and practices regarding our loan origination, loan servicing and debt collection business activities. We incur significant ongoing costs to comply with new and existing laws and governmental regulation of our business. | ||
We must comply with a number of federal, state and local consumer protection laws including, among others, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act, the Real Estate Settlement Procedures Act (RESPA), the Truth in Lending Act (TILA), the Fair Credit Reporting Act, the Servicemembers Civil Relief Act, Homeowners Protection Act, the Federal Trade Commission Act and, more recently, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), and state mortgage origination, mortgage servicing and foreclosure laws. These laws apply to loan origination, loan servicing, debt collection, use of credit reports, safeguarding of non-public personally identifiable information about our customers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures and notices to borrowers. These requirements can and do change as statutes and regulations are enacted, promulgated or amended. | ||
There are a number of foreign laws and regulations that are applicable to our operations in India, the Philippines and Uruguay, including acts that govern licensing, employment, safety, taxes, insurance, and the laws and regulations that govern the creation, continuation and the winding up of companies as well as the relationships between the shareholders, the company, the public and the government in both countries. |
NOTE_25_COMMITMENTS_AND_CONTIN
NOTE 25 COMMITMENTS AND CONTINGENCIES | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
COMMITMENTS AND CONTINGENCIES | ' | ||||
NOTE 25 | COMMITMENTS AND CONTINGENCIES | ||||
We are subject to various pending legal proceedings, including those subject to loss sharing and indemnification provisions of our various acquisitions. In our opinion, the resolution of those proceedings will not have a material effect on our financial condition, results of operations or cash flows. | |||||
Regulatory Contingencies | |||||
We are subject to a number of pending federal and state regulatory investigations, examinations, inquiries, requests for information and/or other actions. In July 2010, OLS received two subpoenas from the Federal Housing Finance Agency as conservator for Freddie Mac and Fannie Mae in connection with ten private label mortgage securitization transactions where Freddie Mac and Fannie Mae have invested. The transactions include mortgage loans serviced but not originated by OLS or its affiliates. On November 24, 2010, OLS received a Civil Investigative Demand (CID) from the FTC requesting documents and information regarding various servicing activities. On June 6, 2012, the FTC notified OLS that it had referred this CID to the CFPB. On November 7, 2011, OLS received a CID from the Attorney General’s Office of the Commonwealth of Massachusetts requesting documents and information regarding certain foreclosures executed in Massachusetts. On January 18, 2012, OLS received a subpoena from the New York Department of Financial Services (NY DFS) requesting documents regarding OLS’ policies, procedures and practices regarding lender-placed or “force-placed” insurance which is required to be provided for borrowers who allow their hazard insurance policies to lapse. Separately, on December 5, 2012, we entered into a Consent Order with the NY DFS in which we agreed to the appointment of an independent Monitor to oversee our compliance with the Agreement on Servicing Practices. NY DFS selected the firms that will act as the Monitor, and their formal engagement commenced effective July 1, 2013. The engagement will last until July 1, 2015, and we intend to continue to cooperate with the NY DFS and the Monitor. | |||||
As previously reported, on August 13, 2012, OLS received a request from the MMC to provide information and data relating to our loan servicing portfolio, including loan count and volume data, loan modifications, fees assessed, delinquencies, short sales, loan-to-value data and rating agency reports. The MMC, along with the CFPB, certain state Attorneys General and other agencies who were involved in the National Mortgage Settlement executed on February 9, 2012 by the five large banks (collectively, the Regulators), also requested that we indicate our position on behalf of OLS and Litton on the servicing standards and consumer relief provisions contained in that Settlement. In response, we indicated our willingness to adopt the servicing standards set out in the National Mortgage Settlement with certain caveats and to undertake various consumer assistance commitments in the form of loan modifications and other foreclosure avoidance alternatives. On February 26, 2013, the Regulators requested that, in addition to committing to the servicing standards and loan modifications, we also consider a proposal to contribute to a consumer relief fund that would provide cash payments to certain borrowers foreclosed upon by OLS and various entities we have acquired. In subsequent discussions, it was clarified that the Regulators sought our agreement on servicing standards, loan modifications and the proposed consumer relief fund to settle and release various potential legal claims against Ocwen, Litton and Homeward arising out of MMC examinations and potential follow on federal and/or state enforcement actions (the Proposed Regulators’ Settlement). In light of the substantial progress the parties have made toward an agreement in principle regarding the Proposed Regulators’ Settlement, we believe such a settlement is probable. Consummation of a final settlement would be subject to completion of definitive settlement documents acceptable to all parties, the participation of all relevant regulatory agencies, and execution of certain contractual undertakings by the sellers of Litton and Homeward. In the event a final settlement is not concluded, we will defend any ensuing legal proceedings vigorously. As disclosed in Note 16 – Other Liabilities, we have established a liability of $66.4 million for the Proposed Regulators’ Settlement. | |||||
As part of the ResCap Acquisition, OLS is required to service the ResCap loans in accordance with the requirements of the National Mortgage Settlement, although OLS is not responsible for any payment, penalty or financial obligation, including but not limited to providing Ally’s share of financial relief to borrowers under that settlement. The Office of Mortgage Settlement Oversight (OMSO) which is responsible for monitoring compliance with obligations under the National Mortgage Settlement, issued a report on February 14, 2013 confirming that Ally/ResCap have completed its minimum consumer relief obligations. | |||||
One or more of the foregoing regulatory actions or similar actions in the future against Ocwen, OLS, Litton or Homeward could cause us to incur fines, penalties, settlement costs, damages, legal fees or other charges in material amounts, or undertake remedial actions pursuant to administrative orders or court-issued injunctions, any of which could adversely affect our financial results or incur additional significant costs related to our loan servicing operations. | |||||
In addition to these matters, Ocwen receives periodic inquires, both formal and informal in nature, from various state and federal agencies as part of those agencies’ oversight of the mortgage servicing sector. Such ongoing inquiries, including those into servicer foreclosure processes, could result in additional actions by state or federal governmental bodies, regulators or the courts that could result in an extension of foreclosure timelines, which may be applicable generally to the servicing industry or to us in particular. In addition, a number of our match funded advance facilities contain provisions that limit the eligibility of advances to be financed based on the length of time that advances are outstanding, and two of our match funded advance facilities have provisions that limit new borrowings if average foreclosure timelines extend beyond a certain time period, either of which, if such provisions applied, could adversely affect liquidity by reducing our average effective advance rate. Increases in the amount of advances and the length of time to recover advances, fines or increases in operating expenses, and decreases in the advance rate and availability of financing for advances could result in increased borrowings, reduced cash and higher interest expense which could negatively impact our liquidity and profitability. | |||||
Loan Put-Back and Related Contingencies | |||||
In several recent court actions, mortgage loan sellers against whom repurchase claims have been asserted based on alleged breaches of representations and warranties are defending themselves on various grounds including the expiration of statutes of limitation, lack of notice and opportunity to cure and vitiation of the obligation to repurchase as a result of foreclosure or charge off of the loan. Ocwen is not a party to any of the actions, but we are the servicer for certain securitizations involved in such actions. In connection with these actions, Ocwen has entered into tolling agreements with respect to its role as servicer for a very small number of securitizations and may enter into additional tolling agreements in the future. Should Ocwen be made a party to these or similar actions, we may need to defend allegations that we failed to service loans in accordance with applicable agreements and that such failures prejudiced the rights of repurchase claimants against loan sellers. We believe that any such allegations would be without merit and, if necessary, would vigorously defend against them. If, however, we were required to compensate claimants for losses related to seller breaches of representations and warranties in respect of loans we service, then our business, financial condition and results of operations could be adversely affected. | |||||
We have exposure to representation, warranty and indemnification obligations because of our lending, sales and securitization activities, our acquisitions to the extent we assume one or more of these obligations and in connection with our servicing practices. We recognize the fair value of representation and warranty obligations in connection with originations upon sale or securitization of the loan or upon completion of an acquisition, to the extent we assume these obligations. Obligations recognized in connection with our loan sales and securitization activities are recognized in Gain on loans held for sale, net on our Consolidated Statements of Operations. The fair value of liabilities assumed as part of an MSR or servicing business acquisition are recognized on the closing date. Thereafter, the estimation of the liability considers probable future obligations based on industry data of loans of similar type segregated by year of origination and estimated loss severity based on current loss rates for similar loans, our historical rescission rates and the current pipeline of unresolved demands. Our historical loss severity considers the historical loss experience that we incur upon sale or liquidation of a repurchased loan as well as current market conditions. At September 30, 2013, we had provided or assumed representation and warranty obligations in connection with $89.4 billion of UPB covering both forward and reverse mortgage loans. At September 30, 2013, we had outstanding representation and warranty repurchase demands of $113.0 million UPB (534 loans). We review each demand and monitor through resolution, primarily through rescission, loan repurchase or make-whole payment. | |||||
The following table presents the changes in our liability for indemnification obligations for the nine months ended September 30, 2013, including representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines: | |||||
Balance at December 31, 2012 | $ | 38,140 | |||
Provision for representation and warranty obligations | 18,116 | ||||
New production reserves | 1,055 | ||||
Obligations assumed in connection with MSR and servicing business acquisitions | 189,742 | ||||
Charge-offs (1) | (40,979 | ) | |||
Balance at September 30, 2013 | $ | 206,074 | |||
-1 | Includes principal and interest losses realized in connection with repurchased loans, make-whole, indemnification and fee payments and settlements net of recoveries, if any. | ||||
We believe it is reasonably possible that losses beyond amounts currently recorded for potential representation and warranty obligations and related claims described above could occur, and such losses could have an adverse impact on our results of operations, financial condition or cash flows. However, based on currently available information, we are unable to estimate a range of reasonably possible losses above amounts that have been recorded at September 30, 2013. |
NOTE_26_SUBSEQUENT_EVENTS
NOTE 26 SUBSEQUENT EVENTS | 9 Months Ended | |
Sep. 30, 2013 | ||
Subsequent Events [Abstract] | ' | |
SUBSEQUENT EVENTS | ' | |
NOTE 26 | SUBSEQUENT EVENTS | |
On October 25, 2013, OLS completed a sale to HLSS Holdings, LLC and Home Loan Servicing Solutions, Ltd. of Rights to MSRs and related servicing advances for a servicing portfolio of subprime and Alt-A residential mortgage loans. | ||
This transaction resulted in our sale of Rights to MSRs with approximately $10.0 billion in UPB of mortgage loans as of October 24, 2013. The purchase price for the transaction was approximately $388 million, including $360 million for servicing advances and $28 million for the associated Rights to MSRs. Within 90 days of the closing, the purchase price or other terms may be adjusted to reflect any adjustments in the calculation of the UPB of the underlying mortgage loans or servicing advance balances sold in the transaction. | ||
We sold these mortgage servicing assets to HLSS pursuant to an amended Sale Supplement to the Master Servicing Rights Purchase Agreement between OLS, HLSS Holdings, LLC and Home Loan Servicing Solutions, Ltd. In addition to our sale of the right, title and interest to the Rights to MSRs and the associated servicing advances, HLSS Holdings, LLC also committed to purchase servicing advances that arise under the related pooling and servicing agreements after the closing date. In return, OLS continues to subservice the related mortgage loans, receives a monthly base fee equal to 12% of the servicing fees collected in any given month and retains any ancillary income payable to the servicer (excluding investment income earned on any custodial accounts) pursuant to the related pooling and servicing agreements. OLS also earns a monthly performance based incentive fee based on the servicing fees collected. If the targeted advance ratio in any month exceeds the predetermined level for that month set forth in the Sale Supplement and the Subservicing Supplement for the transaction, any performance based incentive fee payable for such month will be reduced by an amount equal to 3% per annum of the amount of any such excess servicing advances. | ||
As disclosed in Note 1, we entered into a Purchase Agreement with OneWest Bank, FSB that is closing in stages. As part of the OneWest MSR Transaction, in October 2013, we closed the purchase of approximately $1.1 billion in UPB of MSRs and related servicing advances, including approximately $6.6 million of MSRs and approximately $37.1 million of servicing advances. On November 1, 2013, we closed the purchase of approximately $32.9 billion in UPB of MSRs and related servicing advances. The purchase included approximately $235.6 million of MSRs and approximately $1.3 billion of servicing advances. The November purchase was funded from the proceeds of a newly executed $1.6 billion match funded advance financing facility and available cash. The new facility consists of three notes, the largest of which bears interest at 1-Month LIBOR plus an initial margin of 1.75% with the two smaller notes bearing interest at the lender's commercial paper rate plus initial margins of 1.67% and 4.25%. The notes mature in October 2044 with an amortization date beginning in October 2014. |
NOTE_1_DESCRIPTION_OF_BUSINESS1
NOTE 1 DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | ||
Sep. 30, 2013 | |||
Accounting Policies [Abstract] | ' | ||
Transfers of Financial Assets | ' | ||
Transfers of Financial Assets | |||
We securitize, sell and service forward and reverse residential mortgage loans. Securitization transactions typically involve the use of VIEs and are accounted for either as sales or as secured financings. We typically retain economic interests in the securitized assets in the form of servicing rights and obligations. In order to efficiently finance our assets and operations and create liquidity, we may sell servicing advances, MSRs and the right to receive servicing fees, excluding ancillary income, relating to certain of our MSRs (Rights to MSRs). | |||
In order to determine whether or not a VIE is required to be consolidated, we consider our ongoing involvement with the VIE. In circumstances where we have both the power to direct the activities that most significantly impact the VIEs performance and the obligation to absorb losses or the right to receive benefits that could be significant, we would conclude that we would consolidate the entity, which precludes us from recording an accounting sale in connection with the transfer of the financial assets. In the case of a consolidated VIE, we continue to record the underlying residential mortgage loans or servicing advances, and we record the securitized debt on our consolidated balance sheet. | |||
In the case of transfers where either one or both of the power or economic criteria above are not met, we evaluate whether we achieve a sale for accounting purposes. In order to achieve a sale, the transferred assets must be legally isolated, not be constrained by restrictions from further transfer, and be deemed to be beyond our control. If we fail any of these three criteria, the accounting is consistent with a secured financing as described in the preceding paragraph. Subsequent to the determination that a transaction does not meet the accounting sale criteria, we may determine that we meet the criteria. In the event we subsequently meet the accounting sale criteria, we derecognize the transferred assets and related liabilities. | |||
In the case of transfers of MSRs and Rights to MSRs where we retain the right to subservice, we defer the related gain or loss and amortize the balance over the life of the subservicing agreement. | |||
Gains or losses on off-balance sheet securitizations take into consideration any retained interests, including servicing rights and representation and warranty obligations, both of which are initially recorded at fair value at the date of sale in Gain on loans held for sale, net, in our Consolidated Statements of Operations. | |||
Recent Accounting Pronouncements | ' | ||
Recent Accounting Pronouncements | |||
Accounting Standards Update (ASU) 2011-11, (Accounting Standards Codification (ASC) 210, Balance Sheet): Disclosures about Offsetting Assets and Liabilities and ASU 2013-01: Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. This ASU contains new disclosure requirements regarding the nature of an entity’s rights of offset and related arrangements associated with financial and derivative instruments. ASU 2013-01 clarified the scope of transactions that are subject to ASU 2011-11. The new disclosures also provide information about gross and net exposures. Retrospective application is required for all comparative periods presented. Our adoption of these standards on January 1, 2013 did not have a material impact on our unaudited consolidated financial statements, as the requirements relate to disclosures only. | |||
ASU 2013-02 (ASC 220, Comprehensive Income): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (which amends ASC 220, Comprehensive Income). ASC 2013-02 contains new requirements related to the presentation and disclosure of items that are reclassified out of accumulated other comprehensive income. The ASU is required to be applied prospectively. Adoption of this standard on January 1, 2013 did not have a material impact on our unaudited consolidated financial statements, as the requirements relate to disclosures only. | |||
ASU 2013-04 (ASC 405, Liabilities): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, a consensus of the FASB Emerging Issues Task Force (EITF). On February 28, 2013, the FASB issued ASU 2013-04. The ASU requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, as the sum of the following: | |||
a. | The amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors, and | ||
b. | Any additional amount the reporting entity expects to pay on behalf of its co-obligors. | ||
Required disclosures include a description of the joint-and-several arrangement and the total outstanding amount of the obligation for all joint parties. The ASU permits entities to aggregate disclosures (as opposed to providing separate disclosures for each joint-and-several obligation). The ASU is effective for all prior periods in fiscal years beginning on or after December 15, 2013 (and interim reporting periods within those years). The ASU should be applied retrospectively to obligations with joint-and-several liabilities existing at the beginning of an entity’s fiscal year of adoption. Entities that elect to use hindsight in measuring their obligations during the comparative periods must disclose that fact. Early adoption is permitted. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial condition or results of operations. | |||
ASU 2013-05 (ASC 830, Foreign Currency Matters): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity, a consensus of the FASB Emerging Issues Task Force. On March 4, 2013, the FASB issued ASU 2013-05, which requires that the entire amount of a cumulative translation adjustment (CTA) related to an entity’s investment in a foreign entity should be released when there has been a: | |||
● | sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity, | ||
● | loss of a controlling financial interest in an investment in a foreign entity (i.e., the foreign entity is deconsolidated), or | ||
● | step acquisition for a foreign entity (i.e., when an entity has changed from applying the equity method for an investment in a foreign entity to consolidating the foreign entity). | ||
The ASU does not change the requirement to release a pro rata portion of the CTA of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The ASU is effective for fiscal years (and interim periods within those fiscal years) beginning on or after December 15, 2013. The ASU should be applied prospectively from the beginning of the fiscal year of adoption. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial condition or results of operations. | |||
ASU 2013-10 (ASC 815, Derivatives and Hedging): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes (a consensus of the FASB Emerging Issues Task Force). On July 17, 2013, the FASB issued ASU 2013-10, which permits the Fed Funds Effective Swap Rate to be used as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815, in addition to interest rates on direct Treasury obligations of the U.S. government (UST) and the London Interbank Offered Rate (LIBOR). The ASU also removes the restriction on using different benchmark rates for similar hedges. The ASU is effective prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013. Because we terminated our remaining interest rate swap agreements on May 31, 2013, our adoption of this standard did not have a material impact on our consolidated financial condition or results of operations. | |||
ASU 2013-11 (ASC 740, Income Taxes): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). On July 18, 2013, the FASB issued ASU 2013-11, which clarifies that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. | |||
The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The ASU should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. We are currently evaluating the effect of adopting this standard effective January 1, 2014, but we do not anticipate that our adoption will have a material impact on our consolidated financial condition or results of operations. |
NOTE_2_SECURITIZATIONS_AND_VAR1
NOTE 2 SECURITIZATIONS AND VARIABLE INTEREST ENTITIES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Asset Sales and Financing [Abstract] | ' | ||||||||
Schedule of cash flows related to transfers accounted for as sales | ' | ||||||||
Three Months | Nine Months | ||||||||
Proceeds received from securitizations | $ | 1,776,309 | $ | 6,240,459 | |||||
Servicing fees collected | 6,317 | 13,125 | |||||||
Purchases of previously transferred assets, net of claims reimbursed | (358 | ) | (358 | ) | |||||
$ | 1,782,268 | $ | 6,253,226 | ||||||
Schedule of assets that relate to our continuing involvement with forward loans that we have transferred with servicing rights retained as well as our maximum exposure to loss including the unpaid principal balance | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Carrying value of assets: | |||||||||
Mortgage servicing rights, at amortized cost | $ | 53,562 | $ | — | |||||
Mortgage servicing rights, at fair value | 2,751 | 2,908 | |||||||
Advances and match funded advances | 16,254 | — | |||||||
Unpaid principal balance of loans transferred (1) | 6,125,869 | 238,010 | |||||||
Maximum exposure to loss | $ | 6,198,436 | $ | 240,918 | |||||
-1 | The UPB of the loans transferred is the maximum exposure to loss under our standard representations and warranties obligations. |
NOTE_3_TRANSFERS_OF_FINANCIAL_1
NOTE 3 TRANSFERS OF FINANCIAL ASSETES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Asset Sales and Financing [Abstract] | ' | ||||||||
Schedule of summary of the assets and liabilities sold to HLSS | ' | ||||||||
2013 | 2012 | ||||||||
Sale of MSRs accounted for as a financing | $ | 388,472 | $ | 184,269 | |||||
Sale of match funded advances | 3,489,907 | 1,088,505 | |||||||
Sale of advance SPEs: | |||||||||
Match funded advances | — | 413,374 | |||||||
Debt service account | — | 14,786 | |||||||
Prepaid lender fees and debt issuance costs | — | 5,422 | |||||||
Other prepaid expenses | — | 1,928 | |||||||
Match funded liabilities | — | (358,335 | ) | ||||||
Accrued interest payable and other accrued expenses | — | (841 | ) | ||||||
Net assets of advance SPEs | — | 76,334 | |||||||
Sales price, as adjusted | 3,878,379 | 1,349,108 | |||||||
Amount due to (from) HLSS for post-closing adjustments at September 30 | — | (4,260 | ) | ||||||
3,878,379 | 1,344,848 | ||||||||
Amount received from (paid to) HLSS as settlement of post-closing adjustments outstanding at the end of the previous year | 1,410 | — | |||||||
Total cash received | $ | 3,879,789 | $ | 1,344,848 |
NOTE_4_BUSINESS_ACQUISITIONS_T
NOTE 4 BUSINESS ACQUISITIONS (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
ResCap and Homeward Acquisitions | ' | ||||||||||||||||||||||||
Schedule of purchase price allocation | ' | ||||||||||||||||||||||||
ResCap | Homeward | ||||||||||||||||||||||||
Purchase Price Allocation | March 31, | Adjustments | Revised | December 31, | Adjustments | Revised | |||||||||||||||||||
2013 | 2012 | ||||||||||||||||||||||||
Cash | $ | — | $ | — | $ | — | $ | 79,511 | $ | — | $ | 79,511 | |||||||||||||
Loans held for sale | — | — | — | 558,721 | — | 558,721 | |||||||||||||||||||
MSRs (2) | 393,891 | (2,038 | ) | 391,853 | -1 | 358,119 | 2,225 | 360,344 | |||||||||||||||||
Advances and match funded advances (2) | 1,622,348 | 100,031 | 1,722,379 | -1 | 2,266,882 | — | 2,266,882 | -1 | |||||||||||||||||
Deferred tax assets | — | — | — | 47,346 | — | 47,346 | -1 | ||||||||||||||||||
Premises and equipment | 22,398 | (5,975 | ) | 16,423 | -1 | 16,803 | (4,288 | ) | 12,515 | -1 | |||||||||||||||
Debt service accounts | — | — | — | 69,287 | — | 69,287 | |||||||||||||||||||
Investment in unconsolidated entities | — | — | — | 5,485 | — | 5,485 | -1 | ||||||||||||||||||
Receivables and other assets (3) | 2,989 | — | 2,989 | 56,886 | (29,746 | ) | 27,140 | ||||||||||||||||||
Match funded liabilities | — | — | — | (1,997,459 | ) | — | (1,997,459 | ) | |||||||||||||||||
Other borrowings | — | — | — | (864,969 | ) | — | (864,969 | ) | |||||||||||||||||
Other liabilities | |||||||||||||||||||||||||
Liability for indemnification obligations | (49,500 | ) | — | (49,500 | ) | (32,498 | ) | — | (32,498 | )(1) | |||||||||||||||
Liability for certain foreclosure matters (4) | — | — | — | — | (13,602 | ) | (13,602 | )(1) | |||||||||||||||||
Accrued bonuses | — | — | — | (35,201 | ) | — | (35,201 | ) | |||||||||||||||||
Checks held for escheat | — | — | — | (16,418 | ) | (35 | ) | (16,453 | )(1) | ||||||||||||||||
Other | (24,840 | ) | (284 | ) | (25,124 | ) | (47,614 | ) | 2,763 | (44,851 | )(1) | ||||||||||||||
Total identifiable net assets | 1,967,286 | 91,734 | 2,059,020 | 464,881 | (42,683 | ) | 422,198 | ||||||||||||||||||
Goodwill | 204,743 | (2,933 | ) | 201,810 | -1 | 300,843 | 41,783 | 342,626 | -1 | ||||||||||||||||
Total consideration | $ | 2,172,029 | $ | 88,801 | $ | 2,260,830 | $ | 765,724 | $ | (900 | ) | $ | 764,824 | ||||||||||||
-1 | Initial fair value estimate. | ||||||||||||||||||||||||
-2 | As of the acquisition date, the purchase of MSRs with a UPB of $9.0 billion from ResCap was not complete pending the receipt of certain consents and court approvals. During the third quarter we obtained the required consents and approvals for a portion of these MSRs and paid an additional purchase price of $93.3 million to acquire the MSRs and related advances. The purchase price allocation has been revised to include the resulting adjustments to MSRs, advances and goodwill. We anticipate there will be additional settlements in connection with the ResCap Acquisition in the fourth quarter of 2013. | ||||||||||||||||||||||||
-3 | The purchase price allocation has been revised to include a $29.7 million income tax liability, with an offsetting increase to goodwill. | ||||||||||||||||||||||||
-4 | See Note 16 - Other Liabilities. | ||||||||||||||||||||||||
ResCap Acquisition | ' | ||||||||||||||||||||||||
Schedule of revenue and earnings | ' | ||||||||||||||||||||||||
For the Periods Ended September 30, 2013: | Three Months | Nine Months | |||||||||||||||||||||||
Revenues | $ | 212,164 | $ | 508,589 | |||||||||||||||||||||
Net income | $ | 8,230 | $ | 81,362 | |||||||||||||||||||||
Schedule of pro forma results of operations | ' | ||||||||||||||||||||||||
For the Periods Ended September 30: | Three Months | Nine Months | |||||||||||||||||||||||
2012 | 2013 | 2012 | |||||||||||||||||||||||
Revenues | $ | 374,751 | $ | 1,530,055 | $ | 1,027,102 | |||||||||||||||||||
Net income | $ | 2,696 | $ | 205,062 | $ | 21,921 | |||||||||||||||||||
Homeward Acquisitions | ' | ||||||||||||||||||||||||
Schedule of pro forma results of operations | ' | ||||||||||||||||||||||||
For the Periods Ended September 30, 2012: | Three Months | Nine Months | |||||||||||||||||||||||
Revenues | $ | 346,037 | $ | 949,587 | |||||||||||||||||||||
Net income | $ | 57,013 | $ | 133,821 |
NOTE_5_FAIR_VALUE_OF_FINANCIAL1
NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||
Schedule of carrying and estimated fair values of financial instruments | ' | ||||||||||||||||||||
30-Sep-13 | 31-Dec-12 | ||||||||||||||||||||
Level | Carrying | Fair | Carrying | Fair | |||||||||||||||||
Value | Value | Value | Value | ||||||||||||||||||
Financial assets: | |||||||||||||||||||||
Loans held for sale, at fair value (1) | 2 | $ | 335,102 | $ | 335,102 | $ | 426,480 | $ | 426,480 | ||||||||||||
Loans held for sale, at lower of cost or fair value (2) | 3 | 86,753 | 86,753 | 82,866 | 82,866 | ||||||||||||||||
Loans – restricted for securitization investors, at fair value (1) | 3 | 290,853 | 290,853 | — | — | ||||||||||||||||
Advances and match funded advances (3) | 3 | 1,480,012 | 1,480,012 | 3,233,707 | 3,233,707 | ||||||||||||||||
Receivables, net (3) | 3 | 253,150 | 253,150 | 167,459 | 167,459 | ||||||||||||||||
Financial liabilities: | |||||||||||||||||||||
Match funded liabilities (3) | 3 | $ | 363,012 | $ | 363,012 | $ | 2,532,745 | $ | 2,533,278 | ||||||||||||
Other borrowings: | |||||||||||||||||||||
Senior secured term loan (3) | 3 | 1,287,821 | 1,278,273 | 305,997 | 310,822 | ||||||||||||||||
Secured borrowings – owed to securitization investors, at fair value (1) | 3 | 284,276 | 284,276 | — | — | ||||||||||||||||
Other (3) | 3 | 1,020,494 | 1,020,494 | 790,682 | 790,682 | ||||||||||||||||
Total Other borrowings | 2,592,591 | 2,583,043 | 1,096,679 | 1,101,504 | |||||||||||||||||
Derivative financial instruments (1): | |||||||||||||||||||||
Interest rate lock commitments (IRLCs) | 2 | $ | 13,491 | $ | 13,491 | $ | 5,781 | $ | 5,781 | ||||||||||||
Interest rate swaps | 3 | — | — | (10,836 | ) | (10,836 | ) | ||||||||||||||
Forward MBS trades | 1 | (12,185 | ) | (12,185 | ) | (1,719 | ) | (1,719 | ) | ||||||||||||
U.S. Treasury futures | 1 | — | — | (1,258 | ) | (1,258 | ) | ||||||||||||||
Interest rate caps | 3 | — | — | 168 | 168 | ||||||||||||||||
MSRs, at fair value (1) | 3 | $ | 96,938 | $ | 96,938 | $ | 85,213 | $ | 85,213 | ||||||||||||
-1 | Measured at fair value on a recurring basis. | ||||||||||||||||||||
-2 | Measured at fair value on a non-recurring basis. | ||||||||||||||||||||
-3 | Disclosed, but not carried, at fair value. | ||||||||||||||||||||
Schedule of reconciliation of the changes in fair value of Level 3 assets | ' | ||||||||||||||||||||
Loans – | Secured | Derivative | MSRs at | Total | |||||||||||||||||
restricted for | borrowings – | Financial | Fair | ||||||||||||||||||
securitization | owed to | Instruments | Value | ||||||||||||||||||
investors | securitization | ||||||||||||||||||||
investors | |||||||||||||||||||||
Three Months Ended September 30, 2013: | |||||||||||||||||||||
Beginning balance | $ | 76,649 | $ | (73,641 | ) | $ | 176 | $ | 97,163 | $ | 100,347 | ||||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Purchases | — | — | — | — | — | ||||||||||||||||
Issuances | 211,052 | (206,714 | ) | — | — | 4,338 | |||||||||||||||
Sales | — | — | — | — | — | ||||||||||||||||
Settlements | (1,293 | ) | 1,021 | (176 | ) | — | (448 | ) | |||||||||||||
209,759 | (205,693 | ) | (176 | ) | — | 3,890 | |||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | 4,445 | (4,942 | ) | — | (225 | ) | (722 | ) | |||||||||||||
Included in Other comprehensive income (loss) | — | — | — | — | — | ||||||||||||||||
4,445 | (4,942 | ) | — | (225 | ) | (722 | ) | ||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | 290,853 | $ | (284,276 | ) | $ | — | $ | 96,938 | $ | 103,515 | ||||||||||
Three Months Ended September 30, 2012: | |||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | (14,905 | ) | $ | — | $ | (14,905 | ) | |||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Settlements | — | — | 102 | — | 102 | ||||||||||||||||
— | — | 102 | — | 102 | |||||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | — | — | 1,397 | — | 1,397 | ||||||||||||||||
Included in Other comprehensive income (loss) | — | — | (2,688 | ) | — | (2,688 | ) | ||||||||||||||
— | — | (1,291 | ) | — | (1,291 | ) | |||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | — | $ | — | $ | (16,094 | ) | $ | — | $ | (16,094 | ) | |||||||||
Loans – | Secured | Derivative | MSRs at | Total | |||||||||||||||||
restricted for | borrowings – | Financial | Fair | ||||||||||||||||||
securitization | owed to | Instruments | Value | ||||||||||||||||||
investors | securitization | ||||||||||||||||||||
investors | |||||||||||||||||||||
Nine Months Ended September 30, 2013: | |||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | (10,668 | ) | $ | 85,213 | $ | 74,545 | ||||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Purchases | 10,251 | (10,179 | ) | — | — | 72 | |||||||||||||||
Issuances | 274,081 | (272,652 | ) | — | — | 1,429 | |||||||||||||||
Sales | — | — | 24,156 | — | 24,156 | ||||||||||||||||
Settlements | (2,164 | ) | 1,888 | (1,242 | ) | — | (1,518 | ) | |||||||||||||
282,168 | (280,943 | ) | 22,914 | — | 24,139 | ||||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | 8,685 | (3,333 | ) | 117 | 11,725 | 17,194 | |||||||||||||||
Included in Other comprehensive income (loss) | — | — | (12,363 | ) | — | (12,363 | ) | ||||||||||||||
8,685 | (3,333 | ) | (12,246 | ) | 11,725 | 4,831 | |||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | 290,853 | $ | (284,276 | ) | $ | — | $ | 96,938 | $ | 103,515 | ||||||||||
Nine Months Ended September 30, 2012: | |||||||||||||||||||||
Beginning balance | $ | — | $ | — | $ | (16,676 | ) | $ | — | $ | (16,676 | ) | |||||||||
Purchases, issuances, sales and settlements: | |||||||||||||||||||||
Settlements | — | — | 2,524 | — | 2,524 | ||||||||||||||||
— | — | 2,524 | — | 2,524 | |||||||||||||||||
Total realized and unrealized gains and (losses) (1): | |||||||||||||||||||||
Included in Other, net | — | — | 6,645 | — | 6,645 | ||||||||||||||||
Included in Other comprehensive income (loss) | — | — | (8,587 | ) | — | (8,587 | ) | ||||||||||||||
— | — | (1,942 | ) | — | (1,942 | ) | |||||||||||||||
Transfers in and / or out of Level 3 | — | — | — | — | — | ||||||||||||||||
Ending balance | $ | — | $ | — | $ | (16,094 | ) | $ | — | $ | (16,094 | ) | |||||||||
-1 | For derivative financial instruments held at September 30, 2012, total net losses were $1.3 million and $7.7 million for the three and nine months ended September 30, 2012, respectively. |
NOTE_6_LOANS_HELD_FOR_SALE_AT_1
NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Loans Held For Sale At Fair Value [Abstract] | ' | ||||||||||||||||
Schedule of activity in balance of loans held for sale | ' | ||||||||||||||||
Balance at December 31, 2012 | $ | 426,480 | |||||||||||||||
Originations and purchases (1) | 5,988,501 | ||||||||||||||||
Proceeds from sale | (6,033,785 | ) | |||||||||||||||
Loss on sale of loans (2) | (46,962 | ) | |||||||||||||||
Other | 868 | ||||||||||||||||
Balance at September 30, 2013 | $ | 335,102 | |||||||||||||||
-1 | Purchases include $60.0 million of reverse mortgages acquired in the Liberty Acquisition. | ||||||||||||||||
-2 | Includes gains of $14.5 million and $20.6 million recorded during the three and nine months ended September 30, 2013, respectively, to adjust Loans – Restricted for Securitization Investors to fair value. | ||||||||||||||||
Schedule of activity in Gain on loans held for sale | ' | ||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Gain on sales of loans (1) | $ | 4,622 | $ | — | $ | 36,156 | $ | — | |||||||||
Change in fair value of IRLCs | 18,912 | — | 5,918 | — | |||||||||||||
Change in fair value of loans held for sale | 14,362 | — | 1,452 | — | |||||||||||||
Gain (loss) on hedge instruments | (9,408 | ) | — | 30,989 | — | ||||||||||||
Other | (226 | ) | — | (1,603 | ) | — | |||||||||||
$ | 28,262 | $ | — | $ | 72,912 | $ | — | ||||||||||
-1 | Includes gains of $16.3 million and $63.2 million for the three and nine months ended September 30, 2013, respectively, representing the value assigned to MSRs retained on sales of loans. Also includes gains of $4.1 million and $20.3 million recorded during the three and nine months ended September 30, 2013, respectively, on sales of repurchased loans into Ginnie Mae guaranteed securitizations. These loans are classified as held for sale at the lower of cost or fair value. See Note 13 – Other Assets. |
NOTE_7_ADVANCES_Tables
NOTE 7 ADVANCES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Advances [Abstract] | ' | ||||||||
Schedule of advances, representing payments made | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Servicing: | |||||||||
Principal and interest | $ | 149,184 | $ | 83,617 | |||||
Taxes and insurance | 604,636 | 51,447 | |||||||
Foreclosures, bankruptcy and other | 183,861 | 41,296 | |||||||
937,681 | 176,360 | ||||||||
Other | 8,606 | 8,103 | |||||||
$ | 946,287 | $ | 184,463 |
NOTE_8_MATCH_FUNDED_ADVANCES_T
NOTE 8 MATCH FUNDED ADVANCES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Match Funded Advances [Abstract] | ' | ||||||||
Schedule of advances, representing payments made | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Principal and interest | $ | 235,766 | $ | 1,577,808 | |||||
Taxes and insurance | 218,952 | 1,148,486 | |||||||
Foreclosures, bankruptcy, real estate and other | 79,007 | 322,950 | |||||||
$ | 533,725 | $ | 3,049,244 |
NOTE_9_MORTGAGE_SERVICING_Tabl
NOTE 9 MORTGAGE SERVICING (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Mortgage Servicing [Abstract] | ' | ||||||||||||||||
Schedule of activity related to MSRs - Amortization method | ' | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Balance at December 31 | $ | 678,937 | $ | 293,152 | |||||||||||||
Additions recognized in connection with business and asset acquisitions (1) | 1,208,222 | 181,949 | |||||||||||||||
Additions recognized on the sale of residential mortgage loans | 63,154 | — | |||||||||||||||
Sales (2) | (17,523 | ) | — | ||||||||||||||
Servicing transfers, adjustments and other | 2,052 | (88 | ) | ||||||||||||||
Amortization (3) | (197,899 | ) | (54,678 | ) | |||||||||||||
Balance at September 30 | $ | 1,736,943 | $ | 420,335 | |||||||||||||
Estimated fair value at September 30 | $ | 2,532,239 | $ | 488,499 | |||||||||||||
-1 | MSR recognized in connection with business and asset acquisitions during the first nine months of 2013 include: | ||||||||||||||||
● | MSRs of $391.9 million acquired in the ResCap Acquisition. See Note 4 – Business Acquisitions for additional information. | ||||||||||||||||
● | MSRs of $683.8 million acquired in the Ally MSR Transaction. The acquired MSRs relate to mortgage loans with a UPB of $87.5 billion owned by Freddie Mac and Fannie Mae. We also acquired servicing advances and other receivables of $73.6 million. We assumed the origination representation and warranty obligations of approximately $136.7 million in connection with a majority of the acquired MSRs. We had been subservicing these MSRs on behalf of Ally under a subservicing contract assumed by us in connection with the ResCap Acquisition. | ||||||||||||||||
● | MSRs of $127.0 million with a UPB of approximately $30.5 billion and related servicing advance receivables of $371.6 million acquired in the OneWest MSR Transaction. We expect the remainder of the transaction to close during the fourth quarter. The total estimated purchase price is approximately $2.4 billion with $432.2 million attributed to MSRs and $2.0 billion attributed to servicing advances. The total UPB to be acquired is estimated at $72.4 billion. No operations or other assets were purchased in the transaction. In October 2013, we closed the purchase of approximately $6.6 million of MSRs with a UPB of approximately $1.1 billion and approximately $37.1 million of servicing advances. On November 1, 2013, we closed the purchase of approximately $235.6 million of MSRs with a UPB of approximately $32.9 billion and approximately $1.3 billion of servicing advances. See Note 26 - Subsequent Events for additional information. | ||||||||||||||||
-2 | Cash proceeds from the sale were $21.5 million. These MSRs were sold with subservicing retained. The gain on the sale of $3.2 million has been deferred and will be recognized in earnings over the life of the subservicing contract. | ||||||||||||||||
-3 | Amortization of mortgage servicing rights is reported net of the amortization of servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations. | ||||||||||||||||
Schedule of activity related to MSRs - Fair value measurement method | ' | ||||||||||||||||
Balance at December 31, 2012 | $ | 85,213 | |||||||||||||||
Changes in fair value: | |||||||||||||||||
Due to changes in market valuation assumptions | 19,800 | ||||||||||||||||
Realization of cash flows and other changes | (8,075 | ) | |||||||||||||||
Balance at September 30, 2013 | $ | 96,938 | |||||||||||||||
Schedule of estimated change in the fair value of our MSRs | ' | ||||||||||||||||
Adverse change in fair value | |||||||||||||||||
10% | 20% | ||||||||||||||||
Weighted average prepayment speeds | $ | (3,695 | ) | $ | (7,234 | ) | |||||||||||
Discount rate (Option-adjusted spread) | $ | (2,148 | ) | $ | (4,128 | ) | |||||||||||
Schedule of components of servicing and subservicing fees | ' | ||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Loan servicing and subservicing fees: | |||||||||||||||||
Servicing | $ | 335,884 | $ | 145,861 | $ | 887,500 | $ | 394,454 | |||||||||
Subservicing | 35,286 | 14,257 | 115,437 | 27,619 | |||||||||||||
371,170 | 160,118 | 1,002,937 | 422,073 | ||||||||||||||
Home Affordable Modification Program (HAMP) fees | 40,213 | 21,687 | 118,412 | 55,761 | |||||||||||||
Late charges | 30,445 | 16,370 | 85,930 | 52,891 | |||||||||||||
Loan collection fees | 8,387 | 4,102 | 22,524 | 11,271 | |||||||||||||
Custodial accounts (float earnings) | 743 | 942 | 4,533 | 2,393 | |||||||||||||
Other | 32,309 | 19,792 | 99,056 | 34,046 | |||||||||||||
$ | 483,267 | $ | 223,011 | $ | 1,333,392 | $ | 578,435 | ||||||||||
Schedule of composition of servicing and subservicing portfolios by type of property serviced | ' | ||||||||||||||||
Residential | Commercial | Total | |||||||||||||||
UPB at September 30, 2013 | |||||||||||||||||
Servicing (1) | $ | 362,792,312 | $ | — | $ | 362,792,312 | |||||||||||
Subservicing | 72,027,114 | 495,312 | 72,522,426 | ||||||||||||||
$ | 434,819,426 | $ | 495,312 | $ | 435,314,738 | ||||||||||||
UPB at December 31, 2012 | |||||||||||||||||
Servicing (1) | $ | 175,762,161 | $ | — | $ | 175,762,161 | |||||||||||
Subservicing | 27,903,555 | 401,031 | 28,304,586 | ||||||||||||||
$ | 203,665,716 | $ | 401,031 | $ | 204,066,747 | ||||||||||||
-1 | Includes UPB of $177.1 billion and $79.4 billion at September 30, 2013 and December 31, 2012, respectively, for which the Rights to MSRs have been sold to HLSS. |
NOTE_10_RECEIVABLES_Tables
NOTE 10 RECEIVABLES (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Receivables [Abstract] | ' | ||||||||||||
Schedule of receivables | ' | ||||||||||||
Receivables | Allowance for | Net | |||||||||||
Losses | |||||||||||||
30-Sep-13 | |||||||||||||
Servicing (1) | $ | 155,076 | $ | (19,413 | ) | $ | 135,663 | ||||||
Due from related parties (2) | 35,383 | — | 35,383 | ||||||||||
Income taxes receivable | 23,955 | — | 23,955 | ||||||||||
Other | 30,372 | (1,969 | ) | 28,403 | |||||||||
$ | 244,786 | $ | (21,382 | ) | $ | 223,404 | |||||||
31-Dec-12 | |||||||||||||
Servicing (1) | $ | 84,870 | $ | (1,647 | ) | $ | 83,223 | ||||||
Income taxes receivable | 25,546 | — | 25,546 | ||||||||||
Due from related parties (2) | 12,361 | — | 12,361 | ||||||||||
Other | 18,577 | (1,994 | ) | 16,583 | |||||||||
$ | 141,354 | $ | (3,641 | ) | $ | 137,713 | |||||||
-1 | The receivable balances arise from our Servicing business and include reimbursable expenditures due from investors and amounts to be recovered from the custodial accounts of the trustees. The balances at September 30, 2013 also include $67.4 million of receivables and $16.2 million of allowance for losses related to defaulted FHA or VA insured loans repurchased from Ginnie Mae guaranteed securitizations. | ||||||||||||
-2 | See Note 23 – Related Party Transactions for additional information regarding transactions with Altisource and HLSS. |
NOTE_11_GOODWILL_AND_INTANGIBL1
NOTE 11 GOODWILL AND INTANGIBLES (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||||||||||||||
Schedule of goodwill | ' | ||||||||||||||||||||
ResCap | Homeward | Litton | HomEq | Total | |||||||||||||||||
Acquisition | Acquisition | Acquisition | Acquisition | ||||||||||||||||||
Balance at December 31, 2012 | $ | — | $ | 342,626 | $ | 57,430 | $ | 12,810 | $ | 412,866 | |||||||||||
Derecognition of goodwill in connection with the sale of a business (1) (2) | (128,750 | ) | (81,607 | ) | — | — | (210,357 | ) | |||||||||||||
ResCap Acquisition (2) | 201,810 | — | — | — | 201,810 | ||||||||||||||||
Balance at September 30, 2013 | $ | 73,060 | $ | 261,019 | $ | 57,430 | $ | 12,810 | 404,319 | ||||||||||||
Liberty Acquisition (2) (3) | 3,200 | ||||||||||||||||||||
Correspondent One (2) | 101 | ||||||||||||||||||||
Balance at September 30, 2013 | $ | 407,620 | |||||||||||||||||||
-1 | On March 29, 2013, we sold the diversified fee-based business acquired in the Homeward Acquisition to Altisource and derecognized the assigned goodwill. On April 12, 2013, we sold the diversified fee-based business acquired in the ResCap Acquisition to Altisource and derecognized the assigned goodwill. | ||||||||||||||||||||
-2 | See Note 4 – Business Acquisitions for additional information regarding this transaction. | ||||||||||||||||||||
-3 | Acquired intangible asset related to licenses. The useful life is considered indefinite and therefore the intangible asset is not amortized. |
NOTE_13_OTHER_ASSETS_Tables
NOTE 13 OTHER ASSETS (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Assets [Abstract] | ' | ||||||||
Schedule of other assets | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Loans – restricted for securitization investors, at fair value (1) | $ | 290,853 | $ | — | |||||
Loans held for sale, at lower of cost or fair value (2) | 86,753 | 82,866 | |||||||
Prepaid lender fees and debt issuance costs, net (3) | 25,197 | 14,389 | |||||||
Prepaid income taxes | 23,112 | 23,112 | |||||||
Derivatives, at fair value (4) | 12,849 | 10,795 | |||||||
Investment in unconsolidated entities (5) | 11,767 | 25,187 | |||||||
Real estate, net | 8,346 | 6,205 | |||||||
Interest earning collateral deposits (6) | 6,533 | 31,710 | |||||||
Acquisition deposits (7) | — | 57,000 | |||||||
Prepaid expenses and other | 13,123 | 22,314 | |||||||
$ | 478,533 | $ | 273,578 | ||||||
-1 | Loans sold into Ginnie Mae guaranteed securitizations that we include in our Consolidated Financial Statements because the transfers of reverse mortgage loans to the trusts did not qualify for sale accounting treatment. See Note 2 – Securitizations and Variable Interest Entities for additional information. | ||||||||
-2 | The carrying values at September 30, 2013 and December 31, 2012 are net of valuation allowances of $27.0 million and $14.7 million, respectively. The balances include non-performing subprime single-family residential loans that we do not intend to hold to maturity. The balance at September 30, 2013 includes $67.8 million of loans that we are required to repurchase from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolutions. The balance at December 31, 2012 includes non-performing mortgage loans with a carrying value of $65.4 million that we acquired in December 2012 and sold to Altisource Residential, LP in February 2013 for an insignificant gain. | ||||||||
-3 | These balances relate to match funded liabilities and other secured borrowings. | ||||||||
-4 | See Note 19 – Derivative Financial Instruments and Hedging Activities for additional information. | ||||||||
-5 | The balance at December 31, 2012 includes an investment of $13.4 million that represented our 49% equity interest in Correspondent One. As disclosed in Note 4 – Business Acquisitions, we increased our ownership to 100% on March 31, 2013. Effective on that date, we began including the accounts of Correspondent One in our consolidated financial statements and eliminated our current investment in consolidation. | ||||||||
-6 | These balances include $1.5 million and $25.8 million of cash collateral held by the counterparties to certain of our derivative agreements at September 30, 2013 and December 31, 2012, respectively. | ||||||||
-7 | The balance at December 31, 2012 represents an earnest money cash deposit we made in connection with the ResCap Acquisition. This deposit was subsequently applied towards the purchase price upon closing of the transaction on February 15, 2013. See Note 4 – Business Acquisitions for additional information. |
NOTE_14_MATCH_FUNDED_LIABILITI1
NOTE 14 MATCH FUNDED LIABILITIES (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Match Funded Liabilities [Abstract] | ' | ||||||||||||||||||
Schedule of match funded liabilities | ' | ||||||||||||||||||
Available | Balance Outstanding | ||||||||||||||||||
Maturity | Amortization | Borrowing | September 30, | December 31, | |||||||||||||||
Borrowing Type | Interest Rate | -1 | Date (1) | Capacity (2) | 2013 | 2012 | |||||||||||||
2011-Servicer Advance Revolving Trust 1 (3) | 2.23% | May-43 | May-13 | $ | — | $ | — | $ | 325,000 | ||||||||||
2011-Servicer Advance Revolving Trust 1 (3) | 3.37 – 5.92% | May-43 | May-13 | — | — | 525,000 | |||||||||||||
2012-Servicing Advance Revolving Trust 2 (3) | 3.27 – 6.90% | Sep. 2043 | Sept. 2013 | — | — | 250,000 | |||||||||||||
2012-Servicing Advance Revolving Trust 3 (3) | 2.98% | Mar. 2043 | Mar. 2013 | — | — | 248,999 | |||||||||||||
2012-Servicing Advance Revolving Trust 3 (3) | 3.72 – 7.04% | Mar. 2044 | Mar. 2014 | — | — | 299,278 | |||||||||||||
Total fixed rate | — | — | 1,648,277 | ||||||||||||||||
Advance Receivable Backed Notes (4) | 1-month | Apr. 2015 | Apr. 2014 | — | — | 205,016 | |||||||||||||
LIBOR (1ML) | |||||||||||||||||||
+ 285 bps | |||||||||||||||||||
Advance Receivable Backed Notes Series 2012-ADV1 (5) | Commercial | Dec. 2043 | Dec. 2013 | 18,959 | 81,041 | 232,712 | |||||||||||||
paper (CP) | |||||||||||||||||||
rate + 225 or | |||||||||||||||||||
335 bps | |||||||||||||||||||
Advance Receivable Backed Notes Series 2012-ADV1 | 1ML + 250 | Jun-16 | Jun-14 | — | 225,000 | 94,095 | |||||||||||||
bps | |||||||||||||||||||
Advance Receivable Backed Note | 1ML + 300 | Dec. 2015 | Dec. 2014 | 12,383 | 37,617 | 49,138 | |||||||||||||
bps | |||||||||||||||||||
2011-Servicing Advance Revolving Trust 1 (3) | 1ML + 300 | May-43 | May-13 | — | — | 204,633 | |||||||||||||
bps | |||||||||||||||||||
2012-Servicing Advance Revolving Trust 2 (3) | 1ML + 315 | Sep. 2043 | Sep. 2013 | — | — | 22,003 | |||||||||||||
bps | |||||||||||||||||||
2012-Servicing Advance Revolving Trust 3 (3) | 1ML + 300 | Mar. 2044 | Mar. 2014 | — | — | 40,626 | |||||||||||||
bps – 675 bps | |||||||||||||||||||
2012-Homeward Agency Advance Funding Trust 2012-1 (6) | 1ML + 300 | Nov. 2013 | Nov. 2013 | 5,646 | 19,354 | 16,094 | |||||||||||||
bps | |||||||||||||||||||
2012-Homeward DSF Advance Revolving Trust 2012-1 (3) | 1ML + 450 | Feb. 2013 | Feb. 2013 | — | — | 20,151 | |||||||||||||
bps | |||||||||||||||||||
Total variable rate | 36,988 | 363,012 | 884,468 | ||||||||||||||||
$ | 36,988 | $ | 363,012 | $ | 2,532,745 | ||||||||||||||
-1 | The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In two advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed. | ||||||||||||||||||
-2 | Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. At September 30, 2013, $0.1 million of the available borrowing capacity could be used based on the amount of eligible collateral. | ||||||||||||||||||
-3 | Facility was repaid in February 2013 from the proceeds of a new $1.4 billion bridge facility (Homeward Residential Bridge Loan Trust – 2013) with an amortization date of August 14, 2013. On July 1, 2013, we repaid the new bridge facility in full from proceeds received on the sale of servicing advances to HLSS. | ||||||||||||||||||
-4 | We repaid this facility in full in July 2013. | ||||||||||||||||||
-5 | On August 30, 2013, we amended this facility to reduce the maximum borrowing capacity to $100 million from $450 million. | ||||||||||||||||||
-6 | On October 21, 2013, we extended the maturity date of this facility to November 29, 2013 with two optional six-month extensions subject to lender approval. |
NOTE_15_OTHER_BORROWINGS_Table
NOTE 15 OTHER BORROWINGS (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||
Other Borrowings [Abstract] | ' | ||||||||||||||||||
Schedule of lines of credit and other secured and unsecured borrowings | ' | ||||||||||||||||||
Available | Balance Outstanding | ||||||||||||||||||
Borrowing | September 30, | December 31, | |||||||||||||||||
Borrowings | Collateral | Interest Rate | Maturity | Capacity | 2013 | 2012 | |||||||||||||
Servicing: | |||||||||||||||||||
SSTL (1) | -1 | 1ML + 550 bps; | Sept. 2016 | $ | — | $ | — | $ | 314,229 | ||||||||||
LIBOR floor of | |||||||||||||||||||
150 bps (1) | |||||||||||||||||||
SSTL (2) | -2 | -2 | Feb. 2018 | — | 1,293,500 | — | |||||||||||||
Senior unsecured term loan (3) | 1-Month Euro- | Mar. 2017 | — | — | 75,000 | ||||||||||||||
dollar rate + 675 | |||||||||||||||||||
bps with a | |||||||||||||||||||
Eurodollar floor | |||||||||||||||||||
of 150 bps | |||||||||||||||||||
Financing liability – MSRs pledged (4) | MSRs (4) | -4 | -4 | — | 643,595 | 303,705 | |||||||||||||
Financing liability – MSRs pledged (5) | MSRs (5) | -5 | -5 | — | — | 2,603 | |||||||||||||
Promissory note (6) | MSRs | 1ML + 350 bps | May-17 | — | 17,163 | 18,466 | |||||||||||||
Repurchase agreement | Loans held | 1 ML + 250 – 345 | Apr. 2014 | 47,878 | 52,122 | — | |||||||||||||
for sale | bps | ||||||||||||||||||
(LHFS) | |||||||||||||||||||
47,878 | 2,006,380 | 714,003 | |||||||||||||||||
Lending: | |||||||||||||||||||
Master repurchase agreement (7) | LHFS | 1ML + 175 bps | Mar. 2014 | 230,085 | 69,915 | 88,122 | |||||||||||||
Participation agreement (8) | LHFS | N/A | May-14 | — | 19,588 | 58,938 | |||||||||||||
Master repurchase agreement (9) | LHFS | 1ML + 175 to 275 | Aug. 2014 | 60,989 | 89,011 | 133,995 | |||||||||||||
bps | |||||||||||||||||||
Master repurchase agreement (10) | LHFS | 1ML + 175 to 200 | Sep. 2014 | 265,898 | 34,102 | 107,020 | |||||||||||||
bps | |||||||||||||||||||
Master repurchase agreement (11) | LHFS | 1ML + 275 bps | Nov. 2013 | 21,873 | 78,127 | — | |||||||||||||
Financing liability – MSRs pledged (5) | MSRs (5) | -5 | -5 | — | 10,403 | — | |||||||||||||
Mortgage warehouse agreement | LHFS | 1 ML + 275 bps; | Jun. 2014 | 56,755 | 3,245 | — | |||||||||||||
floor of 3.50% | |||||||||||||||||||
Secured borrowings - owed to securitization investors (12) | Loans held | 1ML + 220 bps | -12 | — | 284,276 | — | |||||||||||||
for | |||||||||||||||||||
investment | |||||||||||||||||||
635,600 | 588,667 | 388,075 | |||||||||||||||||
Corporate Items and Other | |||||||||||||||||||
Securities sold under an agreement to repurchase (13) | Ocwen Real | Class A-2 notes: | Monthly | — | 3,223 | 2,833 | |||||||||||||
Estate Asset | 1ML + 200 bps; | ||||||||||||||||||
Liquidating | Class A-3 notes: | ||||||||||||||||||
Trust 2007-1 | 1ML + 300 bps | ||||||||||||||||||
Notes | |||||||||||||||||||
683,478 | 2,598,270 | 1,104,911 | |||||||||||||||||
Discount (1)(2) | — | (5,679 | ) | (8,232 | ) | ||||||||||||||
$ | 683,478 | $ | 2,592,591 | $ | 1,096,679 | ||||||||||||||
-1 | In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment. | ||||||||||||||||||
-2 | On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are generally required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, and net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. However, for assets sales that are part of an HLSS Transaction, we have the option, within 180 days, either to invest the net cash proceeds in MSRs or related assets, such as advances, or to repay loan principal. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25%. To date we have elected option (b) to determine the interest rate. | ||||||||||||||||||
On September 23, 2013, we entered into Amendment No. 1 to the Senior Secured Term Loan Facility Agreement and Amendment No. 1 to the related Pledge and Security Agreement. These amendments: | |||||||||||||||||||
● | permit repurchases of all of the Preferred Stock, which may be converted to common stock prior to repurchase, and up to $1.5 billion of common stock, subject, in each case, to pro forma financial covenant compliance; | ||||||||||||||||||
● | eliminate the dollar cap on Junior Indebtedness (as defined in the SSTL) but retain the requirement for any such issuance to be subject to pro forma covenant compliance; | ||||||||||||||||||
● | include a value for whole loans (i.e., loans held for sale) in collateral value for purposes of calculating the loan-to-value ratio and include specified deferred servicing fees and the fair value of specified mortgage servicing rights in net worth for purposes of calculating the ratio of consolidated total debt to consolidated tangible net worth; and | ||||||||||||||||||
● | modify the applicable quarterly covenant levels for the corporate leverage ratio, ratio of consolidated total debt to consolidated tangible net worth and loan-to-value ratio. | ||||||||||||||||||
-3 | We repaid this loan in full in February 2013. | ||||||||||||||||||
-4 | As part of the HLSS Transactions, we transfer certain Rights to MSRs to HLSS. Because we have not yet transferred legal title to the MSRs, we account for these transfers as financings with the proceeds from the sale of the Rights to MSRs recorded as a financing liability. The financing liability is amortized using the interest method with the servicing income that is remitted to HLSS representing payments of principal and interest. The liability has no contractual maturity but is amortized over the estimated life of the transferred Rights to MSRs. See Note 3 –Transfers of Financial Assets for additional information. | ||||||||||||||||||
-5 | We sold MSRs for certain loans to an unrelated third party in December 2012 and June 2013; however, we are required to repurchase the MSRs for any loans that cannot be refinanced by the purchaser under the federal government’s Home Affordable Refinance Program (HARP). As a result, the sale is being accounted for as a financing. The financing liability is being amortized using the interest method with the servicing income that is remitted to the purchaser representing payments of principal and interest. In June 2013 and September 2013, we derecognized the liability from the December 2012 sale related to loans that had been refinanced under HARP and recognized a total gain of $4.5 million gain on the retirement of the financing liability. | ||||||||||||||||||
-6 | Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding. | ||||||||||||||||||
-7 | On March 19, 2013, the maturity date of the Master Repurchase Agreement was extended to March 18, 2014 and the maximum borrowing capacity was increased from $120.0 million to $300.0 million. | ||||||||||||||||||
-8 | Under this participation agreement, the lender provides financing on an uncommitted basis for up to $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. However, the transaction does not qualify for sales accounting treatment and is, therefore, accounted for as a financing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. In April 2013, we extended the participation agreement maturity date to May 31, 2014. | ||||||||||||||||||
-9 | On August 3, 2013, we extended the maturity date of this facility to August 2, 2014. | ||||||||||||||||||
-10 | On September 27, 2013, we extended the maturity date of this facility to September 26, 2014, | ||||||||||||||||||
-11 | On October 28, 2013, we extended the maturity date of this facility to November 12, 2013. | ||||||||||||||||||
-12 | This represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed securitization that we include in our consolidated financial statements because the transfers of reverse mortgage loans to the trusts did not qualify for sales accounting treatment. There are no maturity dates; the borrowings mature as the related loans are repaid. | ||||||||||||||||||
-13 | This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral. |
NOTE_16_OTHER_LIABILITIES_Tabl
NOTE 16 OTHER LIABILITIES (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Other Liabilities [Abstract] | ' | ||||||||
Schedule of other liabilities | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Liability for indemnification obligations (1) | $ | 206,074 | $ | 38,140 | |||||
Accrued expenses | 97,497 | 68,068 | |||||||
Liability for certain foreclosure matters (2) | 66,431 | 13,602 | |||||||
Payable to servicing and subservicing investors (3) | 27,063 | 9,973 | |||||||
Checks held for escheat | 24,965 | 33,259 | |||||||
Liability for selected tax items | 22,338 | 22,702 | |||||||
Due to related parties (4) | 16,535 | 45,034 | |||||||
Derivatives, at fair value (6) | 11,660 | 18,658 | |||||||
Servicing liabilities (5) | 11,568 | 9,830 | |||||||
Accrued interest payable | 9,455 | 5,410 | |||||||
Other | 61,122 | 23,861 | |||||||
$ | 554,708 | $ | 288,537 | ||||||
-1 | The balance includes origination representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines. These obligations were primarily assumed in connection with the Ally MSR Transaction, the ResCap Acquisition and the Homeward Acquisition. See Note 4 – Business Acquisitions, Note 9 – Mortgage Servicing and Note 25 – Commitments and Contingencies for additional information. | ||||||||
-2 | We recognized $52.8 million of expense in Professional services in the second quarter of 2013 to establish the liability. We recognized the remaining $13.6 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill. See Note 25 – Commitments and Contingencies for additional information. | ||||||||
-3 | The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements. | ||||||||
-4 | See Note 23 – Related Party Transactions for additional information. | ||||||||
-5 | During the nine months ended September 30, 2013 and 2012, amortization of servicing liabilities exceeded the amount of charges we recognized to increase our servicing liability obligations by $0.5 million and $1.1 million, respectively. Amortization of mortgage servicing rights is reported net of this amount in the unaudited Consolidated Statement of Operations. | ||||||||
-6 | See Note 19 – Derivative Financial Instruments and Hedging Activities for additional information. |
NOTE_17_MEZZANINE_EQUITY_Table
NOTE 17 MEZZANINE EQUITY (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Equity [Abstract] | ' | ||||
Schedule of carrying value of preferred shares | ' | ||||
Initial issuance price on December 27, 2012 | $ | 162,000 | |||
Discount for beneficial conversion feature | (8,688 | ) | |||
Accretion of BCF discount (Deemed dividend) | 60 | ||||
Carrying value at December 31, 2012 | 153,372 | ||||
Conversion of 100,000 Preferred Shares (1) | (100,000 | ) | |||
Accretion of BCF discount (Deemed dividend) (2) | 6,573 | ||||
Carrying value at September 30, 2013 | $ | 59,945 | |||
-1 | On September 23, 2013, holders elected to convert 100,000 of the Preferred Shares into 3,145,640 shares of common stock. See Note 23 – Related Party Transactions for additional information. | ||||
-2 | Accretion includes a $3.5 million accelerated write-off of the unamortized discount related to the 100,000 Preferred Shares converted on September 23, 2013. |
NOTE_18_EQUITY_Tables
NOTE 18 EQUITY (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Equity [Abstract] | ' | ||||||||
Schedule of accumulated other comprehensive loss (AOCL), net of income taxes | ' | ||||||||
September 30, | December 31, | ||||||||
2013 | 2012 | ||||||||
Unrealized losses on cash flow hedges | $ | 7,649 | $ | 6,310 | |||||
Other | (580 | ) | 131 | ||||||
$ | 7,069 | $ | 6,441 |
NOTE_19_DERIVATIVE_FINANCIAL_I1
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ||||||||||||||||||||
Schedule of changes in notional balance of holdings of derivatives | ' | ||||||||||||||||||||
IRLCs | U.S. | Forward | Interest | Interest | |||||||||||||||||
Treasury | MBS | Rate Caps | Rate Swaps | ||||||||||||||||||
Futures | Trades | ||||||||||||||||||||
Balance at December 31, 2012 | $ | 1,112,519 | $ | 109,000 | $ | 1,638,979 | $ | 1,025,000 | $ | 1,495,955 | |||||||||||
Additions | 4,062,236 | 85,000 | 9,316,350 | — | 1,280,000 | ||||||||||||||||
Amortization | (228,806 | ) | — | (33,372 | ) | (24,000 | ) | — | |||||||||||||
Maturities | (3,709,513 | ) | — | (4,558,971 | ) | — | (295,604 | ) | |||||||||||||
Terminations | (549,877 | ) | (194,000 | ) | (5,627,670 | ) | (1,001,000 | ) | (2,480,351 | ) | |||||||||||
Balance at September 30, 2013 | $ | 686,559 | $ | — | $ | 735,316 | $ | — | $ | — | |||||||||||
Fair value of net derivative assets (liabilities) at: | |||||||||||||||||||||
30-Sep-13 | $ | 13,491 | $ | — | $ | (12,185 | ) | $ | — | $ | — | ||||||||||
31-Dec-12 | $ | 5,781 | $ | (1,258 | ) | $ | (1,719 | ) | $ | 168 | $ | (10,836 | ) | ||||||||
Maturity | Oct. 2013 – Jan. 2014 | — | Oct. 2013 – Nov. 2013 | — | — | ||||||||||||||||
Schedule of gains (losses) on derivatives | ' | ||||||||||||||||||||
Purpose | Expiration | Notional | Fair Value | Gains / | Consolidated | ||||||||||||||||
Date | Amount | -1 | (Losses) | Statement of | |||||||||||||||||
Operations | |||||||||||||||||||||
Caption | |||||||||||||||||||||
Interest rate risk of mortgage loans held for sale and IRLCs | |||||||||||||||||||||
Forward MBS trades | 2014 | $ | 735,316 | $ | (12,185 | ) | $ | 30,989 | Gain on loans held for sale, net and Other, net | ||||||||||||
IRLCs | 2013 | 686,559 | 13,491 | 5,918 | Gain on loans held for sale, net | ||||||||||||||||
Total derivatives | $ | 1,306 | $ | 36,907 | |||||||||||||||||
-1 | Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities on our unaudited Consolidated Balance Sheets. | ||||||||||||||||||||
Schedule of changes in the losses on cash flow hedges included in AOCL | ' | ||||||||||||||||||||
Accumulated losses on cash flow hedges at December 31, 2012 | $ | 9,878 | |||||||||||||||||||
Additional net losses on cash flow hedges | 12,363 | ||||||||||||||||||||
Ineffectiveness of cash flow hedges reclassified to earnings | (657 | ) | |||||||||||||||||||
Losses on terminated hedging relationships amortized to earnings (1) | (9,434 | ) | |||||||||||||||||||
Accumulated losses on cash flow hedges at September 30, 2013 | $ | 12,150 | |||||||||||||||||||
-1 | Where the hedging relationship has been terminated but the hedged transaction is still forecast to occur, losses on the hedging relationship that are included in AOCL are amortized to earnings in the periods in which earnings are affected by the hedged transaction. Amortization in the third quarter included $4.1 million of accelerated amortization as a result of the early repayment and termination of four advance financing facilities as a result of the July 1, 2013 HLSS Transaction. | ||||||||||||||||||||
Schedule of statements of operations related to derivative financial instruments | ' | ||||||||||||||||||||
Three Months | Nine Months | ||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||||||
Servicing and origination expense | |||||||||||||||||||||
Gains on economic hedges | $ | — | $ | — | $ | 1,017 | $ | — | |||||||||||||
Gain on loans held for sale, net | |||||||||||||||||||||
Gains on economic hedges | 9,608 | — | 36,907 | — | |||||||||||||||||
Other, net | |||||||||||||||||||||
Gains (losses) on economic hedges (1) | (103 | ) | 1,397 | (3,822 | ) | 6,645 | |||||||||||||||
Ineffectiveness of cash flow hedges | — | 47 | (657 | ) | 46 | ||||||||||||||||
Write-off of losses in AOCL for a discontinued hedge relationship | (7,780 | ) | (3,089 | ) | (9,434 | ) | (4,633 | ) | |||||||||||||
Write-off of losses in AOCL for hedge of a financing facility assumed by HLSS (See Note 3 –Transfers of Financial Assets) | — | — | — | (5,958 | ) | ||||||||||||||||
$ | 1,725 | $ | (1,645 | ) | $ | 24,011 | $ | (3,900 | ) | ||||||||||||
-1 | Includes a gain of $3.4 million recognized during the three months ended March 31, 2012 from the termination of foreign exchange forward contracts. |
NOTE_20_INTEREST_EXPENSE_Table
NOTE 20 INTEREST EXPENSE (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Interest Expense [Abstract] | ' | ||||||||||||||||
Schedule of components of interest expense | ' | ||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Match funded liabilities | $ | 11,249 | $ | 32,359 | $ | 66,678 | $ | 99,394 | |||||||||
Other borrowings (1) | 95,496 | 24,877 | 228,198 | 60,160 | |||||||||||||
Debt securities: | |||||||||||||||||
3.25% Convertible Notes | — | — | — | 153 | |||||||||||||
10.875% Capital Trust Securities | — | 473 | — | 1,894 | |||||||||||||
Other | 3,310 | 708 | 8,463 | 2,059 | |||||||||||||
$ | 110,055 | $ | 58,417 | $ | 303,339 | $ | 163,660 | ||||||||||
-1 | Includes interest expense of $74.2 million and $14.0 million for the three months ended September 30, 2013 and 2012, respectively, and $168.6 million and $27.6 million for the nine months ended September 30, 2013 and 2012, respectively, related to financing liabilities recorded in connection with the HLSS Transactions. See Note 3 –Transfers of Financial Assets and Note 15 – Other Borrowings for additional information. |
NOTE_21_BASIC_AND_DILUTED_EARN1
NOTE 21 BASIC AND DILUTED EARNINGS PER SHARE (EPS) (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Earnings Per Share, Basic and Diluted [Abstract] | ' | ||||||||||||||||
Schedule of reconciliation of calculation of basic EPS to diluted EPS | ' | ||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Basic EPS: | |||||||||||||||||
Net income attributable to Ocwen common stockholders | $ | 61,155 | $ | 51,400 | $ | 177,847 | $ | 115,582 | |||||||||
Weighted average shares of common stock | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 | |||||||||||||
Basic EPS | $ | 0.45 | $ | 0.38 | $ | 1.31 | $ | 0.87 | |||||||||
Diluted EPS: | |||||||||||||||||
Net income attributable to Ocwen common stockholders | $ | 61,155 | $ | 51,400 | $ | 177,847 | $ | 115,582 | |||||||||
Preferred stock dividends (1) | — | — | — | — | |||||||||||||
Interest expense on Convertible Notes, net of income tax (2) | — | — | — | 98 | |||||||||||||
Adjusted net income attributable to Ocwen | $ | 61,155 | $ | 51,400 | $ | 177,847 | $ | 115,680 | |||||||||
Weighted average shares of common stock | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 | |||||||||||||
Effect of dilutive elements: | |||||||||||||||||
Preferred Shares (1) | — | — | — | — | |||||||||||||
Convertible Notes (2) | — | — | — | 1,347,642 | |||||||||||||
Stock options | 4,263,965 | 3,769,099 | 4,030,297 | 3,468,156 | |||||||||||||
Common stock awards | 5,396 | 5,296 | 11,301 | 2,713 | |||||||||||||
Dilutive weighted average shares of common stock | 140,057,195 | 138,702,881 | 139,747,490 | 138,301,865 | |||||||||||||
Diluted EPS | $ | 0.44 | $ | 0.37 | $ | 1.27 | $ | 0.84 | |||||||||
Stock options excluded from the computation of diluted EPS: | |||||||||||||||||
Anti-dilutive (3) | — | 255,000 | — | 190,833 | |||||||||||||
Market-based (4) | 547,500 | 1,726,250 | 547,500 | 1,726,250 | |||||||||||||
-1 | The effect of our Preferred Shares on diluted EPS is computed using the if-converted method. For the three and nine months ended September 30, 2013, we assumed no conversion to common shares because the effect was anti-dilutive. | ||||||||||||||||
-2 | Prior to the redemption of the 3.25% Convertible Notes in March 2012, we also computed their effect on diluted EPS using the if-converted method. Interest expense and related amortization costs applicable to the Convertible Notes, net of income tax, were added back to net income. We assumed the conversion of the Convertible Notes into shares of common stock for purposes of computing diluted EPS unless the effect was anti-dilutive. We issued 4,635,159 shares of common stock upon conversion of $56.4 million of the Convertible Notes. | ||||||||||||||||
-3 | These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock. | ||||||||||||||||
-4 | Shares that are issuable upon the achievement of certain performance criteria related to OCN’s stock price and an annualized rate of return to investors. |
NOTE_22_BUSINESS_SEGMENT_REPOR1
NOTE 22 BUSINESS SEGMENT REPORTING (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Segment Reporting Information [Line Items] | ' | ||||||||||||||||||||
Schedule of segment reporting information | ' | ||||||||||||||||||||
Servicing | Lending | Corporate | Corporate | Business | |||||||||||||||||
Items and | Eliminations | Segments | |||||||||||||||||||
Other | Consolidated | ||||||||||||||||||||
Results of Operations | |||||||||||||||||||||
Three Months Ended September 30, 2013: | |||||||||||||||||||||
Revenue | $ | 496,302 | $ | 33,539 | $ | 1,801 | $ | (402 | ) | $ | 531,240 | ||||||||||
Operating expenses (1) | 305,654 | 29,504 | 11,143 | (41 | ) | 346,260 | |||||||||||||||
Income (loss) from operations | 190,648 | 4,035 | (9,342 | ) | (361 | ) | 184,980 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | 859 | 3,066 | 1,454 | — | 5,379 | ||||||||||||||||
Interest expense (1) | (106,848 | ) | (3,279 | ) | 72 | — | (110,055 | ) | |||||||||||||
Other | (6,631 | ) | 1,843 | 398 | 361 | (4,029 | ) | ||||||||||||||
Other income (expense), net | (112,620 | ) | 1,630 | 1,924 | 361 | (108,705 | ) | ||||||||||||||
Income (loss) before income taxes | $ | 78,028 | $ | 5,665 | $ | (7,418 | ) | $ | — | $ | 76,275 | ||||||||||
Three Months Ended September 30, 2012: | |||||||||||||||||||||
Revenue | $ | 232,104 | $ | — | $ | 873 | $ | (277 | ) | $ | 232,700 | ||||||||||
Operating expenses (1) | 88,743 | — | 4,162 | (112 | ) | 92,793 | |||||||||||||||
Income (loss) from operations | 143,361 | — | (3,289 | ) | (165 | ) | 139,907 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | — | — | 2,084 | — | 2,084 | ||||||||||||||||
Interest expense (1) | (58,144 | ) | — | (273 | ) | — | (58,417 | ) | |||||||||||||
Other | (963 | ) | — | (2,030 | ) | 165 | (2,828 | ) | |||||||||||||
Other income (expense), net | (59,107 | ) | — | (219 | ) | 165 | (59,161 | ) | |||||||||||||
Income (loss) before income taxes | $ | 84,254 | $ | — | $ | (3,508 | ) | $ | — | $ | 80,746 | ||||||||||
Servicing | Lending | Corporate | Corporate | Business | |||||||||||||||||
Items and | Eliminations | Segments | |||||||||||||||||||
Other | Consolidated | ||||||||||||||||||||
Nine Months Ended September 30, 2013: | |||||||||||||||||||||
Revenue | $ | 1,381,872 | $ | 81,180 | $ | 19,758 | $ | (492 | ) | $ | 1,482,318 | ||||||||||
Operating expenses (1) | 795,645 | 69,543 | 95,361 | (131 | ) | 960,418 | |||||||||||||||
Income (loss) from operations | 586,227 | 11,637 | (75,603 | ) | (361 | ) | 521,900 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | 1,382 | 12,432 | 3,516 | — | 17,330 | ||||||||||||||||
Interest expense (1) | (293,381 | ) | (10,108 | ) | 150 | — | (303,339 | ) | |||||||||||||
Other | (30,961 | ) | 6,852 | 2,977 | 361 | (20,771 | ) | ||||||||||||||
Other income (expense), net | (322,960 | ) | 9,176 | 6,643 | 361 | (306,780 | ) | ||||||||||||||
Income (loss) before income taxes | $ | 263,267 | $ | 20,813 | $ | (68,960 | ) | $ | — | $ | 215,120 | ||||||||||
Nine Months Ended September 30, 2012: | |||||||||||||||||||||
Revenue | $ | 606,689 | $ | — | $ | 2,736 | $ | (812 | ) | $ | 608,613 | ||||||||||
Operating expenses (1) | 252,542 | — | 12,659 | (391 | ) | 264,810 | |||||||||||||||
Income (loss) from operations | 354,147 | — | (9,923 | ) | (421 | ) | 343,803 | ||||||||||||||
Other income (expense), net: | |||||||||||||||||||||
Interest income | — | — | 6,434 | — | 6,434 | ||||||||||||||||
Interest expense (1) | (162,810 | ) | — | (850 | ) | — | (163,660 | ) | |||||||||||||
Other | (204 | ) | — | (5,765 | ) | 421 | (5,548 | ) | |||||||||||||
Other income (expense), net | (163,014 | ) | — | (181 | ) | 421 | (162,774 | ) | |||||||||||||
Income (loss) before income taxes | $ | 191,133 | $ | $ | (10,104 | ) | $ | — | $ | 181,029 | |||||||||||
Total Assets | |||||||||||||||||||||
30-Sep-13 | $ | 3,925,510 | $ | 778,777 | $ | 607,393 | $ | — | $ | 5,311,680 | |||||||||||
31-Dec-12 | $ | 4,498,043 | $ | 550,569 | $ | 634,143 | $ | — | $ | 5,682,755 | |||||||||||
30-Sep-12 | $ | 3,611,768 | $ | — | $ | 544,248 | $ | — | $ | 4,156,016 | |||||||||||
Depreciation and Amortization | ' | ||||||||||||||||||||
Segment Reporting Information [Line Items] | ' | ||||||||||||||||||||
Schedule of segment reporting information | ' | ||||||||||||||||||||
Servicing | Lending | Corporate | Business | ||||||||||||||||||
Items and | Segments | ||||||||||||||||||||
Other | Consolidated | ||||||||||||||||||||
Three Months Ended September 30, 2013: | |||||||||||||||||||||
Depreciation expense | $ | 3,589 | $ | 135 | $ | 2,973 | $ | 6,697 | |||||||||||||
Amortization of MSRs | 79,035 | 148 | — | 79,183 | |||||||||||||||||
Amortization of debt discount | 330 | — | — | 330 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 1,178 | — | — | 1,178 | |||||||||||||||||
Three Months Ended September 30, 2012: | |||||||||||||||||||||
Depreciation expense | $ | 395 | $ | — | $ | 1,564 | $ | 1,959 | |||||||||||||
Amortization of MSRs | 20,150 | — | — | 20,150 | |||||||||||||||||
Amortization of debt discount | 1,199 | — | — | 1,199 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 1,207 | — | — | 1,207 | |||||||||||||||||
Nine Months Ended September 30, 2013: | |||||||||||||||||||||
Depreciation expense | $ | 9,968 | $ | 209 | $ | 6,976 | $ | 17,153 | |||||||||||||
Amortization of MSRs | 197,287 | 148 | — | 197,435 | |||||||||||||||||
Amortization of debt discount | 1,082 | — | — | 1,082 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 3,264 | — | — | 3,264 | |||||||||||||||||
Nine Months Ended September 30, 2012: | |||||||||||||||||||||
Depreciation expense | $ | 1,069 | $ | — | $ | 2,827 | $ | 3,896 | |||||||||||||
Amortization of MSRs | 53,561 | — | — | 53,561 | |||||||||||||||||
Amortization of debt discount | 2,679 | — | — | 2,679 | |||||||||||||||||
Amortization of debt issuance costs – SSTL | 3,050 | — | — | 3,050 | |||||||||||||||||
NOTE_23_RELATED_PARTY_TRANSACT1
NOTE 23 RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Related Party Transactions [Abstract] | ' | ||||||||||||||||
Schedule of revenues and expenses related to various service agreements | ' | ||||||||||||||||
Three Months | Nine Months | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Revenues and Expenses: | |||||||||||||||||
Altisource: | |||||||||||||||||
Revenues | $ | 5,185 | $ | 4,156 | $ | 15,390 | $ | 12,229 | |||||||||
Expenses | 13,153 | 6,826 | 36,650 | 20,537 | |||||||||||||
HLSS: | |||||||||||||||||
Revenues | $ | 20 | $ | 125 | $ | 172 | $ | 165 | |||||||||
Expenses | 386 | 780 | 1,615 | 1,773 | |||||||||||||
Schedule of amounts receivable from or payable to at the dates | ' | ||||||||||||||||
September 30, | December 31, | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Net Receivable (payable) | |||||||||||||||||
Altisource | $ | (3,489 | ) | $ | (5,971 | ) | |||||||||||
HLSS | 22,337 | (25,524 | ) | ||||||||||||||
$ | 18,848 | $ | (31,495 | ) |
NOTE_25_COMMITMENTS_AND_CONTIN1
NOTE 25 COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended | ||||
Sep. 30, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Schedule of indemnification obligations | ' | ||||
Balance at December 31, 2012 | $ | 38,140 | |||
Provision for representation and warranty obligations | 18,116 | ||||
New production reserves | 1,055 | ||||
Obligations assumed in connection with MSR and servicing business acquisitions | 189,742 | ||||
Charge-offs (1) | (40,979 | ) | |||
Balance at September 30, 2013 | $ | 206,074 | |||
-1 | Includes principal and interest losses realized in connection with repurchased loans, make-whole, indemnification and fee payments and settlements net of recoveries, if any. |
NOTE_1_DESCRIPTION_OF_BUSINESS2
NOTE 1 DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Detail) (USD $) | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 |
In Millions, unless otherwise specified | Reclassification | Reclassification | |
Other Income | Other Income | ||
Accounting Policy [Line Items] | ' | ' | ' |
Business acquisition, percentage of voting interests acquired | 50.00% | ' | ' |
Process management fees | ' | $8.90 | $27.60 |
NOTE_2_SECURITIZATIONS_AND_VAR2
NOTE 2 SECURITIZATIONS AND VARIABLE INTEREST ENTITIES (Detail) - (Table 1) (USD $) | 3 Months Ended | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 |
Asset Sales and Financing [Abstract] | ' | ' |
Proceeds received from securitizations | $1,776,309 | $6,240,459 |
Servicing fees collected | 6,317 | 13,125 |
Purchases of previously transferred assets, net of claims reimbursed | -358 | -358 |
Cash flows received from and paid to securitization trusts, Total | $1,782,268 | $6,253,226 |
NOTE_2_SECURITIZATIONS_AND_VAR3
NOTE 2 SECURITIZATIONS AND VARIABLE INTEREST ENTITIES (Detail) - (Table 2) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Carrying value of assets: | ' | ' | ||
Mortgage servicing rights, at amortized cost | $53,562 | ' | ||
Mortgage servicing rights, at fair value | 2,751 | 2,908 | ||
Advances and match funded advances | 16,254 | ' | ||
Unpaid principal balance of loans transferred | 6,125,869 | [1] | 238,010 | [1] |
Maximum exposure to loss | $6,198,436 | $240,918 | ||
[1] | The UPB of the loans transferred is the maximum exposure to loss under our standard representations and warranties obligations. |
NOTE_2_SECURITIZATIONS_AND_VAR4
NOTE 2 SECURITIZATIONS AND VARIABLE INTEREST ENTITIES (Detail) | 9 Months Ended |
Sep. 30, 2013 | |
Trust | |
Variable Interest Entities [Abstract] | ' |
Beneficial interests held in number of trust | 4 |
Percentage of loan transferred | 1.00% |
NOTE_2_SECURITIZATIONS_AND_VAR5
NOTE 2 SECURITIZATIONS AND VARIABLE INTEREST ENTITIES (Detail 1) (USD $) | 3 Months Ended | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 |
MSRs | $16.30 | $63.20 |
Ocwen | ' | ' |
Balance of notes outstanding | 37.6 | 37.6 |
OLS | ' | ' |
Balance of notes outstanding | 37.6 | 37.6 |
HMBS | ' | ' |
Borrowings pledged as collateral to the pools | 284.3 | 284.3 |
HECMs | ' | ' |
Loans pledged as collateral | $290.90 | $290.90 |
NOTE_3_TRANSFERS_OF_FINANCIAL_2
NOTE 3 TRANSFERS OF FINANCIAL ASSETS (Detail) - (Table 1) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Net assets of advance SPEs | ' | $76,334 |
HLSS | ' | ' |
Sale of MSRs accounted for as a financing | 388,472 | 184,269 |
Sale of match funded advances | 3,489,907 | 1,088,505 |
Match funded advances | ' | 413,374 |
Debt service account | ' | 14,786 |
Prepaid lender fees and debt issuance costs | ' | 5,422 |
Other prepaid expenses | ' | 1,928 |
Match funded liabilities | ' | -358,335 |
Accrued interest payable and other accrued expenses | ' | -841 |
Net assets of advance SPEs | ' | 76,334 |
Sales price, as adjusted | 3,878,379 | 1,349,108 |
Amount due to (from) HLSS for post-closing adjustments at September 30 | ' | -4,260 |
Cash received before settlement of post closing adjustments | 3,878,379 | 1,344,848 |
Amount received from (paid to) HLSS as settlement of post-closing adjustments outstanding at the end of the previous year | 1,410 | ' |
Total cash received | $3,879,789 | $1,344,848 |
NOTE_3_TRANSFERS_OF_FINANCIAL_3
NOTE 3 TRANSFERS OF FINANCIAL ASSETS (Detail) (HLSS, USD $) | 9 Months Ended | |
In Billions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
HLSS | ' | ' |
Unpaid principal balance of loans related to servicing assets sold | $109.80 | $48.20 |
NOTE_4_BUSINESS_ACQUISITIONS_D
NOTE 4 BUSINESS ACQUISITIONS (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Mar. 31, 2013 | Dec. 31, 2012 | Mar. 31, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2012 | Dec. 31, 2012 | ||||||||
In Thousands, unless otherwise specified | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | Homeward Acquisition | Homeward Acquisition | Homeward Acquisition | ||||||||||
Initial Estimate | Adjustments | Initial Estimate | Adjustments | ||||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||||||||
Cash | ' | ' | ' | ' | ' | ' | $79,511 | $79,511 | ' | ||||||||
Loans held for sale | ' | ' | ' | ' | ' | ' | 558,721 | 558,721 | ' | ||||||||
MSRs | ' | ' | 391,853 | [1],[2] | ' | 393,891 | [1] | -2,038 | [1] | 360,344 | [1] | 358,119 | [1] | 2,225 | [1] | ||
Advances and match funded advances | ' | ' | 1,722,379 | [1],[2] | ' | 1,622,348 | [1] | 100,031 | [1] | 2,266,882 | [1],[2] | 2,266,882 | [1] | ' | [1] | ||
Deferred tax assets | ' | ' | ' | ' | ' | ' | 47,346 | [2] | 47,346 | ' | |||||||
Premises and equipment | ' | ' | 16,423 | [2] | ' | 22,398 | -5,975 | 12,515 | [2] | 16,803 | -4,288 | ||||||
Debt service accounts | ' | ' | ' | ' | ' | ' | 69,287 | 69,287 | ' | ||||||||
Investment in unconsolidated entities | ' | ' | ' | ' | ' | ' | 5,485 | [2] | 5,485 | ' | |||||||
Receivables and other assets | ' | ' | 2,989 | [3] | ' | 2,989 | [3] | ' | [3] | 27,140 | [3] | 56,886 | [3] | -29,746 | [3] | ||
Match funded liabilities | ' | ' | ' | ' | ' | ' | -1,997,459 | -1,997,459 | ' | ||||||||
Other borrowings | ' | ' | ' | ' | ' | ' | -864,969 | -864,969 | ' | ||||||||
Liability for indemnification obligations | -206,074 | [4] | -38,140 | [4] | -49,500 | ' | -49,500 | ' | -32,498 | [2] | -32,498 | ' | |||||
Liability for certain foreclosure matters | -66,431 | [5] | -13,602 | [5] | ' | [6] | ' | ' | [6] | ' | [6] | -13,602 | [2],[6] | ' | [6] | -13,602 | [6] |
Accrued bonuses | ' | ' | ' | ' | ' | ' | -35,201 | -35,201 | ' | ||||||||
Checks held for escheat | ' | ' | ' | ' | ' | ' | -16,453 | [2] | -16,418 | -35 | |||||||
Other | ' | ' | -25,124 | ' | -24,840 | -284 | -44,851 | [2] | -47,614 | 2,763 | |||||||
Total identifiable net assets | ' | ' | 2,059,020 | ' | 1,967,286 | 91,734 | 422,198 | 464,881 | -42,638 | ||||||||
Goodwill | 407,620 | 412,866 | 201,810 | [2] | ' | 204,743 | -2,933 | 342,626 | [2] | 300,843 | 41,783 | ||||||
Total consideration | ' | ' | $2,260,830 | ' | $2,172,029 | $88,801 | $764,824 | $765,724 | ($900) | ||||||||
[1] | As of the acquisition date, the purchase of MSRs with a UPB of $9.0 billion from ResCap was not complete pending the receipt of certain consents and court approvals. During the third quarter we obtained the required consents and approvals for a portion of these MSRs and paid an additional purchase price of $93.3 million to acquire the MSRs and related advances. The purchase price allocation has been revised to include the resulting adjustments to MSRs, advances and goodwill. We anticipate there will be additional settlements in connection with the ResCap Acquisition in the fourth quarter of 2013. | ||||||||||||||||
[2] | Initial fair value estimate. | ||||||||||||||||
[3] | The purchase price allocation has been revised to include a $29.7 million income tax liability, with an offsetting increase to goodwill. | ||||||||||||||||
[4] | The balance includes origination representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines. These obligations were primarily assumed in connection with the Ally MSR Transaction, the ResCap Acquisition and the Homeward Acquisition. See Note 4 - Business Acquisitions, Note 9 - Mortgage Servicing and Note 25 - Commitments and Contingencies for additional information. | ||||||||||||||||
[5] | We recognized $52.8 million of expense in Professional services in the second quarter of 2013 to establish the liability. We recognized the remaining $13.6 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill. See Note 25 - Commitments and Contingencies for additional information. | ||||||||||||||||
[6] | See Note 16 - Other Liabilities. |
NOTE_4_BUSINESS_ACQUISITIONS_D1
NOTE 4 BUSINESS ACQUISITIONS (Detail) - (Table 2) (ResCap Acquisition, USD $) | 3 Months Ended | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 |
ResCap Acquisition | ' | ' |
Business Acquisition [Line Items] | ' | ' |
Revenue | $212,164 | $508,589 |
Net income | $8,230 | $81,362 |
NOTE_4_BUSINESS_ACQUISITIONS_D2
NOTE 4 BUSINESS ACQUISITIONS (Detail) - (Table 3) (ResCap Acquisition, USD $) | 3 Months Ended | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
ResCap Acquisition | ' | ' | ' |
Business Acquisition [Line Items] | ' | ' | ' |
Revenues | $374,751 | $1,530,055 | $1,027,102 |
Net income | $2,696 | $205,062 | $21,921 |
NOTE_4_BUSINESS_ACQUISITIONS_D3
NOTE 4 BUSINESS ACQUISITIONS (Detail) - (Table 4) (Homeward Acquisition, USD $) | 3 Months Ended | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2012 | Sep. 30, 2012 |
Homeward Acquisition | ' | ' |
Business Acquisition [Line Items] | ' | ' |
Revenues | $346,037 | $949,587 |
Net income | $57,013 | $133,821 |
NOTE_4_BUSINESS_ACQUISITIONS_D4
NOTE 4 BUSINESS ACQUISITIONS (Detail) (USD $) | 9 Months Ended | 0 Months Ended | 1 Months Ended | 9 Months Ended | 9 Months Ended | 9 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | Dec. 31, 2012 | Apr. 12, 2013 | Mar. 29, 2013 | Sep. 30, 2013 | Mar. 31, 2013 | Dec. 31, 2012 | Feb. 15, 2013 | Sep. 30, 2013 | Feb. 15, 2013 | Mar. 31, 2013 | Feb. 15, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Dec. 27, 2012 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Mar. 31, 2013 | Apr. 01, 2013 | Sep. 30, 2013 | ||||||
Altisource | Altisource | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | Homeward Acquisition | Homeward Acquisition | Homeward Acquisition | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Correspondent One | Liberty Acquisition | Liberty Acquisition | ||||||||
Subservicing contracts | Senior Secured Term Loan | Freddie Mac and Ginnie Mae loans | MSRs acquired | MSRs acquired | Residential Mortgage | Residential Mortgage | Unrelated Party | Altisource | Maximum | Minimum | Loan | |||||||||||||||||
Facility | MSRs acquired | Loan | Altisource | Altisource | ||||||||||||||||||||||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Intangible assets amortization period | '15 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Unpaid principal balance assets acquired | ' | ' | ' | ' | ' | ' | ' | $26,300,000,000 | ' | $103,800,000,000 | $9,000,000,000 | $40,700,000,000 | ' | ' | $77,000,000,000 | ' | ' | ' | ' | ' | ' | $55,200,000 | ' | |||||
Purchase price paid to acquire MSRs and related advances | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 93,300,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Liability assumed | ' | ' | ' | 4,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Unpaid principal balance of subserviced loans until certain consents and court approvals | ' | ' | ' | ' | ' | ' | ' | 9,000,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Deployed of net additional capital | ' | ' | ' | ' | 840,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Proceeds of senior secured term loan (SSTL) facility | ' | ' | ' | ' | ' | ' | ' | ' | 1,300,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Servicing advance facilities and existing facility borrowed | ' | ' | ' | ' | 1,200,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
New servicing advance facilities | ' | ' | ' | ' | ' | ' | ' | ' | 2 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Existing servicing facility | ' | ' | ' | ' | ' | ' | ' | ' | 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Number of MSRs and subservicing acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 421,000 | ' | ' | ' | ' | ' | ' | 420 | ' | |||||
Aggregate purchase price paid | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 22,000,000 | ' | |||||
Proceeds from sale of business | ' | ' | 128,800,000 | 87,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
Amount of existing outstanding debt repaid to the sellers | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 9,100,000 | ' | |||||
Acquired net assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 26,300,000 | ' | ' | ' | ' | ' | 31,100,000 | ' | |||||
Loans held for sale | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,300,000 | ' | |||||
Assets sold consisted of receivables and other assets | ' | ' | ' | 9,400,000 | ' | 2,989,000 | [1] | ' | ' | ' | ' | ' | ' | ' | 27,140,000 | [1] | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||
Derecognition of goodwill in connection with the sale of a business | -210,357,000 | [2],[3] | ' | 128,800,000 | 81,600,000 | -128,750,000 | [2],[3] | ' | ' | ' | ' | ' | ' | ' | -81,607,000 | [2],[3] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Ownership percentage | 50.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 100.00% | 100.00% | 49.00% | ' | ' | |||||
Total consideration | ' | ' | ' | ' | ' | 2,260,830,000 | ' | ' | ' | ' | ' | ' | ' | 764,824,000 | ' | ' | ' | 900,000 | 12,600,000 | ' | ' | ' | ' | |||||
Cash acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 79,511,000 | ' | 23,000,000 | ' | ' | ' | ' | ' | 4,600,000 | ' | |||||
Receivables acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,100,000 | ' | ' | ' | ' | 11,200,000 | ' | |||||
Goodwill on acquisition | 407,620,000 | 412,866,000 | ' | ' | ' | 201,810,000 | [4] | ' | ' | ' | ' | ' | ' | ' | 342,626,000 | [4] | ' | 100,000 | ' | ' | ' | ' | ' | ' | ' | |||
Recognized gain loss on changes in fair value of investment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 400,000 | ' | ' | ' | ' | ' | ' | ' | |||||
Amount of residential reverse mortgage loans | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 60,000,000 | ' | |||||
Amount of warehouse facilities | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 46,300,000 | ' | |||||
HMBS-related borrowings | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 10,200,000 | ' | |||||
Reverse mortgage loan acquired | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 60,000,000 | |||||
Intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,200,000 | ' | |||||
Revised purchase price allocation to include income tax liability | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $29,700,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | |||||
[1] | The purchase price allocation has been revised to include a $29.7 million income tax liability, with an offsetting increase to goodwill. | |||||||||||||||||||||||||||
[2] | On March 29, 2013, we sold the diversified fee-based business acquired in the Homeward Acquisition to Altisource and derecognized the assigned goodwill. On April 12, 2013, we sold the diversified fee-based business acquired in the ResCap Acquisition to Altisource and derecognized the assigned goodwill. | |||||||||||||||||||||||||||
[3] | See Note 4 - Business Acquisitions for additional information regarding this transaction. | |||||||||||||||||||||||||||
[4] | Initial fair value estimate. |
NOTE_5_FAIR_VALUE_OF_FINANCIAL2
NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Financial assets: | ' | ' | ||
Loans held for sale, at fair value | $335,102 | $426,480 | ||
Loans - restricted for securitization investors, at fair value | 290,853 | [1] | ' | [1] |
Financial liabilities: | ' | ' | ||
Match funded liabilities | 363,012 | 2,532,745 | ||
Carrying Value | ' | ' | ||
Financial assets: | ' | ' | ||
Loans held for sale, at fair value | 335,102 | [2] | 426,480 | [2] |
Loans held for sale, at lower of cost or fair value | 86,753 | [3] | 82,866 | [3] |
Loans - restricted for securitization investors, at fair value | 290,853 | [2] | ' | [2] |
Advances and match funded advances | 1,480,012 | [4] | 3,233,707 | [4] |
Receivables, net | 223,404 | [4] | 137,713 | [4] |
Financial liabilities: | ' | ' | ||
Match funded liabilities | 363,012 | [4] | 2,532,745 | [4] |
Other borrowings: | ' | ' | ||
Senior secured term loan | 1,287,821 | [4] | 305,997 | [4] |
Secured borrowings - owed to securitization investors, at fair value | 284,276 | [2] | ' | [2] |
Other | 1,020,494 | [4] | 790,682 | [4] |
Total Other borrowings | 2,592,591 | 1,096,679 | ||
Carrying Value | Interest Rate Lock Commitments (IRLCs) | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | 13,491 | [2] | 5,781 | [2] |
Carrying Value | Interest rate swaps | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | ' | [2] | -10,836 | [2] |
Carrying Value | Forward MBS trades | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | -12,185 | [2] | -1,719 | [2] |
Carrying Value | U.S. Treasury futures | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | ' | [2] | -1,258 | [2] |
Carrying Value | Interest rate caps | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | ' | [2] | 168 | [2] |
Carrying Value | MSRs acquired | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Mortgage servicing rights | 96,938 | [2] | 85,213 | [2] |
Fair Value | ' | ' | ||
Financial assets: | ' | ' | ||
Loans held for sale, at fair value | 335,102 | [2] | 426,480 | [2] |
Loans held for sale, at lower of cost or fair value | 86,753 | [3] | 82,866 | [3] |
Loans - restricted for securitization investors, at fair value | 290,853 | [2] | ' | [2] |
Advances and match funded advances | 1,480,012 | [4] | 3,233,707 | [4] |
Receivables, net | 223,404 | [4] | 137,713 | [4] |
Financial liabilities: | ' | ' | ||
Match funded liabilities | 363,012 | [4] | 2,533,278 | [4] |
Other borrowings: | ' | ' | ||
Senior secured term loan | 1,278,273 | [4] | 310,822 | [4] |
Secured borrowings - owed to securitization investors, at fair value | 284,276 | [2] | ' | [2] |
Other | 1,020,494 | [4] | 790,682 | [4] |
Total Other borrowings | 2,583,043 | 1,101,504 | ||
Fair Value | Interest Rate Lock Commitments (IRLCs) | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | 13,491 | [2] | 5,781 | [2] |
Fair Value | Interest rate swaps | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | ' | [2] | -10,836 | [2] |
Fair Value | Forward MBS trades | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | -12,185 | [2] | -1,719 | [2] |
Fair Value | U.S. Treasury futures | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | ' | [2] | -1,258 | [2] |
Fair Value | Interest rate caps | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Derivative financial instruments | ' | [2] | 168 | [2] |
Fair Value | MSRs acquired | ' | ' | ||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ||
Mortgage servicing rights | $96,938 | [2] | $85,213 | [2] |
[1] | Loans sold into Ginnie Mae guaranteed securitizations that we include in our Consolidated Financial Statements because the transfers of reverse mortgage loans to the trusts did not qualify for sale accounting treatment. See Note 2 - Securitizations and Variable Interest Entities for additional information. | |||
[2] | Acquired intangible asset related to licenses. The useful life is considered indefinite and therefore the intangible asset is not amortized. | |||
[3] | Measured at fair value on a non-recurring basis. | |||
[4] | Disclosed, but not carried, at fair value. |
NOTE_5_FAIR_VALUE_OF_FINANCIAL3
NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Detail) - (Table 2) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' | ' | ||||
Beginning balance | $100,347 | ($14,905) | $74,545 | ($16,676) | ||||
Purchases, issuances, sales and settlements: | ' | ' | ' | ' | ||||
Purchases | ' | ' | 72 | ' | ||||
Issuances | 4,338 | ' | 1,429 | ' | ||||
Sales | ' | ' | 24,156 | ' | ||||
Settlements | -448 | 102 | -1,518 | 2,524 | ||||
Total | 3,890 | 102 | 24,139 | 2,524 | ||||
Total realized and unrealized gains and (losses) | ' | ' | ' | ' | ||||
Included in Other, net | -722 | [1] | 1,397 | [1] | 17,194 | [1] | 6,645 | [1] |
Included in Other comprehensive income (loss) | ' | [1] | -2,688 | [1] | -12,363 | [1] | -8,587 | [1] |
Total | -722 | [1] | -1,291 | [1] | 4,831 | [1] | -1,942 | [1] |
Transfers in and / or out of Level 3 | ' | ' | ' | ' | ||||
Ending balance | 103,515 | -16,094 | 103,515 | -16,094 | ||||
Loans - restricted for securitization investors | ' | ' | ' | ' | ||||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' | ' | ||||
Beginning balance | 76,649 | ' | ' | ' | ||||
Purchases, issuances, sales and settlements: | ' | ' | ' | ' | ||||
Purchases | ' | ' | 10,251 | ' | ||||
Issuances | 211,052 | ' | 274,081 | ' | ||||
Sales | ' | ' | ' | ' | ||||
Settlements | -1,293 | ' | -2,164 | ' | ||||
Total | 209,759 | ' | 282,168 | ' | ||||
Total realized and unrealized gains and (losses) | ' | ' | ' | ' | ||||
Included in Other, net | 4,445 | [1] | ' | [1] | 8,685 | [1] | ' | [1] |
Included in Other comprehensive income (loss) | ' | [1] | ' | [1] | ' | [1] | ' | [1] |
Total | 4,445 | [1] | ' | [1] | 8,685 | [1] | ' | [1] |
Transfers in and / or out of Level 3 | ' | ' | ' | ' | ||||
Ending balance | 290,853 | ' | 290,853 | ' | ||||
Secured borrowings - owed to securitization investors | ' | ' | ' | ' | ||||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' | ' | ||||
Beginning balance | -73,641 | ' | ' | ' | ||||
Purchases, issuances, sales and settlements: | ' | ' | ' | ' | ||||
Purchases | ' | ' | -10,179 | ' | ||||
Issuances | -206,714 | ' | -272,652 | ' | ||||
Sales | ' | ' | ' | ' | ||||
Settlements | 1,021 | ' | 1,888 | ' | ||||
Total | -205,693 | ' | -280,943 | ' | ||||
Total realized and unrealized gains and (losses) | ' | ' | ' | ' | ||||
Included in Other, net | -4,942 | [1] | ' | [1] | -3,333 | [1] | ' | [1] |
Included in Other comprehensive income (loss) | ' | [1] | ' | [1] | ' | [1] | ' | [1] |
Total | -4,942 | [1] | ' | [1] | -3,333 | [1] | ' | [1] |
Transfers in and / or out of Level 3 | ' | ' | ' | ' | ||||
Ending balance | -284,276 | ' | -284,276 | ' | ||||
Derivative Financial Instruments | ' | ' | ' | ' | ||||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' | ' | ||||
Beginning balance | 176 | -14,905 | -10,668 | -16,676 | ||||
Purchases, issuances, sales and settlements: | ' | ' | ' | ' | ||||
Purchases | ' | ' | ' | ' | ||||
Issuances | ' | ' | ' | ' | ||||
Sales | ' | ' | 24,156 | ' | ||||
Settlements | -176 | 102 | -1,242 | 2,524 | ||||
Total | -176 | 102 | 22,914 | 2,524 | ||||
Total realized and unrealized gains and (losses) | ' | ' | ' | ' | ||||
Included in Other, net | ' | [1] | 1,397 | [1] | 117 | [1] | 6,645 | [1] |
Included in Other comprehensive income (loss) | ' | [1] | -2,688 | [1] | -12,363 | [1] | -8,587 | [1] |
Total | ' | [1] | -1,291 | [1] | -12,246 | [1] | -1,942 | [1] |
Transfers in and / or out of Level 3 | ' | ' | ' | ' | ||||
Ending balance | ' | -16,094 | ' | -16,094 | ||||
MSRs at Fair Value | ' | ' | ' | ' | ||||
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' | ' | ||||
Beginning balance | 97,163 | ' | 85,213 | ' | ||||
Purchases, issuances, sales and settlements: | ' | ' | ' | ' | ||||
Purchases | ' | ' | ' | ' | ||||
Issuances | ' | ' | ' | ' | ||||
Sales | ' | ' | ' | ' | ||||
Settlements | ' | ' | ' | ' | ||||
Total | ' | ' | ' | ' | ||||
Total realized and unrealized gains and (losses) | ' | ' | ' | ' | ||||
Included in Other, net | -225 | [1] | ' | [1] | 11,725 | [1] | ' | [1] |
Included in Other comprehensive income (loss) | ' | [1] | ' | [1] | ' | [1] | ' | [1] |
Total | -225 | [1] | ' | [1] | 11,725 | [1] | ' | [1] |
Transfers in and / or out of Level 3 | ' | ' | ' | ' | ||||
Ending balance | $96,938 | ' | $96,938 | ' | ||||
[1] | For derivative financial instruments held at September 30, 2012, total net losses were $1.3 million and $7.7 million for the three and nine months ended September 30, 2012, respectively. |
NOTE_5_FAIR_VALUE_OF_FINANCIAL4
NOTE 5 FAIR VALUE OF FINANCIAL INSTRUMENTS (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |
In Millions, unless otherwise specified | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Net losses held for sale attributable to derivative financial instruments (in dollars) | $1.30 | ' | $7.70 |
Derivative, description of variable rate basis | ' | 'one-month LIBOR | ' |
Amortized cost | Cost of financing advances | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Fair value inputs basis spread on variable rate | ' | 3.75% | ' |
Fair value inputs, description of variable rate basis | ' | '1-month LIBOR | ' |
Amortized cost | Float earnings | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Fair value inputs, description of variable rate basis | ' | '1-month LIBOR | ' |
Fair value | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 8.95% | ' |
Fair value inputs, description of variable rate basis | ' | '1-Month LIBOR | ' |
SSTL | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Discount rate | ' | 5.50% | ' |
MSRs acquired | Maximum | Amortized cost | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Delinquency rates | ' | 29.42% | ' |
Discount rate | ' | 17.13% | ' |
Prepayment rate | ' | 19.23% | ' |
MSRs acquired | Maximum | Fair value | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Fair value inputs basis spread on variable rate | ' | 10.50% | ' |
MSRs acquired | Minimum | Amortized cost | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Delinquency rates | ' | 6.55% | ' |
Discount rate | ' | 11.33% | ' |
Prepayment rate | ' | 7.39% | ' |
MSRs acquired | Weighted Average | Amortized cost | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Delinquency rates | ' | 17.04% | ' |
Discount rate | ' | 12.80% | ' |
Prepayment rate | ' | 14.87% | ' |
Loans - Restricted for Securitization Investors | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Discount rate | ' | 1.84% | ' |
Loans - Restricted for Securitization Investors | Maximum | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 38.40% | ' |
Weighted average life (in years) | ' | '23 years 6 months 7 days | ' |
Loans - Restricted for Securitization Investors | Minimum | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 4.80% | ' |
Weighted average life (in years) | ' | '2 years 11 months 19 days | ' |
Loans - Restricted for Securitization Investors | Weighted Average | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 8.44% | ' |
Weighted average life (in years) | ' | '6 years 9 months 15 days | ' |
Secured Borrowings - Owed to Securitization Investors | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Discount rate | ' | 1.17% | ' |
Secured Borrowings - Owed to Securitization Investors | Maximum | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 37.97% | ' |
Weighted average life (in years) | ' | '22 years 10 months 6 days | ' |
Secured Borrowings - Owed to Securitization Investors | Minimum | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 4.80% | ' |
Weighted average life (in years) | ' | '2 years 11 months 9 days | ' |
Secured Borrowings - Owed to Securitization Investors | Weighted Average | ' | ' | ' |
Fair Value Of Financial Instrument [Line Items] | ' | ' | ' |
Prepayment rate | ' | 8.44% | ' |
Weighted average life (in years) | ' | '6 years 1 month 24 days | ' |
NOTE_6_LOANS_HELD_FOR_SALE_AT_2
NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Detail) - (Table 1) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | |
Movement In Loans Held For Sale At Fair Value [Roll Forward] | ' | |
Balance at December 31, 2012 | $426,480 | |
Originations and purchases | 5,988,501 | [1] |
Proceeds from sale | -6,033,785 | |
Loss on sale of loans | -46,962 | [2] |
Other | 868 | |
Balance at September 30, 2013 | $335,102 | |
[1] | Purchases include $60.0 million of reverse mortgages acquired in the Liberty Acquisition. | |
[2] | Includes gains of $14.5 million and $20.6 million recorded during the three and nine months ended September 30, 2013, respectively, to adjust Loans - Restricted for Securitization Investors to fair value. |
NOTE_6_LOANS_HELD_FOR_SALE_AT_3
NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Detail) - (Table 2) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Loans Held For Sale At Fair Value [Line Items] | ' | ' | ' | ' | ||||
Gain on sales of loans | $4,622 | [1] | ' | [1] | $36,156 | [1] | ' | [1] |
Change in fair value of loans held for sale | 14,362 | ' | 1,452 | ' | ||||
Gain (loss) on hedge instruments | -9,408 | ' | 30,989 | ' | ||||
Other | -226 | ' | -1,603 | ' | ||||
Gain on loans held for sale, net | 28,262 | ' | 72,912 | ' | ||||
Interest Rate Lock Commitments (IRLCs) | ' | ' | ' | ' | ||||
Loans Held For Sale At Fair Value [Line Items] | ' | ' | ' | ' | ||||
Changes in fair value of IRLCs | $18,912 | ' | $5,918 | ' | ||||
[1] | Includes gains of $16.3 million and $63.2 million for the three and nine months ended September 30, 2013, respectively, representing the value assigned to MSRs retained on sales of loans. Also includes gains of $4.1 million and $20.3 million recorded during the three and nine months ended September 30, 2013, respectively, on sales of repurchased loans into Ginnie Mae guaranteed securitizations. These loans are classified as held for sale at the lower of cost or fair value. See Note 13 - Other Assets. |
NOTE_6_LOANS_HELD_FOR_SALE_AT_4
NOTE 6 LOANS HELD FOR SALE, AT FAIR VALUE (Detail) (USD $) | 3 Months Ended | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 |
Business Acquisition [Line Items] | ' | ' |
MSRs retained on sales of loans | $16.30 | $63.20 |
Loans - Restricted for Securitization Investors to fair value | 4.1 | 20.3 |
Gain on sale of loans | 14.5 | 20.6 |
Liberty Home Equity Solutions Inc | ' | ' |
Business Acquisition [Line Items] | ' | ' |
Reverse mortgage loan cash acquired | $60 | $60 |
NOTE_7_ADVANCES_Detail_Table_1
NOTE 7 ADVANCES (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Advances | $946,287 | $184,463 |
Servicing | ' | ' |
Servicing: | ' | ' |
Principal and interest | 149,184 | 83,617 |
Taxes and insurance | 604,636 | 51,447 |
Foreclosures, bankruptcy and other | 183,861 | 41,296 |
Total | 937,681 | 176,360 |
Corporate Items and Other | ' | ' |
Other | 8,606 | 8,103 |
Total | ' | ' |
Advances | $946,287 | $184,463 |
NOTE_8_MATCH_FUNDED_ADVANCES_D
NOTE 8 MATCH FUNDED ADVANCES (Detail) - (Table 1) (Residential mortgage loan, USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Residential mortgage loan | ' | ' |
Match Funded Advances [Line Items] | ' | ' |
Principal and interest | $235,766 | $1,577,808 |
Taxes and insurance | 218,952 | 1,148,486 |
Foreclosures, bankruptcy, real estate and other | 79,007 | 322,950 |
Match funded advances | $533,725 | $3,049,244 |
NOTE_9_MORTGAGE_SERVICING_Deta
NOTE 9 MORTGAGE SERVICING (Detail) - (Table 1) (USD $) | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | ||
Servicing Asset at Amortized Value, Balance [Roll Forward] | ' | ' | ||
Balance at December 31 | $678,937 | $293,152 | ||
Mortgage servicing rights purchase | 1,208,222 | [1] | 181,949 | [1] |
Additions recognized on the sale of residential mortgage loans | 63,154 | ' | ||
Sales | -17,523 | [2] | ' | [2] |
Servicing transfers, adjustments and other | 2,052 | -88 | ||
Amortization | -197,899 | [3] | -54,678 | [3] |
Balance at September 30 | 1,736,943 | 420,335 | ||
Estimated fair value at September 30 | $2,532,239 | $488,499 | ||
[1] | MSR recognized in connection with business and asset acquisitions during the first nine months of 2013 include: MSRs of $391.9 million acquired in the ResCap Acquisition. See Note 4 - Business Acquisitions for additional information. MSRs of $683.8 million acquired in the Ally MSR Transaction. The acquired MSRs relate to mortgage loans with a UPB of $87.5 billion owned by Freddie Mac and Fannie Mae. We also acquired servicing advances and other receivables of $73.6 million. We assumed the origination representation and warranty obligations of approximately $136.7 million in connection with a majority of the acquired MSRs. We had been subservicing these MSRs on behalf of Ally under a subservicing contract assumed by us in connection with the ResCap Acquisition. MSRs of $127.0 million with a UPB of approximately $30.5 billion and related servicing advance receivables of $371.6 million acquired in the OneWest MSR Transaction. We expect the remainder of the transaction to close during the fourth quarter. The total estimated purchase price is approximately $2.4 billion with $432.2 million attributed to MSRs and $2.0 billion attributed to servicing advances. The total UPB to be acquired is estimated at $72.4 billion. No operations or other assets were purchased in the transaction. In October 2013, we closed the purchase of approximately $6.6 million of MSRs with a UPB of approximately $1.1 billion and approximately $37.1 million of servicing advances. On November 1, 2013, we closed the purchase of approximately $235.6 million of MSRs with a UPB of approximately $32.9 billion and approximately $1.3 billion of servicing advances. See Note 26 - Subsequent Events for additional information. | |||
[2] | Cash proceeds from the sale were $21.5 million. These MSRs were sold with subservicing retained. The gain on the sale of $3.2 million has been deferred and will be recognized in earnings over the life of the subservicing contract. | |||
[3] | Amortization of mortgage servicing rights is reported net of the amortization of servicing liabilities and includes the amount of charges we recognized to increase servicing liability obligations. |
NOTE_9_MORTGAGE_SERVICING_Deta1
NOTE 9 MORTGAGE SERVICING (Detail) - (Table 2) (USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Sep. 30, 2013 |
Servicing Asset at Fair Value, Amount [Roll Forward] | ' |
Balance at December 31, 2012 | $85,213 |
Changes in fair value: | ' |
Due to changes in market valuation assumptions | 19,800 |
Realization of cash flows and other changes | -8,075 |
Balance at September 30, 2013 | $96,938 |
NOTE_9_MORTGAGE_SERVICING_Deta2
NOTE 9 MORTGAGE SERVICING (Detail) - (Table 3) (MSRs acquired, USD $) | Sep. 30, 2013 |
In Thousands, unless otherwise specified | |
MSRs acquired | ' |
Sensitivity Analysis of Fair Value of Interests Continued to be Held by Transferor, Servicing Assets or Liabilities, Impact of Adverse Change in Assumption [Line Items] | ' |
Weighted average prepayment speeds for 10% | ($3,695) |
Discount rate (Option-adjusted spread) for 10% | -2,148 |
Weighted average prepayment speeds for 20% | -7,234 |
Discount rate (Option-adjusted spread) for 20% | ($4,128) |
NOTE_9_MORTGAGE_SERVICING_Deta3
NOTE 9 MORTGAGE SERVICING (Detail) - (Table 4) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Loan servicing and subservicing fees: | ' | ' | ' | ' |
Servicing | $335,884 | $145,861 | $887,500 | $394,454 |
Subservicing | 35,286 | 14,257 | 115,437 | 27,619 |
Servicing And Subservicing Fees Amount, Total | 371,170 | 160,118 | 1,002,937 | 422,073 |
Home Affordable Modification Program (HAMP) fees | 40,213 | 21,687 | 118,412 | 55,761 |
Late charges | 30,445 | 16,370 | 85,930 | 52,891 |
Loan collection fees | 8,387 | 4,102 | 22,524 | 11,271 |
Custodial accounts (float earnings) | 743 | 942 | 4,533 | 2,393 |
Other | 32,309 | 19,792 | 99,056 | 34,046 |
Servicing and subservicing fees, Total | $483,267 | $223,011 | $1,333,392 | $578,435 |
NOTE_9_MORTGAGE_SERVICING_Deta4
NOTE 9 MORTGAGE SERVICING (Detail) - (Table 5) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Servicing | $362,792,312 | [1] | $175,762,161 | [1] |
Subservicing | 72,522,426 | 28,304,586 | ||
Total | 435,314,738 | 204,066,747 | ||
Residential | ' | ' | ||
Servicing | 362,792,312 | [1] | 175,762,161 | |
Subservicing | 72,027,114 | 27,903,555 | ||
Total | 434,819,426 | 203,665,716 | ||
Commercial | ' | ' | ||
Servicing | ' | [1] | ' | [1] |
Subservicing | 495,312 | 401,031 | ||
Total | $495,312 | $401,031 | ||
[1] | Includes UPB of $177.1 billion and $79.4 billion at September 30, 2013 and December 31, 2012, respectively, for which the Rights to MSRs have been sold to HLSS. |
NOTE_9_MORTGAGE_SERVICING_Deta5
NOTE 9 MORTGAGE SERVICING (Detail) (USD $) | 9 Months Ended | 9 Months Ended | 1 Months Ended | ||||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Oct. 25, 2013 | Sep. 30, 2013 | Oct. 31, 2013 | Nov. 01, 2013 | |||
Master servicing rights | Rescap Acquisition | HLSS | HLSS | HLSS | One West Bank | One West Bank | One West Bank | ||||||
Subsequent Event | Master servicing rights | Master servicing rights | Master servicing rights | ||||||||||
Subsequent Event | Subsequent Event | ||||||||||||
Carrying value of servicing assets sold | $465,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Unpaid principal balance of small balance commercial loans serviced | 2,500,000,000 | ' | 2,100,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ||
Fair value disclosure, off-balance sheet risks, amount, asset | 3,500,000,000 | ' | 1,300,000,000 | ' | ' | ' | ' | ' | ' | ' | ' | ||
Unpaid principal balance of loans associated with MSRs sold | ' | ' | ' | ' | ' | 177,100,000,000 | 79,400,000,000 | ' | ' | ' | ' | ||
Origination representation and warranty obligations | ' | ' | ' | 136,700,000 | ' | ' | ' | ' | ' | ' | ' | ||
Purchase price | ' | ' | ' | ' | ' | ' | ' | ' | 2,400,000,000 | ' | ' | ||
Associated Rights to MSRs | ' | ' | ' | ' | ' | ' | ' | 28,000,000 | ' | ' | ' | ||
Servicing advances | ' | ' | ' | ' | ' | ' | ' | 360,000,000 | ' | ' | ' | ||
Total UPB to be acquired | ' | ' | ' | ' | ' | ' | ' | ' | 72,400,000,000 | ' | ' | ||
Proceeds from sale of MSRs | 21,511,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Unrecognized deferred gain on sale of MSRs | 3,200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Purchase price | ' | ' | ' | ' | ' | ' | ' | 388,000,000 | ' | ' | ' | ||
Purchase of MSRs and related servicing advances | ' | ' | ' | 87,500,000,000 | ' | ' | ' | ' | 30,500,000,000 | 1,100,000,000 | 32,900,000,000 | ||
Servicing advances purchase | ' | ' | ' | 73,600,000 | ' | ' | ' | ' | 371,600,000 | 37,100,000 | 1,300,000,000 | ||
Purchase price of MSRs, as adjusted | 1,208,222,000 | [1] | 181,949,000 | [1] | ' | 683,800,000 | 391,900,000 | ' | ' | ' | ' | 6,600,000 | 235,600,000 |
Mortgage servicing rights acquired | ' | ' | ' | ' | ' | ' | ' | ' | 127,000,000 | ' | ' | ||
Servicing assets acquired | ' | ' | ' | ' | ' | ' | ' | ' | 432,200,000 | ' | ' | ||
Servicing advances acquired | ' | ' | ' | ' | ' | ' | ' | ' | $2,000,000,000 | ' | ' | ||
[1] | MSR recognized in connection with business and asset acquisitions during the first nine months of 2013 include: MSRs of $391.9 million acquired in the ResCap Acquisition. See Note 4 - Business Acquisitions for additional information. MSRs of $683.8 million acquired in the Ally MSR Transaction. The acquired MSRs relate to mortgage loans with a UPB of $87.5 billion owned by Freddie Mac and Fannie Mae. We also acquired servicing advances and other receivables of $73.6 million. We assumed the origination representation and warranty obligations of approximately $136.7 million in connection with a majority of the acquired MSRs. We had been subservicing these MSRs on behalf of Ally under a subservicing contract assumed by us in connection with the ResCap Acquisition. MSRs of $127.0 million with a UPB of approximately $30.5 billion and related servicing advance receivables of $371.6 million acquired in the OneWest MSR Transaction. We expect the remainder of the transaction to close during the fourth quarter. The total estimated purchase price is approximately $2.4 billion with $432.2 million attributed to MSRs and $2.0 billion attributed to servicing advances. The total UPB to be acquired is estimated at $72.4 billion. No operations or other assets were purchased in the transaction. In October 2013, we closed the purchase of approximately $6.6 million of MSRs with a UPB of approximately $1.1 billion and approximately $37.1 million of servicing advances. On November 1, 2013, we closed the purchase of approximately $235.6 million of MSRs with a UPB of approximately $32.9 billion and approximately $1.3 billion of servicing advances. See Note 26 - Subsequent Events for additional information. |
NOTE_10_RECEIVABLES_Detail_Tab
NOTE 10 RECEIVABLES (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Other | $223,404 | $137,713 | ||
Receivable | ' | ' | ||
Servicing | 155,076 | [1] | 84,870 | [1] |
Due from related parties | 35,383 | [2] | 12,361 | [2] |
Income taxes receivable | 23,955 | 25,546 | ||
Other | 30,372 | 18,577 | ||
Receivables, Total | 244,786 | 141,354 | ||
Allowance for Losses | ' | ' | ||
Servicing | -19,413 | [1] | -1,647 | [1] |
Due from related parties | ' | [2] | ' | [2] |
Income taxes receivable | ' | ' | ||
Other | -1,969 | -1,994 | ||
Receivables, Total | -21,382 | -3,641 | ||
Net | ' | ' | ||
Servicing | 135,663 | [1] | 83,223 | [1] |
Due from related parties | 35,383 | [2] | 12,361 | [2] |
Income taxes receivable | 23,955 | 25,546 | ||
Other | 28,403 | 16,583 | ||
Receivables, Total | $223,404 | $137,713 | ||
[1] | The receivable balances arise from our Servicing business and include reimbursable expenditures due from investors and amounts to be recovered from the custodial accounts of the trustees. The balances at September 30, 2013 also include $67.4 million of receivables and $16.2 million of allowance for losses related to defaulted FHA or VA insured loans repurchased from Ginnie Mae guaranteed securitizations. | |||
[2] | See Note 23 - Related Party Transactions for additional information regarding transactions with Altisource and HLSS. |
NOTE_10_RECEIVABLES_Detail
NOTE 10 RECEIVABLES (Detail) (USD $) | Sep. 30, 2013 |
In Millions, unless otherwise specified | |
Receivables [Abstract] | ' |
Receivables related to FHA or VA insured loans | $67.40 |
Allowance for losses related to FHA or VA insured loans | $16.20 |
NOTE_11_GOODWILL_AND_INTANGIBL2
NOTE 11 GOODWILL AND INTANGIBLES (Detail) - (Table 1) (USD $) | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Mar. 31, 2013 | ||
Goodwill [Roll Forward] | ' | ' | ||
Balance at December 31, 2012 | $412,866 | ' | ||
Derecognition of goodwill in connection with the sale of a business | -210,357 | [1],[2] | ' | |
ResCap Acquisition | 201,810 | [2] | ' | |
Goodwill excluding liberty and step acquisition, amount | 404,319 | ' | ||
Liberty Acquisition | 3,200 | [2],[3] | ' | |
Correspondent One | 101 | [2] | ' | |
Balance at September 30, 2013 | 407,620 | ' | ||
ResCap Acquisition | ' | ' | ||
Goodwill [Roll Forward] | ' | ' | ||
Balance at December 31, 2012 | ' | 201,810 | [4] | |
Derecognition of goodwill in connection with the sale of a business | -128,750 | [1],[2] | ' | |
ResCap Acquisition | 201,810 | [2] | ' | |
Goodwill excluding liberty and step acquisition, amount | 73,060 | ' | ||
Balance at September 30, 2013 | ' | 201,810 | [4] | |
Homeward Acquisition | ' | ' | ||
Goodwill [Roll Forward] | ' | ' | ||
Balance at December 31, 2012 | 342,626 | [4] | ' | |
Derecognition of goodwill in connection with the sale of a business | -81,607 | [1],[2] | ' | |
ResCap Acquisition | ' | [2] | ' | |
Goodwill excluding liberty and step acquisition, amount | 261,019 | ' | ||
Litton Acquisition | ' | ' | ||
Goodwill [Roll Forward] | ' | ' | ||
Balance at December 31, 2012 | 57,430 | ' | ||
Derecognition of goodwill in connection with the sale of a business | ' | [1],[2] | ' | |
ResCap Acquisition | ' | [2] | ' | |
Goodwill excluding liberty and step acquisition, amount | 57,430 | ' | ||
HomEq Acquisition | ' | ' | ||
Goodwill [Roll Forward] | ' | ' | ||
Balance at December 31, 2012 | 12,810 | ' | ||
Derecognition of goodwill in connection with the sale of a business | ' | [1],[2] | ' | |
ResCap Acquisition | ' | [2] | ' | |
Goodwill excluding liberty and step acquisition, amount | $12,810 | ' | ||
[1] | On March 29, 2013, we sold the diversified fee-based business acquired in the Homeward Acquisition to Altisource and derecognized the assigned goodwill. On April 12, 2013, we sold the diversified fee-based business acquired in the ResCap Acquisition to Altisource and derecognized the assigned goodwill. | |||
[2] | See Note 4 - Business Acquisitions for additional information regarding this transaction. | |||
[3] | Acquired intangible asset related to licenses. The useful life is considered indefinite and therefore the intangible asset is not amortized. | |||
[4] | Initial fair value estimate. |
NOTE_11_GOODWILL_AND_INTANGIBL3
NOTE 11 GOODWILL AND INTANGIBLES (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Mar. 31, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | ||
In Thousands, unless otherwise specified | ResCap Acquisition | ResCap Acquisition | ResCap Acquisition | Homeward Acquisition | Homeward Acquisition | Homeward Acquisition | ||||
Servicing | Servicing | Lending | ||||||||
Goodwill [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ||
Goodwill on acquisition | $407,620 | $412,866 | $201,810 | [1] | ' | $73,100 | $342,626 | [1] | $140,700 | $120,300 |
[1] | Initial fair value estimate. |
NOTE_12_DEBT_SERVICE_ACCOUNTS_
NOTE 12 DEBT SERVICE ACCOUNTS (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Debt Service Accounts [Abstract] | ' | ' |
Debt service accounts | $45,462 | $88,748 |
NOTE_13_OTHER_ASSETS_Detail_Ta
NOTE 13 OTHER ASSETS (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Other Assets [Abstract] | ' | ' | ||
Loans - restricted for securitization investors, at fair value | $290,853 | [1] | ' | [1] |
Loans held for sale, at lower of cost or fair value | 86,753 | [2] | 82,866 | [2] |
Prepaid lender fees and debt issuance costs, net | 25,197 | [3] | 14,389 | [3] |
Prepaid income taxes | 23,112 | 23,112 | ||
Derivatives, at fair value | 12,849 | [4] | 10,795 | [4] |
Investment in unconsolidated entities | 11,767 | [5] | 25,187 | [5] |
Real estate, net | 8,346 | 6,205 | ||
Interest earning collateral deposits | 6,533 | [6] | 31,710 | [6] |
Acquisition deposits | ' | [7] | 57,000 | [7] |
Prepaid expenses and other | 13,123 | 22,314 | ||
Other assets | $478,533 | $273,578 | ||
[1] | Loans sold into Ginnie Mae guaranteed securitizations that we include in our Consolidated Financial Statements because the transfers of reverse mortgage loans to the trusts did not qualify for sale accounting treatment. See Note 2 - Securitizations and Variable Interest Entities for additional information. | |||
[2] | The carrying values at September 30, 2013 and December 31, 2012 are net of valuation allowances of $27.0 million and $14.7 million, respectively. The balances include non-performing subprime single-family residential loans that we do not intend to hold to maturity. The balance at September 30, 2013 includes $67.8 million of loans that we are required to repurchase from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolutions. The balance at December 31, 2012 includes non-performing mortgage loans with a carrying value of $65.4 million that we acquired in December 2012 and sold to Altisource Residential, LP in February 2013 for an insignificant gain. | |||
[3] | These balances relate to match funded liabilities and other secured borrowings. | |||
[4] | See Note 19 - Derivative Financial Instruments and Hedging Activities for additional information. | |||
[5] | The balance at December 31, 2012 includes an investment of $13.4 million that represented our 49% equity interest in Correspondent One. As disclosed in Note 4 - Business Acquisitions, we increased our ownership to 100% on March 31, 2013. Effective on that date, we began including the accounts of Correspondent One in our consolidated financial statements and eliminated our current investment in consolidation. | |||
[6] | These balances include $1.5 million and $25.8 million of cash collateral held by the counterparties to certain of our derivative agreements at September 30, 2013 and December 31, 2012, respectively. | |||
[7] | The balance at December 31, 2012 represents an earnest money cash deposit we made in connection with the ResCap Acquisition. This deposit was subsequently applied towards the purchase price upon closing of the transaction on February 15, 2013. See Note 4 - Business Acquisitions for additional information. |
NOTE_13_OTHER_ASSETS_Detail
NOTE 13 OTHER ASSETS (Detail) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Millions, unless otherwise specified | ||
Ginnie Mae | ' | ' |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' |
Mortgage loans, repurchase amount | $67.80 | ' |
Loans Receivable | Non Performing Mortgage Loans Receivable | ' | ' |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' |
Amount of valuation allowance | 27 | 14.7 |
Carrying value of non-performing mortgage loans | ' | $65.40 |
NOTE_13_OTHER_ASSETS_Detail_1
NOTE 13 OTHER ASSETS (Detail 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Mar. 31, 2013 | Dec. 31, 2012 | ||
Correspondent One | Correspondent One | |||||
Altisource | Altisource | |||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ' | ' | ' | ' | ||
Investments in and advance to affiliates, subsidiaries, associates, and joint ventures (in dollars) | $11,767,000 | [1] | $25,187,000 | [1] | ' | $13,400,000 |
Equity method investment, ownership percentage by parent | ' | ' | 100.00% | 49.00% | ||
Derivative, collateral, right to reclaim cash | $1,500,000 | $25,800,000 | ' | ' | ||
[1] | The balance at December 31, 2012 includes an investment of $13.4 million that represented our 49% equity interest in Correspondent One. As disclosed in Note 4 - Business Acquisitions, we increased our ownership to 100% on March 31, 2013. Effective on that date, we began including the accounts of Correspondent One in our consolidated financial statements and eliminated our current investment in consolidation. |
NOTE_14_MATCH_FUNDED_LIABILITI2
NOTE 14 MATCH FUNDED LIABILITIES (Detail) - (Table 1) (USD $) | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 | ||
Available Borrowing Capacity | $36,988 | [1] | ' | |
Balance Outstanding | 363,012 | 2,532,745 | ||
2011-Servicer Advance Revolving Trust 1 | ' | ' | ||
Interest Rate | '2.23% | [2] | ' | |
Maturity | 31-May-43 | [2],[3] | ' | |
Amortization Date | 'May 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 325,000 | [2] |
2011-Servicer Advance Revolving Trust 1 | ' | ' | ||
Interest Rate | '3.37 - 5.92% | [2] | ' | |
Maturity | 31-May-43 | [2],[3] | ' | |
Amortization Date | 'May 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 525,000 | [2] |
2012-Servicing Advance Revolving Trust 2 | ' | ' | ||
Interest Rate | '3.27 - 6.90% | [2] | ' | |
Maturity | 30-Sep-43 | [2],[3] | ' | |
Amortization Date | 'Sept. 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 250,000 | [2] |
2012-Servicing Advance Revolving Trust 3 | ' | ' | ||
Interest Rate | '2.98% | [2] | ' | |
Maturity | 31-Mar-43 | [2],[3] | ' | |
Amortization Date | 'Mar. 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 248,999 | [2] |
2012-Servicing Advance Revolving Trust 3 | ' | ' | ||
Interest Rate | '3.72 - 7.04% | [2] | ' | |
Maturity | 31-Mar-44 | [2],[3] | ' | |
Amortization Date | 'Mar. 2014 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 299,278 | [2] |
Total fixed rate | ' | ' | ||
Available Borrowing Capacity | ' | [1] | ' | |
Balance Outstanding | ' | 1,648,277 | ||
Advance Receivable Backed Notes | ' | ' | ||
Interest Rate | '1-month LIBOR (1ML) + 285 bps | [4] | ' | |
Maturity | 30-Apr-15 | [3],[4] | ' | |
Amortization Date | 'Apr. 2014 | [3],[4] | ' | |
Available Borrowing Capacity | ' | [1],[4] | ' | |
Balance Outstanding | ' | [4] | 205,016 | [4] |
Advance Receivable Backed Notes Series 2012-ADV1 | ' | ' | ||
Interest Rate | 'Commercial paper (CP) rate + 225 or 335 bps | [5] | ' | |
Maturity | 31-Dec-43 | [3],[5] | ' | |
Amortization Date | 'Dec. 2013 | [3],[5] | ' | |
Available Borrowing Capacity | 18,959 | [1],[5] | ' | |
Balance Outstanding | 81,041 | [5] | 232,712 | [5] |
Advance Receivable Backed Notes Series 2012-ADV1 | ' | ' | ||
Interest Rate | '1ML + 250 bps | ' | ||
Maturity | 30-Jun-16 | [3] | ' | |
Amortization Date | 'June 2014 | [3] | ' | |
Available Borrowing Capacity | ' | [1] | ' | |
Balance Outstanding | 225,000 | 94,095 | ||
Advance Receivable Backed Note | ' | ' | ||
Interest Rate | '1ML + 300 bps | ' | ||
Maturity | 31-Dec-15 | [3] | ' | |
Amortization Date | 'Dec. 2014 | [3] | ' | |
Available Borrowing Capacity | 12,383 | [1] | ' | |
Balance Outstanding | 37,617 | 49,138 | ||
2011-Servicing Advance Revolving Trust 1 | ' | ' | ||
Interest Rate | '1ML + 300 bps | [2] | ' | |
Maturity | 31-May-43 | [2],[3] | ' | |
Amortization Date | 'May 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 204,633 | [2] |
2012-Servicing Advance Revolving Trust 2 | ' | ' | ||
Interest Rate | '1ML + 315 bps | [2] | ' | |
Maturity | 30-Sep-43 | [2],[3] | ' | |
Amortization Date | 'Sep. 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 22,003 | [2] |
2012-Servicing Advance Revolving Trust 3 | ' | ' | ||
Interest Rate | '1ML + 300 bps - 675 bps | [2] | ' | |
Maturity | 31-Mar-44 | [2],[3] | ' | |
Amortization Date | 'Mar. 2014 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 40,626 | [2] |
2012-Homeward Agency Advance Funding Trust 2012-1 | ' | ' | ||
Interest Rate | '1ML + 300 bps | [6] | ' | |
Maturity | 30-Nov-13 | [3],[6] | ' | |
Amortization Date | 'Nov. 2013 | [3],[6] | ' | |
Available Borrowing Capacity | 5,646 | [1],[6] | ' | |
Balance Outstanding | 19,354 | [6] | 16,094 | [6] |
2012-Homeward DSF Advance Revolving Trust 2012-1 | ' | ' | ||
Interest Rate | '1ML + 450 bps | [2] | ' | |
Maturity | 28-Feb-13 | [2],[3] | ' | |
Amortization Date | 'Feb. 2013 | [2],[3] | ' | |
Available Borrowing Capacity | ' | [1],[2] | ' | |
Balance Outstanding | ' | [2] | 20,151 | [2] |
Total variable rate | ' | ' | ||
Available Borrowing Capacity | 36,988 | [1] | ' | |
Balance Outstanding | $363,012 | $884,468 | ||
[1] | Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. At September 30, 2013, $0.1 million of the available borrowing capacity could be used based on the amount of eligible collateral. | |||
[2] | Facility was repaid in February 2013 from the proceeds of a new $1.4 billion bridge facility (Homeward Residential Bridge Loan Trust - 2013) with an amortization date of August 14, 2013. On July 1, 2013, we repaid the new bridge facility in full from proceeds received on the sale of servicing advances to HLSS. | |||
[3] | The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In two advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed. | |||
[4] | We repaid this facility in full in July 2013. | |||
[5] | On August 30, 2013, we amended this facility to reduce the maximum borrowing capacity to $100 million from $450 million. | |||
[6] | On October 21, 2013, we extended the maturity date of this facility to November 29, 2013 with two optional six-month extensions subject to lender approval. |
NOTE_14_MATCH_FUNDED_LIABILITI3
NOTE 14 MATCH FUNDED LIABILITIES (Detail) (USD $) | Sep. 30, 2013 | Feb. 28, 2013 | Aug. 30, 2013 | Aug. 29, 2013 |
In Millions, unless otherwise specified | Homeward Residential Bridge Loan Trust - 2013 Series-Bridge-VF1 and VF2 | Advance Receivable Backed Notes Series 2012-ADV1 | Advance Receivable Backed Notes Series 2012-ADV1 | |
Maximum borrowing capacity | ' | $1,400 | $100 | $450 |
Available borrowing capacity | $0.10 | ' | ' | ' |
NOTE_15_OTHER_BORROWINGS_Detai
NOTE 15 OTHER BORROWINGS (Detail) -(Table 1) (USD $) | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Dec. 31, 2012 | ||
Debt Instrument [Line Items] | ' | ' | ||
Balance Outstanding | $2,598,270 | $1,104,911 | ||
Available Borrowing Capacity | 683,478 | ' | ||
Discount | -5,679 | [1],[2] | -8,232 | [1],[2] |
Balance Outstanding | 2,592,591 | 1,096,679 | ||
Servicing | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Balance Outstanding | 2,006,380 | 714,003 | ||
Available Borrowing Capacity | 47,878 | ' | ||
Servicing | SSTL | Sept. 2016 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Interest Rate | '1ML + 550 bps; LIBOR floor of 150 bps | [1] | ' | |
Maturity | 'Sept. 2016 | [1] | ' | |
Balance Outstanding | ' | [1] | 314,229 | [1] |
Servicing | SSTL | Feb. 2018 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Maturity | 'Feb. 2018 | [2] | ' | |
Balance Outstanding | 1,293,500 | [2] | ' | [2] |
Servicing | Senior unsecured term loan | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Interest Rate | '1-Month Euro-dollar rate + 675 bps with a Eurodollar floor of 150 bps | [3] | ' | |
Maturity | 'Mar. 2017 | [3] | ' | |
Balance Outstanding | ' | [3] | 75,000 | [3] |
Servicing | Financing liability - MSRs pledged | HLSS | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'MSRs | [4] | ' | |
Balance Outstanding | 643,595 | [4] | 303,705 | [4] |
Servicing | Financing liability - MSRs pledged | Unrelated third party | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'MSRs | [5] | ' | |
Balance Outstanding | ' | [5] | 2,603 | [5] |
Servicing | Promissory note | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'MSRs | [6] | ' | |
Interest Rate | '1ML + 350 bps | [6] | ' | |
Maturity | 'May 2017 | [6] | ' | |
Balance Outstanding | 17,163 | [6] | 18,466 | |
Servicing | Repurchase agreement | Apr 2014 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'Loans held for sale (LHFS) | ' | ||
Interest Rate | '1 ML + 250 - 345 bps | ' | ||
Maturity | 'Apr. 2014 | ' | ||
Balance Outstanding | 52,122 | ' | ||
Available Borrowing Capacity | 47,878 | ' | ||
Lending | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Balance Outstanding | 588,667 | 388,075 | ||
Available Borrowing Capacity | 635,600 | ' | ||
Lending | Master repurchase agreement | Mar. 2014 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'LHFS | [7] | ' | |
Interest Rate | '1ML + 175 bps | [7] | ' | |
Maturity | 31-Mar-14 | [7] | ' | |
Balance Outstanding | 69,915 | [7] | 88,122 | [7] |
Available Borrowing Capacity | 230,085 | [7] | ' | |
Lending | Master repurchase agreement | Aug 2014 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'LHFS | [8] | ' | |
Interest Rate | '1ML + 175 to 275 bps | [8] | ' | |
Maturity | 31-Aug-14 | [8] | ' | |
Balance Outstanding | 89,011 | [8] | 133,995 | [8] |
Available Borrowing Capacity | 60,989 | [8] | ' | |
Lending | Master repurchase agreement | Sep. 2014 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'LHFS | [9] | ' | |
Interest Rate | '1ML + 175 to 200 bps | [9] | ' | |
Maturity | 30-Sep-14 | [9] | ' | |
Balance Outstanding | 34,102 | [9] | 107,020 | [9] |
Available Borrowing Capacity | 265,898 | [9] | ' | |
Lending | Master repurchase agreement | Nov. 2013 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'LHFS | [10] | ' | |
Interest Rate | '1ML + 275 bps | [10] | ' | |
Maturity | 30-Nov-13 | [10] | ' | |
Balance Outstanding | 78,127 | [10] | ' | [10] |
Available Borrowing Capacity | 21,873 | [10] | ' | |
Lending | Participation agreement | May 2014 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'LHFS | [11] | ' | |
Maturity | 31-May-14 | [11] | ' | |
Balance Outstanding | 19,588 | [11] | 58,938 | [11] |
Lending | Secured borrowings owed to securitization investors | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'Loans held for investment | [12] | ' | |
Interest Rate | '1ML + 220 bps | [12] | ' | |
Balance Outstanding | 284,276 | [12] | ' | [12] |
Lending | Mortgage warehouse agreement | Jun. 2014 | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'LHFS | ' | ||
Interest Rate | '1 ML + 275 bps; floor of 3.50 | ' | ||
Maturity | 30-Jun-14 | ' | ||
Balance Outstanding | 3,245 | ' | ||
Available Borrowing Capacity | 56,755 | ' | ||
Lending | Financing liability - MSRs pledged | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'MSRs | [5] | ' | |
Balance Outstanding | 10,403 | [5] | ' | [5] |
Corporate Items and Other | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Balance Outstanding | 2,598,270 | 1,104,911 | ||
Available Borrowing Capacity | 683,478 | ' | ||
Corporate Items and Other | Securities sold under an agreement to repurchase | ' | ' | ||
Debt Instrument [Line Items] | ' | ' | ||
Collateral | 'Ocwen Real Estate Asset Liquidating Trust 2007-1 Notes | [13] | ' | |
Interest Rate | 'Class A-2 notes: 1ML + 200 bps; Class A-3 notes: 1ML + 300 bps | [13] | ' | |
Maturity | 'Monthly | [13] | ' | |
Balance Outstanding | $3,223 | [13] | $2,833 | [13] |
[1] | In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment. | |||
[2] | On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are generally required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, and net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. However, for assets sales that are part of an HLSS Transaction, we have the option, within 180 days, either to invest the net cash proceeds in MSRs or related assets, such as advances, or to repay loan principal. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25%. To date we have elected option (b) to determine the interest rate. On September 23, 2013, we entered into Amendment No. 1 to the Senior Secured Term Loan Facility Agreement and Amendment No. 1 to the related Pledge and Security Agreement. These amendments: permit repurchases of all of the Preferred Stock, which may be converted to common stock prior to repurchase, and up to $1.5 billion of common stock, subject, in each case, to pro forma financial covenant compliance;eliminate the dollar cap on Junior Indebtedness (as defined in the SSTL) but retain the requirement for any such issuance to be subject to pro forma covenant compliance; include a value for whole loans (i.e., loans held for sale) in collateral value for purposes of calculating the loan-to-value ratio and include specified deferred servicing fees and the fair value of specified mortgage servicing rights in net worth for purposes of calculating the ratio of consolidated total debt to consolidated tangible net worth; and modify the applicable quarterly covenant levels for the corporate leverage ratio, ratio of consolidated total debt to consolidated tangible net worth and loan-to-value ratio. | |||
[3] | We repaid this loan in full in February 2013. | |||
[4] | As part of the HLSS Transactions, we transfer certain Rights to MSRs to HLSS. Because we have not yet transferred legal title to the MSRs, we account for these transfers as financings with the proceeds from the sale of the Rights to MSRs recorded as a financing liability. The financing liability is amortized using the interest method with the servicing income that is remitted to HLSS representing payments of principal and interest. The liability has no contractual maturity but is amortized over the estimated life of the transferred Rights to MSRs. See Note 3 - Transfers of Financial Assets for additional information. | |||
[5] | We sold MSRs for certain loans to an unrelated third party in December 2012 and June 2013; however, we are required to repurchase the MSRs for any loans that cannot be refinanced by the purchaser under the federal government's Home Affordable Refinance Program (HARP). As a result, the sale is being accounted for as a financing. The financing liability is being amortized using the interest method with the servicing income that is remitted to the purchaser representing payments of principal and interest. In June 2013 and September 2013, we derecognized the liability from the December 2012 sale related to loans that had been refinanced under HARP and recognized a total gain of $4.5 million gain on the retirement of the financing liability. | |||
[6] | Prepayments of the balance on this note may be required if the borrowing base, as defined, falls below the amount of the note outstanding. | |||
[7] | On March 19, 2013, the maturity date of the Master Repurchase Agreement was extended to March 18, 2014 and the maximum borrowing capacity was increased to $120.0 million to $300.0 million. | |||
[8] | On August 3, 2013, we extended the maturity date of this facility to August 2, 2014. | |||
[9] | On September 27, 2013, we extended the maturity date of this facility to September 26, 2014, | |||
[10] | On October 28, 2013, we extended the maturity date of this facility to November 12, 2013. | |||
[11] | Under this participation agreement, the lender provides financing on an uncommitted basis for up to $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. However, the transaction does not qualify for sales accounting treatment and is, therefore, accounted for as a financing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. In April 2013, we extended the participation agreement maturity date to May 31, 2014. | |||
[12] | This represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed securitization that we include in our consolidated financial statements because the transfers of reverse mortgage loans to the trusts did not qualify for sales accounting treatment. There are no maturity dates; the borrowings mature as the related loans are repaid. | |||
[13] | This agreement has no stated credit limit and lending is determined for each transaction based on the acceptability of the securities presented as collateral. |
NOTE_15_OTHER_BORROWINGS_Detai1
NOTE 15 OTHER BORROWINGS (Detail) (USD $) | 9 Months Ended | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | Sep. 23, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Mar. 19, 2013 | Mar. 18, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | |||
Uncommitted Line Of Credit | Master repurchase agreement | Master repurchase agreement | SSTL | SSTL | SSTL | SSTL | SSTL | SSTL | ||||||
Option a (i) | Option (a) ii | Option a (iii) | Option b | Rescap Acquisition | ||||||||||
Debt Instrument [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Debt instrument, borrowings | ' | ' | ' | $100,000,000 | $300,000,000 | $120,000,000 | ' | ' | ' | ' | ' | $1,300,000,000 | ||
Debt instrument, unamortized discount | -5,679,000 | [1],[2] | ' | -8,232,000 | [1],[2] | ' | ' | ' | ' | ' | ' | ' | ' | 6,500,000 |
Debt instrument, frequency of periodic payment | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 'Quarterly | ||
Principal amount of borrowings in consecutive quarterly installments | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,300,000 | ||
Borrowings, description of variable rate basis | ' | ' | ' | ' | ' | ' | ' | 'the prime rate in effect on such day | 'the federal funds rate in effect on such day | 'the one-month Eurodollar rate (1-Month LIBOR)] | 'the one-month Eurodollar rate (1-Month LIBOR)] | ' | ||
Borrowings, basis spread on variable rate | ' | ' | ' | ' | ' | ' | ' | ' | 0.50% | 2.75% | 3.75% | ' | ||
Borrowings, index floor rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2.25% | 1.25% | ' | ||
Percentage of beneficial interest acquirable on underlying mortgage loans | ' | ' | ' | 100.00% | ' | ' | ' | ' | ' | ' | ' | ' | ||
Gain on retirement of financing liability | 4,500,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Number of shares issued upon conversion | ' | 3,145,640 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Common stock to be repurchased | ' | ' | ' | ' | ' | ' | $1,500,000,000 | ' | ' | ' | ' | ' | ||
[1] | In February 2013, we repaid this loan in full and wrote off the remaining discount as part of the loss on extinguishment. | |||||||||||||
[2] | On February 15, 2013, we entered into a new SSTL facility agreement and borrowed $1.3 billion that was used principally to fund the ResCap Acquisition and repay the balance of the previous SSTL. The loan was issued with an original issue discount of $6.5 million that we are amortizing over the term of the loan. We are required to repay the principal amount of the borrowings in consecutive quarterly installments of $3.3 million. In addition, we are generally required to use the net cash proceeds (as defined) from any asset sale (as defined) to repay loan principal. Generally, this provision applies to non-operating sales of assets, and net cash proceeds represent the proceeds from the sale of the assets, net of the repayment of any debt secured by a lien on the assets sold. However, for assets sales that are part of an HLSS Transaction, we have the option, within 180 days, either to invest the net cash proceeds in MSRs or related assets, such as advances, or to repay loan principal. The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate [the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)], plus a margin of 2.75% and a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 3.75% with a 1-Month LIBOR floor of 1.25%. To date we have elected option (b) to determine the interest rate. On September 23, 2013, we entered into Amendment No. 1 to the Senior Secured Term Loan Facility Agreement and Amendment No. 1 to the related Pledge and Security Agreement. These amendments: permit repurchases of all of the Preferred Stock, which may be converted to common stock prior to repurchase, and up to $1.5 billion of common stock, subject, in each case, to pro forma financial covenant compliance;eliminate the dollar cap on Junior Indebtedness (as defined in the SSTL) but retain the requirement for any such issuance to be subject to pro forma covenant compliance; include a value for whole loans (i.e., loans held for sale) in collateral value for purposes of calculating the loan-to-value ratio and include specified deferred servicing fees and the fair value of specified mortgage servicing rights in net worth for purposes of calculating the ratio of consolidated total debt to consolidated tangible net worth; and modify the applicable quarterly covenant levels for the corporate leverage ratio, ratio of consolidated total debt to consolidated tangible net worth and loan-to-value ratio. |
NOTE_16_OTHER_LIABILITIES_Deta
NOTE 16 OTHER LIABILITIES (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | ||
In Thousands, unless otherwise specified | ||||
Other Liabilities [Abstract] | ' | ' | ||
Liability for indemnification obligations | $206,074 | [1] | $38,140 | [1] |
Accrued expenses | 97,497 | 68,068 | ||
Liability for certain foreclosure matters | 66,431 | [2] | 13,602 | [2] |
Payable to servicing and subservicing investors | 27,063 | [3] | 9,973 | [3] |
Checks held for escheat | 24,965 | 33,259 | ||
Liability for selected tax items | 22,338 | 22,702 | ||
Due to related parties | 16,535 | [4] | 45,034 | [4] |
Derivatives, at fair value | 11,660 | [5] | 18,658 | [5] |
Servicing liabilities | 11,568 | [6] | 9,830 | [6] |
Accrued interest payable | 9,455 | 5,410 | ||
Other | 61,122 | 23,861 | ||
Total other liabilities | $554,708 | $288,537 | ||
[1] | The balance includes origination representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines. These obligations were primarily assumed in connection with the Ally MSR Transaction, the ResCap Acquisition and the Homeward Acquisition. See Note 4 - Business Acquisitions, Note 9 - Mortgage Servicing and Note 25 - Commitments and Contingencies for additional information. | |||
[2] | We recognized $52.8 million of expense in Professional services in the second quarter of 2013 to establish the liability. We recognized the remaining $13.6 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill. See Note 25 - Commitments and Contingencies for additional information. | |||
[3] | The balance represents amounts due to investors in connection with loans we service under servicing and subservicing agreements. | |||
[4] | See Note 23 - Related Party Transactions for additional information. | |||
[5] | See Note 19 - Derivative Financial Instruments and Hedging Activities for additional information. | |||
[6] | During the nine months ended September 30, 2013 and 2012, amortization of servicing liabilities exceeded the amount of charges we recognized to increase our servicing liability obligations by $0.5 million and $1.1 million, respectively. Amortization of mortgage servicing rights is reported net of this amount in the unaudited Consolidated Statement of Operations. |
NOTE_16_OTHER_LIABILITIES_Deta1
NOTE 16 OTHER LIABILITIES (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Millions, unless otherwise specified | Jun. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
Other Liabilities [Abstract] | ' | ' | ' | ' |
Professional and Contract Services Expense | $52.80 | ' | ' | ' |
Recognized liability adjustment to initial purchase price allocation related acquisition | ' | ' | ' | 13.6 |
Amount of increase in servicing liability obligations | ' | $0.50 | $1.10 | ' |
NOTE_17_MEZZANINE_EQUITY_Detai
NOTE 17 MEZZANINE EQUITY (Detail) - (Table 1) (USD $) | 0 Months Ended | 9 Months Ended | |
In Thousands, unless otherwise specified | Dec. 31, 2012 | Sep. 30, 2013 | |
Preferred Stock [Roll Forward] | ' | ' | |
Carrying value, beginning balance | $162,000 | $153,372 | |
Discount for beneficial conversion feature | -8,688 | ' | |
Conversion of 100,000 Preferred Shares | ' | -100,000 | [1] |
Accretion of BCF discount (Deemed dividend) | 60 | 6,573 | [2] |
Carrying value, ending balance | $153,372 | $59,945 | |
[1] | On September 23, 2013, holders elected to convert 100,000 of the Preferred Shares into 3,145,640 shares of common stock. See Note 23 - Related Party Transactions for additional information. | ||
[2] | Accretion includes a $3.5 million accelerated write-off of the unamortized discount related to the 100,000 Preferred Shares converted on September 23, 2013. |
NOTE_17_MEZZANINE_EQUITY_Detai1
NOTE 17 MEZZANINE EQUITY (Detail) (USD $) | 0 Months Ended | 1 Months Ended | |
Dec. 31, 2012 | Sep. 23, 2013 | Dec. 27, 2012 | |
Series A Perpetual Convertible Preferred Stock | |||
Stockholders Equity [Line Items] | ' | ' | ' |
Number of preferred stock shares issued | ' | ' | 162,000 |
Stated value per share of preferred stock shares | ' | ' | $0.01 |
Dividend rate percentage of preferred stock shares | ' | ' | 3.75% |
Liquidation preference (in dollars per share) | ' | ' | $1,000 |
Preferred stock, Convertible beneficial conversion feature, Intrinsic value | ($8,688,000) | ' | ' |
Number of conversion of preferred shares | ' | 3,145,640 | ' |
Number of preferred shares to be issued | ' | 100,000 | ' |
Preferred Shares converted | ' | $3,500,000 | ' |
NOTE_18_EQUITY_Detail_Table_1
NOTE 18 EQUITY (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ' | ' |
Accumulated other comprehensive loss, net of income taxes | $7,069 | $6,441 |
Unrealized losses on cash flow hedges | ' | ' |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ' | ' |
Accumulated other comprehensive loss, net of income taxes | 7,649 | 6,310 |
Other | ' | ' |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ' | ' |
Accumulated other comprehensive loss, net of income taxes | ($580) | $131 |
NOTE_18_EQUITY_Detail
NOTE 18 EQUITY (Detail) (USD $) | 1 Months Ended | |
In Millions, except Share data, unless otherwise specified | Oct. 31, 2013 | Sep. 23, 2013 |
Equity [Abstract] | ' | ' |
Payment for repurchase of an equity | ' | $157.90 |
Common shares issued upon conversion of preferred shares | ' | 3,145,640 |
Number of preferred shares to be issued | ' | 100,000 |
Stock repurchase program authorized value | $500 | ' |
NOTE_19_DERIVATIVE_FINANCIAL_I2
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Detail) - (Table 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | ||
In Thousands, unless otherwise specified | Interest Rate Lock Commitments (IRLCs) | U.S. Treasury futures | Forward MBS trades | Interest rate caps | Interest rate swaps | ||||
Derivative [Roll Forward] | ' | ' | ' | ' | ' | ' | ' | ||
Notional balance at December 31, 2012 | ' | ' | $1,112,519 | $109,000 | $1,638,979 | $1,025,000 | $1,495,955 | ||
Additions | ' | ' | 4,062,236 | 85,000 | 9,316,350 | ' | 1,280,000 | ||
Amortization | ' | ' | -228,806 | ' | -33,372 | -24,000 | ' | ||
Maturities | ' | ' | -3,709,513 | ' | -4,558,971 | ' | -295,604 | ||
Terminations | ' | ' | -549,877 | -194,000 | -5,627,670 | -1,001,000 | -2,480,351 | ||
Notional balance at September 30, 2013 | ' | ' | 686,559 | ' | 735,316 | ' | ' | ||
Fair value of net derivative assets (liabilities) at September 30, 2013 | 12,849 | [1] | 10,795 | [1] | 13,491 | ' | -12,185 | ' | ' |
Fair value of net derivative assets (liabilities) at December 31, 2012 | $12,849 | [1] | $10,795 | [1] | $5,781 | ($1,258) | ($1,719) | $168 | ($10,836) |
Maturity | ' | ' | 'Oct. 2013 - Jan. 2014 | ' | 'Oct. 2013 - Nov. 2013 | ' | ' | ||
[1] | See Note 19 - Derivative Financial Instruments and Hedging Activities for additional information. |
NOTE_19_DERIVATIVE_FINANCIAL_I3
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Detail) - (Table 2) (USD $) | 9 Months Ended | 9 Months Ended | ||||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | |||
Not designated as qualifying hedges | Forward MBS trades | Forward MBS trades | Interest Rate Lock Commitments (IRLCs) | Interest Rate Lock Commitments (IRLCs) | Mortgage Loans Held For Sale and Interest Rate Lock Commitments | Mortgage Loans Held For Sale and Interest Rate Lock Commitments | ||||
Forward MBS trades | Interest Rate Lock Commitments (IRLCs) | |||||||||
Not designated as qualifying hedges | Not designated as qualifying hedges | |||||||||
Derivative [Line Items] | ' | ' | ' | ' | ' | ' | ' | |||
Expiration Date | ' | ' | ' | ' | ' | '2014 | '2013 | |||
Notional Amount | ' | $735,316 | $1,638,979 | $686,559 | $1,112,519 | $735,316 | $686,559 | |||
Fair Value | 1,306 | [1] | ' | ' | ' | ' | -12,185 | [1] | 13,491 | [1] |
Gains / (Losses) | $36,907 | ' | ' | ' | ' | $30,989 | $5,918 | |||
Consolidated Statement of Operations Caption | ' | ' | ' | ' | ' | 'Gain on loans held for sale, net and Other, net | 'Gain on loans held for sale, net | |||
[1] | Derivatives are reported at fair value in Receivables, Other assets or in Other liabilities on our unaudited Consolidated Balance Sheets. |
NOTE_19_DERIVATIVE_FINANCIAL_I4
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Detail) (Table 3) (Cash flow hedge, USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | |
Cash flow hedge | ' | |
Changes In Losses On Cash Flow Hedges Included In Aocl [Roll Forward] | ' | |
Accumulated losses on cash flow hedges at December 31, 2012 | $9,878 | |
Additional net losses on cash flow hedges | 12,363 | |
Ineffectiveness of cash flow hedges reclassified to earnings | -657 | |
Losses on terminated hedging relationships amortized to earnings | -9,434 | [1] |
Accumulated losses on cash flow hedges at September 30, 2013 | $12,150 | |
[1] | Where the hedging relationship has been terminated but the hedged transaction is still forecast to occur, losses on the hedging relationship that are included in AOCL are amortized to earnings in the periods in which earnings are affected by the hedged transaction. Amortization in the third quarter included $4.1 million of accelerated amortization as a result of the early repayment and termination of four advance financing facilities as a result of the July 1, 2013 HLSS Transaction. |
NOTE_19_DERIVATIVE_FINANCIAL_I5
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Detail) - (Table 4) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Servicing and origination expense | ' | ' | ' | ' | ||||
Derivative [Line Items] | ' | ' | ' | ' | ||||
Gains (losses) on economic hedges | ' | ' | $1,017 | ' | ||||
Gain on loans held for sale, net | ' | ' | ' | ' | ||||
Derivative [Line Items] | ' | ' | ' | ' | ||||
Gains (losses) on economic hedges | 9,608 | ' | 36,907 | ' | ||||
Other, net | ' | ' | ' | ' | ||||
Derivative [Line Items] | ' | ' | ' | ' | ||||
Gains (losses) on economic hedges | -103 | [1] | 1,397 | [1] | -3,822 | [1] | 6,645 | [1] |
Ineffectiveness of cash flow hedges | ' | 47 | -657 | 46 | ||||
Write-off of losses in AOCL for a discontinued hedge relationship | -7,780 | -3,089 | -9,434 | -4,633 | ||||
Write-off of losses in AOCL for hedge of a financing facility assumed by HLSS (See Note 3 -Transfers of Financial Assets) | ' | ' | ' | -5,958 | ||||
Derivative, gain (loss) on derivative, net | $1,725 | ($1,645) | $24,011 | ($3,900) | ||||
[1] | Includes a gain of $3.4 million recognized during the three months ended March 31, 2012 from the termination of foreign exchange forward contracts. |
NOTE_19_DERIVATIVE_FINANCIAL_I6
NOTE 19 DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Detail) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
In Millions, unless otherwise specified | Mar. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ' | ' | ' |
Derivative, description of variable rate basis | ' | 'one-month LIBOR | ' |
Derivative forward exchange gain | $3.40 | ' | ' |
Unrealized gain (loss) on interest rate cash flow hedges, pretax, accumulated other comprehensive income (loss) | ' | 12.1 | 9.9 |
Unrealized gain (loss) on interest rate cash flow hedges included in accumulated other comprehensive income (loss), tax expense | ' | 4.5 | 3.6 |
Accelerated amortization | ' | $4.10 | ' |
NOTE_20_INTEREST_EXPENSE_Detai
NOTE 20 INTEREST EXPENSE (Detail) - (Table 1) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Debt securities: | ' | ' | ' | ' | ||||
Interest expense | $110,055 | $58,417 | $303,339 | $163,660 | ||||
Match Funded Liabilities | ' | ' | ' | ' | ||||
Debt securities: | ' | ' | ' | ' | ||||
Interest expense | 11,249 | 32,359 | 66,678 | 99,394 | ||||
Other Borrowings | ' | ' | ' | ' | ||||
Debt securities: | ' | ' | ' | ' | ||||
Interest expense | 95,496 | [1] | 24,877 | [1] | 228,198 | [1] | 60,160 | [1] |
Debt Securities Convertible Notes | ' | ' | ' | ' | ||||
Debt securities: | ' | ' | ' | ' | ||||
Interest expense | ' | ' | ' | 153 | ||||
Debt Securities Capital Trust Securities | ' | ' | ' | ' | ||||
Debt securities: | ' | ' | ' | ' | ||||
Interest expense | ' | 473 | ' | 1,894 | ||||
Other | ' | ' | ' | ' | ||||
Debt securities: | ' | ' | ' | ' | ||||
Interest expense | $3,310 | $708 | $8,463 | $2,059 | ||||
[1] | Includes interest expense of $74.2 million and $14.0 million for the three months ended September 30, 2013 and 2012, respectively, and $168.6 million and $27.6 million for the nine months ended September 30, 2013 and 2012, respectively, related to financing liabilities recorded in connection with the HLSS Transactions. See Note 3 - Transfers of Financial Assets and Note 15 - Other Borrowings for additional information. |
NOTE_20_INTEREST_EXPENSE_Detai1
NOTE 20 INTEREST EXPENSE (Detail) - (Parentheticals) (Table 1) | 9 Months Ended |
Sep. 30, 2012 | |
Interest Expense [Abstract] | ' |
Conversion of convertible notes | 3.25% |
Redemption of capital securities | 10.88% |
NOTE_20_INTEREST_EXPENSE_Detai2
NOTE 20 INTEREST EXPENSE (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Other Borrowings [Line Items] | ' | ' | ' | ' | ||||
Financing liabilities , interest expense | $110,055 | $58,417 | $303,339 | $163,660 | ||||
Other Borrowings | ' | ' | ' | ' | ||||
Other Borrowings [Line Items] | ' | ' | ' | ' | ||||
Financing liabilities , interest expense | 95,496 | [1] | 24,877 | [1] | 228,198 | [1] | 60,160 | [1] |
Other Borrowings | HLSS | ' | ' | ' | ' | ||||
Other Borrowings [Line Items] | ' | ' | ' | ' | ||||
Financing liabilities , interest expense | $74,200 | $14,000 | $168,600 | $27,600 | ||||
[1] | Includes interest expense of $74.2 million and $14.0 million for the three months ended September 30, 2013 and 2012, respectively, and $168.6 million and $27.6 million for the nine months ended September 30, 2013 and 2012, respectively, related to financing liabilities recorded in connection with the HLSS Transactions. See Note 3 - Transfers of Financial Assets and Note 15 - Other Borrowings for additional information. |
NOTE_21_BASIC_AND_DILUTED_EARN2
NOTE 21 BASIC AND DILUTED EARNINGS PER SHARE (EPS) (Detail) - (Table 1) (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | ||||
Basic EPS: | ' | ' | ' | ' | ||||
Net income attributable to Ocwen common stockholders (in dollars) | $61,155 | $51,400 | $177,847 | $115,582 | ||||
Weighted average shares of common stock | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 | ||||
Basic EPS | $0.45 | $0.38 | $1.31 | $0.87 | ||||
Diluted EPS: | ' | ' | ' | ' | ||||
Net income attributable to Ocwen common stockholders (in dollars) | 61,155 | 51,400 | 177,847 | 115,582 | ||||
Preferred stock dividends | ' | [1] | ' | [1] | ' | [1] | ' | [1] |
Interest expense on Convertible Notes, net of income tax (in dollars) | ' | [2] | ' | [2] | ' | [2] | 98 | [2] |
Adjusted net income attributable to Ocwen (in dollars) | $61,155 | $51,400 | $177,847 | $115,680 | ||||
Weighted average shares of common stock | 135,787,834 | 134,928,486 | 135,705,892 | 133,483,354 | ||||
Effect of dilutive elements: | ' | ' | ' | ' | ||||
Preferred Shares | ' | [1] | ' | [1] | ' | [1] | ' | [1] |
Convertible Notes | ' | [2] | ' | [2] | ' | [2] | 1,347,642 | [2] |
Stock options | 4,263,965 | 3,769,099 | 4,030,297 | 3,468,156 | ||||
Common stock awards | 5,396 | 5,296 | 11,301 | 2,713 | ||||
Dilutive weighted average shares of common stock | 140,057,195 | 138,702,881 | 139,747,490 | 138,301,865 | ||||
Diluted EPS (in dollars per share) | $0.44 | $0.37 | $1.27 | $0.84 | ||||
Stock options excluded from the computation of diluted EPS: | ' | ' | ' | ' | ||||
Anti-dilutive | ' | [3] | 255,000 | [3] | ' | [3] | 190,833 | [3] |
Market-based | 547,500 | [4] | 1,726,250 | [4] | 547,500 | [4] | 1,726,250 | [4] |
[1] | The effect of our Preferred Shares on diluted EPS is computed using the if-converted method. For the three and nine months ended September 30, 2013, we assumed no conversion to common shares because the effect was anti-dilutive. | |||||||
[2] | Prior to the redemption of the 3.25% Convertible Notes in March 2012, we also computed their effect on diluted EPS using the if-converted method. Interest expense and related amortization costs applicable to the Convertible Notes, net of income tax, were added back to net income. We assumed the conversion of the Convertible Notes into shares of common stock for purposes of computing diluted EPS unless the effect was anti-dilutive. We issued 4,635,159 shares of common stock upon conversion of $56.4 million of the Convertible Notes. | |||||||
[3] | These stock options were anti-dilutive because their exercise price was greater than the average market price of our stock. | |||||||
[4] | Shares that are issuable upon the achievement of certain performance criteria related to OCN's stock price and an annualized rate of return to investors. |
NOTE_21_BASIC_AND_DILUTED_EARN3
NOTE 21 BASIC AND DILUTED EARNINGS PER SHARE (EPS) (Detail) (USD $) | 9 Months Ended |
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2012 |
Debt Instrument [Line Items] | ' |
Percentage of interest rate on convertible notes | 3.25% |
Convertible Notes Payable | ' |
Debt Instrument [Line Items] | ' |
Percentage of interest rate on convertible notes | 3.25% |
Conversion amount, convertible notes | $56,400 |
Debt conversion, converted instrument, shares issued (in shares) | 4,635,159 |
NOTE_22_BUSINESS_SEGMENT_REPOR2
NOTE 22 BUSINESS SEGMENT REPORTING (Detail) - (Table 1) (USD $) | 3 Months Ended | 9 Months Ended | |||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 |
Revenue | $531,240 | $232,700 | $1,482,318 | $608,613 | ' |
Operating expenses | 346,260 | 92,793 | 960,418 | 264,810 | ' |
Other income (expense), net: | ' | ' | ' | ' | ' |
Interest expense | -110,055 | -58,417 | -303,339 | -163,660 | ' |
Other income (expense), net | -5,311 | -2,175 | -8,215 | -4,895 | ' |
Total Assets | ' | ' | ' | ' | ' |
Balance as of | 5,311,680 | ' | 5,311,680 | ' | 5,682,755 |
Corporate Eliminations | ' | ' | ' | ' | ' |
Revenue | -402 | -277 | -492 | -812 | ' |
Operating expenses | -41 | -112 | -131 | -391 | ' |
Income (loss) from operations | -361 | -165 | -361 | -421 | ' |
Other income (expense), net: | ' | ' | ' | ' | ' |
Interest income | ' | ' | ' | ' | ' |
Interest expense | ' | ' | ' | ' | ' |
Other | 361 | 165 | 361 | 421 | ' |
Other income (expense), net | 361 | 165 | 361 | 421 | ' |
Income (loss) before income taxes | ' | ' | ' | ' | ' |
Total Assets | ' | ' | ' | ' | ' |
Balance as of | ' | ' | ' | ' | ' |
Business Segments Consolidated | ' | ' | ' | ' | ' |
Revenue | 531,240 | 232,700 | 1,482,318 | 608,613 | ' |
Operating expenses | 346,260 | 92,793 | 960,418 | 264,810 | ' |
Income (loss) from operations | 184,980 | 139,907 | 521,900 | 343,803 | ' |
Other income (expense), net: | ' | ' | ' | ' | ' |
Interest income | 5,379 | 2,084 | 17,330 | 6,434 | ' |
Interest expense | -110,055 | -58,417 | -303,339 | -163,660 | ' |
Other | -4,029 | -2,828 | -20,771 | -5,548 | ' |
Other income (expense), net | -108,705 | -59,161 | -306,780 | -162,774 | ' |
Income (loss) before income taxes | 76,275 | 80,746 | 215,120 | 181,029 | ' |
Total Assets | ' | ' | ' | ' | ' |
Balance as of | 5,311,680 | 4,156,016 | 5,311,680 | 4,156,016 | 5,682,755 |
Operating Segments | Servicing | ' | ' | ' | ' | ' |
Revenue | 496,302 | 232,104 | 1,381,872 | 606,689 | ' |
Operating expenses | 305,654 | 88,743 | 795,645 | 252,542 | ' |
Income (loss) from operations | 190,648 | 143,361 | 586,227 | 354,147 | ' |
Other income (expense), net: | ' | ' | ' | ' | ' |
Interest income | 859 | ' | 1,382 | ' | ' |
Interest expense | -106,848 | -58,144 | -293,381 | -162,810 | ' |
Other | -6,631 | -963 | -30,961 | -204 | ' |
Other income (expense), net | -112,620 | -59,107 | -322,960 | -163,014 | ' |
Income (loss) before income taxes | 78,028 | 84,254 | 263,267 | 191,133 | ' |
Total Assets | ' | ' | ' | ' | ' |
Balance as of | 3,925,510 | 3,611,768 | 3,925,510 | 3,611,768 | 4,498,043 |
Operating Segments | Lending | ' | ' | ' | ' | ' |
Revenue | 33,539 | ' | 81,180 | ' | ' |
Operating expenses | 29,504 | ' | 69,543 | ' | ' |
Income (loss) from operations | 4,035 | ' | 11,637 | ' | ' |
Other income (expense), net: | ' | ' | ' | ' | ' |
Interest income | 3,066 | ' | 12,432 | ' | ' |
Interest expense | -3,279 | ' | -10,108 | ' | ' |
Other | 1,843 | ' | 6,852 | ' | ' |
Other income (expense), net | 1,630 | ' | 9,176 | ' | ' |
Income (loss) before income taxes | 5,665 | ' | 20,813 | ' | ' |
Total Assets | ' | ' | ' | ' | ' |
Balance as of | 778,777 | ' | 778,777 | ' | 550,569 |
Corporate Items and Other | ' | ' | ' | ' | ' |
Revenue | 1,801 | 873 | 19,758 | 2,736 | ' |
Operating expenses | 11,143 | 4,162 | 95,361 | 12,659 | ' |
Income (loss) from operations | -9,342 | -3,289 | -75,603 | -9,923 | ' |
Other income (expense), net: | ' | ' | ' | ' | ' |
Interest income | 1,454 | 2,084 | 3,516 | 6,434 | ' |
Interest expense | 72 | -273 | 150 | -850 | ' |
Other | 398 | -2,030 | 2,977 | -5,765 | ' |
Other income (expense), net | 1,924 | -219 | 6,643 | -181 | ' |
Income (loss) before income taxes | -7,418 | -3,508 | -68,960 | -10,104 | ' |
Total Assets | ' | ' | ' | ' | ' |
Balance as of | $607,393 | $544,248 | $607,393 | $544,248 | $634,143 |
NOTE_22_BUSINESS_SEGMENT_REPOR3
NOTE 22 BUSINESS SEGMENT REPORTING (Detail) - (Table 2) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Amortization of MSRs | $79,183 | $20,150 | $197,435 | $53,561 |
Amortization of debt discount | ' | ' | 1,082 | 2,679 |
Amortization of debt issuance costs - SSTL | ' | ' | 3,264 | 3,050 |
Business Segments Consolidated | ' | ' | ' | ' |
Depreciation expense | 6,697 | 1,959 | 17,153 | 3,896 |
Amortization of MSRs | 79,183 | 20,150 | 197,435 | 53,561 |
Amortization of debt discount | 330 | 1,199 | 1,082 | 2,679 |
Amortization of debt issuance costs - SSTL | 1,178 | 1,207 | 3,264 | 3,050 |
Operating Segments | Servicing | ' | ' | ' | ' |
Depreciation expense | 3,589 | 395 | 9,968 | 1,069 |
Amortization of MSRs | 79,035 | 20,150 | 197,287 | 53,561 |
Amortization of debt discount | 330 | 1,199 | 1,082 | 2,679 |
Amortization of debt issuance costs - SSTL | 1,178 | 1,207 | 3,264 | 3,050 |
Operating Segments | Lending | ' | ' | ' | ' |
Depreciation expense | 135 | ' | 209 | ' |
Amortization of MSRs | 148 | ' | 148 | ' |
Amortization of debt discount | ' | ' | ' | ' |
Amortization of debt issuance costs - SSTL | ' | ' | ' | ' |
Corporate Items and Other | ' | ' | ' | ' |
Depreciation expense | 2,973 | 1,564 | 6,976 | 2,827 |
Amortization of MSRs | ' | ' | ' | ' |
Amortization of debt discount | ' | ' | ' | ' |
Amortization of debt issuance costs - SSTL | ' | ' | ' | ' |
NOTE_23_RELATED_PARTY_TRANSACT2
NOTE 23 RELATED PARTY TRANSACTIONS (Detail) - (Table 1) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Altisource | ' | ' | ' | ' |
Revenues and Expenses: | ' | ' | ' | ' |
Revenues | $5,185 | $4,156 | $15,390 | $12,229 |
Expenses | 13,153 | 6,826 | 36,650 | 20,537 |
HLSS | ' | ' | ' | ' |
Revenues and Expenses: | ' | ' | ' | ' |
Revenues | 20 | 125 | 172 | 165 |
Expenses | $386 | $780 | $1,615 | $1,773 |
NOTE_23_RELATED_PARTY_TRANSACT3
NOTE 23 RELATED PARTY TRANSACTIONS (Detail) - (Table 2) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
Net Receivable (payable) | ' | ' |
Net Receivable (payable) | $18,848 | ($31,495) |
Altisource | ' | ' |
Net Receivable (payable) | ' | ' |
Net Receivable (payable) | -3,489 | -5,971 |
HLSS | ' | ' |
Net Receivable (payable) | ' | ' |
Net Receivable (payable) | $22,337 | ($25,524) |
NOTE_23_RELATED_PARTY_TRANSACT4
NOTE 23 RELATED PARTY TRANSACTIONS (Detail) | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Mar. 31, 2013 |
Mr. Erbey | Mr. Erbey | Mr. Erbey | Mr. Erbey | Mr. Erbey | Correspondent One | |
Ocwen | Altisource | HLSS | Altisource Asset Management Corporation | Residential | ||
Related Party Transaction [Line Items] | ' | ' | ' | ' | ' | ' |
Ownership percentage by related party | 13.00% | 23.00% | 1.00% | 9.00% | 4.00% | ' |
Joint venture, ownership percentage acquired | ' | ' | ' | ' | ' | 49.00% |
NOTE_23_RELATED_PARTY_TRANSACT5
NOTE 23 RELATED PARTY TRANSACTIONS (Detail 1) (Altisource, USD $) | 9 Months Ended |
In Millions, unless otherwise specified | Sep. 30, 2013 |
Altisource | ' |
Related Party Transaction [Line Items] | ' |
Related party transaction, cash consideration paid | $128.80 |
NOTE_23_RELATED_PARTY_TRANSACT6
NOTE 23 RELATED PARTY TRANSACTIONS (Detail 2) (Senior Unsecured Term Loan Facility Agreement, Altisource, Senior Unsecured Term Loan Facility, USD $) | 1 Months Ended |
In Millions, unless otherwise specified | Dec. 27, 2012 |
Senior Unsecured Term Loan Facility Agreement | Altisource | Senior Unsecured Term Loan Facility | ' |
Related Party Transaction [Line Items] | ' |
Senior unsecured term loan facility amount | $75 |
Debt instrument description of variable rate | 'one-month Eurodollar Rate (1-Month LIBOR) |
Debt instrument description of variable rate basis | 6.75% |
Debt instrument description of variable index floor rate basis | 1.50% |
NOTE_23_RELATED_PARTY_TRANSACT7
NOTE 23 RELATED PARTY TRANSACTIONS (Detail 3) (Altisource Residential LP, USD $) | 1 Months Ended | |
In Millions, unless otherwise specified | Dec. 21, 2012 | Feb. 14, 2013 |
Servicing agreement | Master Mortgage Loan Sale Agreement | |
Ocwen Mortgage Servicing Inc | ||
Related Party Transaction [Line Items] | ' | ' |
Term of agreement | '15 years | ' |
Sale of non-performing residential mortgage loan | ' | $64.40 |
NOTE_23_RELATED_PARTY_TRANSACT8
NOTE 23 RELATED PARTY TRANSACTIONS (Detail 4) (Altisource Asset Management Corporation, Special Restricted Stock Award Agreement, Special Equity Incentive Plan 2012) | 0 Months Ended |
Dec. 11, 2012 | |
Mr. Erbey | ' |
Related Party Transaction [Line Items] | ' |
Number of restricted stock issued | 52,589 |
Ronald M. Faris | ' |
Related Party Transaction [Line Items] | ' |
Number of restricted stock issued | 29,216 |
NOTE_23_RELATED_PARTY_TRANSACT9
NOTE 23 RELATED PARTY TRANSACTIONS (Detail 5) (USD $) | 1 Months Ended | 1 Months Ended | |||
Sep. 23, 2013 | Dec. 31, 2012 | Dec. 27, 2012 | Sep. 23, 2013 | Dec. 27, 2012 | |
Homeward Acquisition | Homeward Acquisition | Homeward Acquisition | Homeward Acquisition | ||
WLRoss and Co Llc | WLRoss and Co Llc | WLRoss and Co Llc | |||
Preferred Stock | Preferred Stock | ||||
Business Acquisition [Line Items] | ' | ' | ' | ' | ' |
Total consideration | ' | $764,824,000 | $766,000,000 | ' | ' |
Business acquisition, cost of acquired entity, cash paid | ' | ' | 604,000,000 | ' | ' |
Purchase price of acquisition paid in issuance of preferred stock | ' | ' | ' | ' | 162,000,000 |
Number of preferred stock issued for acquisition | ' | ' | ' | ' | 162,000 |
Dividend rate percentage of preferred stock shares | ' | ' | ' | ' | 3.75% |
Conversion price of preferred shares converted into common stock | ' | ' | $31.79 | ' | ' |
Number of preferred shares to be issued | 100,000 | ' | ' | 100,000 | ' |
Common shares issued upon conversion of preferred shares | 3,145,640 | ' | ' | 3,145,640 | ' |
Payment for repurchase of an equity | $157,900,000 | ' | ' | $157,900,000 | ' |
NOTE_25_COMMITMENTS_AND_CONTIN2
NOTE 25 COMMITMENTS AND CONTINGENCIES (Detail) - (Table 1) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | |
Indemnification Obligations Liability [Roll Forward] | ' | |
Balance at December 31, 2012 | $38,140 | [1] |
Provision for representation and warranty obligations | 18,116 | |
New production reserves | 1,055 | |
Obligations assumed in connection with MSR and servicing business acquisitions | 189,742 | |
Charge-offs | -40,979 | [2] |
Balance at September 30, 2013 | $206,074 | [1] |
[1] | The balance includes origination representation and warranty obligations and compensatory fees for foreclosures that may ultimately exceed investor timelines. These obligations were primarily assumed in connection with the Ally MSR Transaction, the ResCap Acquisition and the Homeward Acquisition. See Note 4 - Business Acquisitions, Note 9 - Mortgage Servicing and Note 25 - Commitments and Contingencies for additional information. | |
[2] | Includes principal and interest losses realized in connection with repurchased loans, make-whole, indemnification and fee payments and settlements net of recoveries, if any. |
NOTE_25_COMMITMENTS_AND_CONTIN3
NOTE 25 COMMITMENTS AND CONTINGENCIES (Detail) (USD $) | 9 Months Ended | |||
Sep. 30, 2013 | Dec. 31, 2012 | |||
Loan | ||||
Commitments and Contingencies Disclosure [Abstract] | ' | ' | ||
Provided or assumed representation and warranty obligations of unpaid principal balance | $89,400,000,000 | ' | ||
Warranty repurchase demands | 113,000,000 | ' | ||
Number of unpaid principal balance loans | 534 | ' | ||
Liability for certain foreclosure matters | $66,431,000 | [1] | $13,602,000 | [1] |
[1] | We recognized $52.8 million of expense in Professional services in the second quarter of 2013 to establish the liability. We recognized the remaining $13.6 million of the liability as an adjustment to the initial purchase price allocation related to the Homeward Acquisition. We applied this measurement period adjustment retrospectively to our Consolidated Balance Sheet at December 31, 2012 with an offsetting increase in goodwill. See Note 25 - Commitments and Contingencies for additional information. |
NOTE_26_SUBSEQUENT_EVENTS_Deta
NOTE 26 SUBSEQUENT EVENTS (Detail) (USD $) | 9 Months Ended | 1 Months Ended | 1 Months Ended | ||||||||||||||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Oct. 31, 2013 | Oct. 31, 2013 | Oct. 31, 2013 | Oct. 25, 2013 | Oct. 24, 2013 | Oct. 25, 2013 | Nov. 30, 2013 | Oct. 31, 2013 | Nov. 01, 2013 | |||
Master servicing rights | HLSS | HLSS | One West Bank | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | Subsequent Event | |||||
Master servicing rights | Note one | Note two | Note three | Ocwen Loan Servicing, LLC | HLSS | HLSS | One West Bank | One West Bank | One West Bank | ||||||||
Master servicing rights | Master servicing rights | Master servicing rights | |||||||||||||||
Subsequent Event [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ||
Sale of Rights in UPB of mortgage loans | ' | ' | ' | $109,800,000,000 | $48,200,000,000 | ' | ' | ' | ' | ' | $10,000,000,000 | ' | ' | ' | ' | ||
Purchase price | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 388,000,000 | ' | ' | ' | ||
Servicing advances | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 360,000,000 | ' | ' | ' | ||
Associated Rights to MSRs | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 28,000,000 | ' | ' | ' | ||
Monthly base fee payable to the servicer for subservice of related mortgage loans | ' | ' | ' | ' | ' | ' | ' | ' | ' | 12.00% | ' | ' | ' | ' | ' | ||
Incentive fee reduction p.a percentage of excess servicing advances | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3.00% | ' | ' | ' | ' | ' | ||
Proceeds of match funded advance financing facility | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,600,000,000 | ' | ' | ||
Borrowings, description of variable rate basis | ' | ' | ' | ' | ' | ' | '1-Month LIBOR plus an initial margin. | 'commercial paper rate plus initial margins | 'commercial paper rate plus initial margins | ' | ' | ' | ' | ' | ' | ||
Borrowings, basis spread on variable rate | ' | ' | ' | ' | ' | ' | 1.75% | 1.67% | 4.25% | ' | ' | ' | ' | ' | ' | ||
Purchase of MSRs and related servicing advances | ' | ' | 87,500,000,000 | ' | ' | 30,500,000,000 | ' | ' | ' | ' | ' | ' | ' | 1,100,000,000 | 32,900,000,000 | ||
Servicing advances purchase | ' | ' | 73,600,000 | ' | ' | 371,600,000 | ' | ' | ' | ' | ' | ' | ' | 37,100,000 | 1,300,000,000 | ||
Purchase price of MSRs, as adjusted | $1,208,222,000 | [1] | $181,949,000 | [1] | $683,800,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $6,600,000 | $235,600,000 |
[1] | MSR recognized in connection with business and asset acquisitions during the first nine months of 2013 include: MSRs of $391.9 million acquired in the ResCap Acquisition. See Note 4 - Business Acquisitions for additional information. MSRs of $683.8 million acquired in the Ally MSR Transaction. The acquired MSRs relate to mortgage loans with a UPB of $87.5 billion owned by Freddie Mac and Fannie Mae. We also acquired servicing advances and other receivables of $73.6 million. We assumed the origination representation and warranty obligations of approximately $136.7 million in connection with a majority of the acquired MSRs. We had been subservicing these MSRs on behalf of Ally under a subservicing contract assumed by us in connection with the ResCap Acquisition. MSRs of $127.0 million with a UPB of approximately $30.5 billion and related servicing advance receivables of $371.6 million acquired in the OneWest MSR Transaction. We expect the remainder of the transaction to close during the fourth quarter. The total estimated purchase price is approximately $2.4 billion with $432.2 million attributed to MSRs and $2.0 billion attributed to servicing advances. The total UPB to be acquired is estimated at $72.4 billion. No operations or other assets were purchased in the transaction. In October 2013, we closed the purchase of approximately $6.6 million of MSRs with a UPB of approximately $1.1 billion and approximately $37.1 million of servicing advances. On November 1, 2013, we closed the purchase of approximately $235.6 million of MSRs with a UPB of approximately $32.9 billion and approximately $1.3 billion of servicing advances. See Note 26 - Subsequent Events for additional information. |