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DISCONTINUED OPERATIONS | 12 Months Ended
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Dec. 31, 2016
Discontinued Operations and Disposal Groups [Abstract] |
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS The revenue and net (loss) income reported as discontinued operations in the accompanying consolidated statements of operations and comprehensive income are as follows (in thousands):
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Revenue | $ | 1,325 |  |  | $ | 6 |  |  | $ | 14,256 |
(Loss) income before income taxes (a) | $ | (5,728 | ) |  | $ | (5,047 | ) |  | $ | 10,392 |
Income tax benefit (expense) | 2,014 |  |  | 1,778 |  |  | (543 | )
Net (loss) income | $ | (3,714 | ) |  | $ | (3,269 | ) |  | $ | 9,849 |
(a) | Income before income taxes for the year ended December 31, 2014 includes income from a reduction in the loan loss reserve of $14.1 million. See additional information in "Loan Loss Obligations" below.
LendingTree Loans On June 6, 2012, the Company sold substantially all of the operating assets of its LendingTree Loans business for $55.9 million in cash to a wholly-owned subsidiary of Discover Financial Services ("Discover"). Discover generally did not assume liabilities of the LendingTree Loans business that arose before the closing date, except for certain liabilities directly related to assets Discover acquired. Of the purchase price paid, as of December 31, 2016, $4.0 million is being held in escrow in accordance with the agreement with Discover for certain loan loss obligations that remain with the Company following the sale. As a result of a settlement agreement in 2014 with a secondary market purchaser of loans, $12.1 million was released from escrow in December 2015. The escrowed amount is recorded as restricted cash at December 31, 2016. Discover participated as a marketplace lender from closing of the transaction through July 2015. Significant Assets and Liabilities of LendingTree Loans Upon closing of the sale of substantially all of the operating assets of the LendingTree Loans business on June 6, 2012, LendingTree Loans ceased to originate consumer loans. Liability for losses on previously sold loans will remain with LendingTree Loans and are discussed below. Loan Loss Obligations LendingTree Loans sold loans it originated to investors on a servicing-released basis, so the risk of loss or default by the borrower was generally transferred to the investor. However, LendingTree Loans was required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the loan. Subsequent to the loan sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual loans, LendingTree Loans may be obligated to repurchase the respective loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery. In the case of early loan payoffs and early defaults on certain loans, LendingTree Loans may be required to repay all or a portion of the premium initially paid by the investor. HLC, a subsidiary of the Company, continues to be liable for these indemnification obligations, repurchase obligations and premium repayment obligations following the sale of substantially all of the operating assets of its LendingTree Loans business in the second quarter of 2012. The following table represents the aggregate loans sold, subsequent settlements and remaining unsettled loans as of December 31, 2016:
| Number of Loans |  | Original Issue Balance
| (in thousands) |  | (in billions)
Loans sold by HLC | 234 |  |  | $ | 38.9 |
Subsequent settlements | (172 | ) |  | (28.8 | )
Remaining unsettled loans | 62 |  |  | $ | 10.1 |
During the fourth quarter of 2015, LendingTree Loans completed a settlement agreement for $0.6 million with one of the investors to which it had sold loans. This investor accounted for approximately 10% of the total number of loans sold and 12% of the original issue balance. This settlement related to all existing and future losses on loans sold to this investor. During the fourth quarter of 2014, LendingTree Loans completed a settlement agreement for $5.4 million with the largest investor to which it had sold loans. This investor accounted for approximately 40% of both the total number of loans sold and the original issue balance. This settlement related to all existing and future losses on loans sold to this investor. The settlement was paid in the fourth quarter of 2014 with restricted cash of $3.1 million and cash on hand of $2.3 million. The settlement with this investor in the fourth quarter of 2014 and the impact this settlement had on the estimate of the remaining loan loss obligations resulted in income of $14.1 million, which was included in income from discontinued operations in the accompanying consolidated statements of operations and comprehensive income during 2014. The adjustment to the loan loss reserve did not result in tax expense recognition due to the Company's full valuation allowance against its deferred tax assets. In the second quarter of 2014, LendingTree Loans completed settlements with two buyers of previously purchased loans. The Company has been negotiating with certain of the remaining secondary market purchasers to settle any existing and future contingent liabilities, but it may not be able to complete such negotiations on acceptable terms, or at all. Because LendingTree Loans does not service the loans it sold, it does not maintain nor generally have access to the current balances and loan performance data with respect to the individual loans previously sold to investors. Accordingly, LendingTree Loans is unable to determine, with precision, its maximum exposure for breaches of the representations and warranties it made to the investors that purchased such loans. The Company uses a settlement discount framework for evaluating the adequacy of the reserve for loan losses. This model estimates lifetime losses on the population of remaining loans originated and sold by LendingTree Loans using actual defaults for loans with similar characteristics and projected future defaults. It also considers the likelihood of claims expected due to alleged breaches of representations and warranties made by LendingTree Loans and the percentage of those claims investors estimate LendingTree Loans may agree to repurchase. A settlement discount factor is then applied to the result of the foregoing to reflect publicly-announced bulk settlements for similar loan types and vintages, as well as LendingTree Loans' non-operating status, in order to estimate a range of potential obligation. The estimated range of remaining loan losses using this settlement discount framework was determined to be $4.4 million to $8.0 million at December 31, 2016. The reserve balance recorded as of December 31, 2016 was $6.8 million. Management has considered both objective and subjective factors in the estimation process, but given current general industry trends in mortgage loans as well as housing prices and market expectations, actual losses related to LendingTree Loans' obligations could vary significantly from the obligation recorded as of the balance sheet date or the range estimated above. Additionally, LendingTree has guaranteed certain loans sold to two investors in the event that LendingTree Loans is unable to satisfy its repurchase and warranty obligations related to such loans. Based on historical experience, it is anticipated that LendingTree Loans will continue to receive repurchase requests and incur losses on loans sold in prior years. The activity related to loss reserves on previously sold loans is as follows (in thousands):
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Loan loss reserve, beginning of period | $ | 8,127 |  |  | $ | 8,750 |  |  | $ | 28,543 |
Provision adjustments (a) | (1,323 | ) |  | — |  |  | (14,144 | )
Charge-offs to reserves | — |  |  | (623 | ) |  | (5,649 | )
Loan loss reserve, end of period | $ | 6,804 |  |  | $ | 8,127 |  |  | $ | 8,750 |
(a) | As discussed above, during 2014, LendingTree Loans completed a settlement agreement with the largest investor to which it had sold loans, resulting in an adjustment to the provision. During 2016, the Company adjusted the loan loss reserve by $1.8 million to remove the estimated liability for loans sold to RFC. The Company is in litigation with RFC and reserved the loss for this litigation in the legal reserve. See Note 13—Contingencies for additional information about the RFC litigation.
The liability for losses on previously sold loans is presented as current liabilities of discontinued operations in the accompanying consolidated balance sheets as of December 31, 2016 and 2015.

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