XML 51 R34.htm IDEA: XBRL DOCUMENT v2.4.0.6
NOTE 27 BUSINESS SEGMENT REPORTING
 12 Months Ended
Dec. 31, 2011
Segment Reporting Disclosure [Text Block]

NOTE 27 BUSINESS SEGMENT REPORTING


Effective January 1, 2011, we realigned our business segments in response to the growth in our core servicing business and the continuing reductions in our equity investments in asset management vehicles and our remaining investments in subprime loans and residual securities. Effective with this realignment, our former Loans and Residuals segment and Asset Management Vehicles segment are included in Corporate Items and Other. Our business segments reflect the internal reporting that we use to evaluate operating performance of products and services and to assess the allocation of our resources. Segment results for prior periods have been restated to conform to the current segment structure.


Due to the Separation, as of August 10, 2009, neither the assets and liabilities, nor the subsequent operations of the former Ocwen Solutions line of business comprising the Mortgage Services, Financial Services and Technology Products segments are included in our results.


A brief description of our current business segments is as follows:


Servicing. This segment provides loan servicing for a fee, including asset management and resolution services, primarily to owners of subprime residential mortgages. In most cases, we provide these services either because we purchased the MSR from the owner of the mortgage or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Subprime loans represent residential loans that were made to borrowers who generally did not qualify under guidelines of Fannie Mae and Freddie Mac (nonconforming loans) or have subsequently become delinquent. This segment is primarily comprised of our core residential servicing business.


Corporate Items and Other. We report 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 and certain corporate expenses in Corporate Items and Other. Debt securities, which are comprised of the 3.25% Convertible Notes and the 10.875% Capital Securities, are also included in Corporate Items and Other.


Effective with the segment realignment discussed above, Corporate Items and Other includes the former Loans and Residuals segment and the former Asset Management Vehicles segment. Our recently acquired equity investment in Correspondent One is also included in Corporate Items and Other.


The former Loans and Residuals segment included our investments in subprime residential loans held for resale and subprime residual mortgage backed trading securities related to our former subprime loan origination operation and whole loan purchase and securitization activities. The Loans and Residuals segment also included the four loan securitization trusts that we began including in our consolidated financial statements effective January 1, 2010. The former Asset Management Vehicles segment was comprised of our 27% equity investment in OSI and approximately a 25% equity investment in ONL and OREO. These unconsolidated entities are engaged in the management of residential assets. Other business activities included in Corporate Items and Other that are not considered to be of continuing significance include our affordable housing investment activities.


We allocate interest income and expense to each business segment for funds raised or 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

    Mortgage
Services 		    Financial
Services 		    Technology
Products 		    Corporate
Items and
Other 		    Corporate
Eliminations 		    Business
Segments
Consolidated 		 
Results of Operations                                          
For the year ended December 31, 2011                                      
Revenue (1) (2)   $ 494,871     $ —     $ —     $ —     $ 2,348     $ (1,289 )   $ 495,930  
Operating expenses (1) (3) (4)     231,238       —       —       —       8,971       (625 )     239,584  
Income (loss) from operations     263,633       —       —       —       (6,623 )     (664 )     256,346  
Other income (expense):                                                        
Interest income     110       —       —       —       8,766       —       8,876  
Interest expense     (132,574 )     —       —       —       (196 )     —       (132,770 )
Other (1) (2) (5) (6)     4,711       —       —       —       (14,832 )     664       (9,457 )
Other income (expense), net     (127,753 )     —       —       —       (6,262 )     664       (133,351 )
Income (loss) from continuing operations before income taxes   $ 135,880     $ —     $ —     $ —     $ (12,885 )   $ —     $ 122,995  
                                                         
For the year ended December 31, 2010                                                  
Revenue (1) (2)   $ 359,798     $ —     $ —     $ —     $ 2,112     $ (1,529 )   $ 360,381  
Operating expenses (1) (3)     200,108       —       —       —       37,130       (764 )     236,474  
Income (loss) from operations     159,690       —       —       —       (35,018 )     (765 )     123,907  
Other income (expense):                                                        
Interest income     207       —       —       —       10,652       —       10,859  
Interest expense     (80,514 )     —       —       —       (5,409 )     —       (85,923 )
Other (1) (2) (6)     (1,188 )     —       —       —       (9,266 )     765       (9,689 )
Other income (expense), net     (81,495 )     —       —       —       (4,023 )     765       (84,753 )
Income (loss) from continuing operations before income taxes   $ 78,195     $ —     $ —     $ —     $ (39,041 )   $ —     $ 39,154  
                                                         
For the year ended December 31, 2009                                                  
Revenue (1) (2)   $ 272,725     $ 54,052     $ 40,293     $ 28,331     $ 2,917     $ (17,590 )   $ 380,728  
Operating expenses (1) (3)(7)     129,252       37,040       45,002       18,638       22,247       (16,525 )     235,654  
Income (loss) from operations     143,473       17,012       (4,709 )     9,693       (19,330 )     (1,065 )     145,074  
Other income (expense):                                                        
Interest income     266       2       —       —       8,518       —       8,786  
Interest expense     (59,458 )     (28 )     (1,285 )     (289 )     (1,894 )     —       (62,954 )
Other (1) (2) (6)     3,400       829       25       186       (3,150 )     1,065       2,355  
Other income (expense), net     (55,792 )     803       (1,260 )     (103 )     3,474       1,065       (51,813 )
Income (loss) from continuing operations before income taxes   $ 87,681     $ 17,815     $ (5,969 )   $ 9,590     $ (15,856 )   $ —     $ 93,261  

   

Servicing

   

Corporate
Items and
Other

   

Corporate
Eliminations

   

Business
Segments
Consolidated

 
Total Assets                        
December 31, 2011   $ 4,310,354     $ 426,803     $ —     $ 4,737,157  
                                 
December 31, 2010   $ 2,495,966     $ 425,443     $ —     $ 2,921,409  
                                 
December 31, 2009   $ 1,191,212     $ 578,138     $ —     $ 1,769,350  

(1) Intersegment billings for services rendered to other segments are recorded as revenues, as contra-expense or as other income, depending on the type of service that is rendered. Intersegment billings are as follows:

   

Servicing

   

Mortgage
Services

   

Technology
Products

   

Corporate
Items and
Other

   

Business
Segments
Consolidated

 
For the year ended December 31, 2011   $ 1,170     $ —     $ —     $ 119     $ 1,289  
For the year ended December 31, 2010     1,356       —       —       173       1,529  
For the year ended December 31, 2009     5,668       59       20,425       471       26,623  

(2) Servicing has a contractual right to receive interest income on float balances. However, Corporate controls investment decisions associated with the float balances. Accordingly, Servicing receives revenues generated by those investments that are associated with float balances but are reported in Corporate Items and Other. Gains and losses associated with corporate investment decisions are recognized in Corporate Items and Other.

(3) Depreciation and amortization expense are as follows:

   

Servicing

   

Mortgage
Services

   

Financial
Services

   

Technology
Products

   

Corporate
Items and
Other

   

Business
Segments
Consolidated

 
For the year ended December 31, 2011:                                    
Depreciation expense   $ 2,410     $ —     $ —     $ —     $ 1,750     $ 4,160  
Amortization of MSRs     42,996       —       —       —       —       42,996  
Amortization of debt discount     8,853       —       —       —       —       8,853  
Amortization of debt issuance costs – senior secured term loan     9,764       —       —       —       —       9,764  
                                                 
For the year ended December 31, 2010:                                                
Depreciation expense   $ 5,916     $ —     $ —     $ —     $ 1,596     $ 7,512  
Amortization of MSRs     31,455       —       —       —       —       31,455  
Amortization of debt discount     5,217       —       —       —       172       5,389  
Amortization of debt issuance costs – senior secured term loan     2,086       —       —       —       —       2,086  
                                                 
For the year ended December 31, 2009:                                                
Depreciation expense   $ 54     $ 19     $ 283     $ 3,204     $ 1,182     $ 4,742  
Amortization of MSRs     32,228       —       —       —       —       32,228  
Amortization of intangibles     —       —       1,624       —       —       1,624  
Amortization of debt discount     3,437       —       —       —       1,735       5,172  

(4) Operating expenses for 2011 and 2010 include non-recurring transaction-related expenses associated with the Litton and HomEq acquisitions of $50,340 and $52,603, respectively, recorded in the Servicing segment.
   
(5) Other income (expense) for 2010 includes gains of $6,036 recorded in Corporate Items and Other from sales of our investments in affordable housing projects.
   
(6) Other income (expense) for 2010 and 2009 includes gains (losses) on auction rate securities of $(7,909) and $11,863, respectively, recorded in Corporate Items and Other.
   
(7) Operating expenses for 2009 include advisory expenses related to the Separation transaction of $3,477 recorded in Corporate Items and Other.