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Note 15 DERIVATIVE FINANCIAL INSTRUMENTS
 3 Months Ended
Mar. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 15       Derivative Financial Instruments


Because 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.


Foreign Currency Exchange Rate Risk Management


In August and October 2011, we entered into foreign exchange forward contracts with a notional amount of $59,400 to hedge against the effect of changes in the value of the India Rupee (INR) on amounts payable to our India subsidiary, OFSPL, through February 2013. These contracts replaced those that expired in April 2011. We did not designate the foreign exchange contracts as hedges. On January 27, 2012, we terminated the remaining foreign exchange forward contracts.


Our operations in Uruguay also expose us to foreign currency exchange rate risk, but we consider this risk to be insignificant.


Interest Rate Management


In our Servicing segment, during 2010, we entered into three interest rate swaps in order to hedge against the effects of changes in interest rates on our borrowings under our advance funding facilities. In 2011, we entered into an additional four interest rate swaps and one interest rate cap. The cap was not designated as a hedge.


The following summarizes our use of swaps at March 31, 2012 to hedge the effects of changes in the interest rate environment on borrowings under our advance funding facilities:


Purpose   Date Opened   Effective
Date (1) 		  Maturity   We Pay   We Receive   Notional Amount     Fair Value  
Not designated as hedges:                                
Hedge the effects of a change in 1-Month LIBOR on borrowing under a $265,000 advance funding facility (2)   April 2010   July 2010   July 2013    2.0590%   1-Month LIBOR   $ 250,000     $ (5,844 )
Hedge the effects of a change in the lender’s commercial paper rate and 1-Month LIBOR on borrowing under an advance facility (3)  

May 2010 and

June 2010

  September 2010   August 2013   1.5750%
and 1.5275% 		  1-Month LIBOR     407,089       (6,148 )
Total not designated as hedges                         657,089       (11,992 )
                                     
Designated as hedges:                                    
Hedge the effects of changes in 1-Month LIBOR or the lenders’ commercial paper rate on advance funding facilities   October 2011   June 2013   January 2015   0.9275%
and 0.9780% 		  1-Month LIBOR     201,892       (2,407 )
Hedge the effects of changes in 1-Month LIBOR or the lenders’ commercial paper rate on advance funding facilities (4)   December 2011   February 2012   January 2015   0.7000%
and 0.6825% 		  1-Month LIBOR     464,834       (1,157 )
Total designated as hedges                         666,726       (3,564 )
Total                       $ 1,323,815     $ (15,556 )

(1) The effective date of the swap is the date from which monthly settlements begin to be computed.
   
(2) We originally designated this swap as a cash flow hedge; however, the hedging relationship failed to meet the effectiveness criterion both for the third quarter of 2011 and on a prospective basis beyond the third quarter because declines in advances pledged as collateral to the hedged debt resulted in lower than anticipated borrowings. As a result, we discontinued hedge accounting for this hedging relationship effective July 1, 2011 and began amortizing to earnings the $6,179 of deferred losses in Accumulated other comprehensive loss. Unamortized deferred losses were $3,862 at March 31, 2012. Amortization will continue until the related advance facility matures in July 2013. The balance outstanding under the advance facility at March 31, 2012 was $149,805.

(3) The hedging relationship was terminated when the advance facility was assumed on March 5, 2012 by HLSS as part of the HLSS Transaction. See Note 4 for additional information regarding the match funded liabilities assumed by HLSS Holdings.
   
(4) Projected net settlements on the swaps for the next twelve months total approximately $1,300 of payments to the counterparties.

The following table summarizes our use of derivatives during the three months ended March 31, 2012:


    Interest Rate Cap     Foreign Exchange Forwards     Interest Rate Swaps  
                         
Notional balance at December 31, 2011   $ 1,600,000     $ 46,200     $ 1,393,685  
Additions     —       —       —  
Maturities     —       —       (69,870 )
Terminations     —       (46,200 )     —  
Notional balance at March 31, 2012   $ 1,600,000     $ —     $ 1,323,815  
                         
Fair value of derivative assets (liabilities) at (1):                        
March 31, 2012   $ 2,750     $ —     $ (15,556 )
December 31, 2011   $ 3,600     $ (5,785 )   $ (14,491 )
                         
Maturity     May 2014       —       July 2013 to January 2015  

(1) Derivatives are reported at fair value in Receivables or Other liabilities.

Other income (expense), net, includes the following related to derivative financial instruments for the three months ended March 31:


    2012     2011  
Net realized and unrealized gains (losses) on derivative financial instruments that are not designated as hedges (1)   $ 3,405     $ (110 )
Unrealized gains (losses) arising from ineffectiveness of interest rate swaps designated as cash flow hedges     63       (243 )
Amortization of deferred losses included in Accumulated other comprehensive loss related to a discontinued hedging relationship     (772 )     —  
Write off of deferred losses included in Accumulated other comprehensive loss related to the hedge against the effects of changes in interest rates on an advance financing facility assumed by HLSS (See Note 4)     (5,958 )     —  
    $ (3,262 )   $ (353 )

(1) Includes the gain of $3,359 that we realized upon termination of the remaining foreign exchange forward contracts.

Included in Accumulated other comprehensive loss at March 31, 2012 and December 31, 2011, respectively, were $7,338 and $12,114 of deferred unrealized losses, before taxes of $2,650 and $4,354, respectively, on the interest rate swaps that we designated as cash flow hedges.