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Note 26 BUSINESS SEGMENT REPORTING
 12 Months Ended
Dec. 31, 2012
Segment Reporting Disclosure [Text Block]
NOTE 26 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. Through this segment, 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 or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Subprime loans represent the largest category, or stratum of the residential loans that we service. Subprime loans represent residential loans that were made to borrowers who generally did not qualify under GSE guidelines (nonconforming loans) or have subsequently become delinquent. This segment is primarily comprised of our core residential servicing business.


Lending. In addition to acquiring Homeward’s residential servicing business, we also acquired its loan origination platform as part of the Homeward Acquisition which closed on December 27, 2012. The Lending segment is focused on originating and purchasing agency-conforming residential mortgage loans mainly through our correspondent lending business. In addition, in 2012, Homeward commenced a direct lending business to initially pursue refinancing opportunities from its existing portfolio, where permitted. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis and are measured at fair value.


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 includes the diversified fee-based business that we acquired as part of the Homeward Acquisition on December 27, 2012 and expect to sell to Altisource in March 2013. Services provided by this business include property valuation, REO management, title and closing and advisory.


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 Items and Other     Corporate Eliminations     Business Segments Consolidated  
Results of Operations                                        
For the year ended December 31, 2012                                        
Revenue (1) (2)   $ 840,648     $ 141     $ 5,122     $ (905 )   $ 845,006  
Operating expenses (1) (3)     344,333       409       19,667       (484 )     363,925  
Income (loss) from operations     496,315       (268 )     (14,545 )     (421 )     481,081  
Other income (expense):                                        
Interest income     9       309       8,011       —       8,329  
Interest expense     (221,948 )     (514 )     (993 )     —       (223,455 )
Other (1) (2)     (13 )     214       (9,069 )     421       (8,447 )
Other income (expense), net     (221,952 )     9       (2,051 )     421       (223,573 )
Income (loss) from continuing operations before income taxes   $ 274,363     $ (259 )   $ (16,596 )   $ —     $ 257,508  
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)     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) (4)     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) (5) (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  

    Servicing     Lending     Corporate Items and Other     Corporate Eliminations     Business Segments Consolidated  
Total Assets                                        
December 31, 2012   $ 4,461,755     $ 551,733     $ 658,394     $ —     $ 5,671,882  
                                         
December 31, 2011   $ 4,301,371     $ —     $ 426,653     $ —     $ 4,728,024  
                                         
December 31, 2010   $ 2,495,966     $ —     $ 425,443     $ —     $ 2,921,409  
                                         

(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.
(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     Lending     Corporate Items and Other     Business Segments Consolidated  
For the year ended December 31, 2012:                                
Depreciation expense   $ 1,469     $ 8     $ 4,243     $ 5,720  
Amortization of MSRs     72,897       —       —       72,897  
Amortization of debt discount     3,259       —       —       3,259  
Amortization of debt issuance costs – SSTL     3,718       —       —       3,718  
                                 
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 – SSTL     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 – SSTL     2,086       —       —       2,086  

(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 includes losses on auction rate securities of $7,909 recorded in Corporate Items and Other.