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Mortgage Servicing | 9 Months Ended
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Sep. 30, 2014
Transfers and Servicing [Abstract] |
Mortgage Servicing | Note 8 – Mortgage Servicing Mortgage Servicing Rights – Amortization Method The following tables summarize the activity in the carrying value of amortization method servicing assets for the nine months ended September 30. 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, if any.
|  | 2014 |  | 2013
Beginning balance |  | $ | 1,953,352 |  |  | $ | 678,937 |
Additions recognized in connection with business acquisitions: |  |  |  |  |  |
OSI (1) |  | 9,008 |  |  | — |
ResCap Acquisition (1) |  | 11,370 |  |  | 391,853 |
Liberty Acquisition (1) |  | — |  |  | 2,532 |
Additions recognized in connection with asset acquisitions: |  |  |  |
Ally MSR Transaction |  | — |  |  | 683,787 |
OneWest MSR Transaction (2) |  | 1,516 |  |  | 127,047 |
Greenpoint MSR Transaction (3) |  | 3,690 |  |  | — |
Other |  | 14,132 |  |  | 3,003 |
Additions recognized on the sale of mortgage loans |  | 50,480 |  |  | 63,154 |
Sales |  | (137 | ) |  | (17,523 | )
Servicing transfers and adjustments |  | (518 | ) |  | 2,052 |
Amortization |  | (186,075 | ) |  | (197,899 | )
Ending balance |  | $ | 1,856,818 |  |  | $ | 1,736,943 |
Estimated fair value at end of period |  | $ | 2,364,393 |  |  | $ | 2,532,239 |
(1) | See Note 3 – Business Acquisitions for additional information regarding MSRs recognized in connection with business acquisitions.
(2) | The acquired MSRs in 2014 relate to mortgage loans with a UPB of $1.1 billion and related servicing advances of $34.3 million acquired in the final closing of the OneWest MSR Transaction. The OneWest MSR Transaction closed in stages, and the majority of loans were boarded onto our primary servicing platform as of December 31, 2013. As of September 30, 2013, we had acquired MSRs of $127.0 million with a UPB of $30.5 billion and related servicing advance receivables of $371.6 million.
(3) | The acquired MSRs relate to mortgage loans with a UPB of $948.9 million and related servicing advances of $47.6 million.
We have sold certain Rights to MSRs as part of the HLSS Transactions which did not qualify as sales for accounting purposes. In addition, on February 26, 2014, we issued $123.6 million of OASIS Series 2014-1 Notes secured by Ocwen-owned MSRs relating to Freddie Mac mortgages of $11.8 billion UPB. We account for these transactions as financings. See Note 11 – Borrowings for additional information. Mortgage Servicing Rights—Fair Value Measurement Method This portfolio comprises servicing rights for which we elected the fair value option and includes Agency forward residential mortgage loans for which we previously hedged the related market risks. The following table summarizes the activity related to fair value servicing assets for the nine months ended September 30:
| 2014 |  | 2013
Beginning balance | $ | 116,029 |  |  | $ | 85,213 |
Servicing transfers | (934 | ) |  | — |
Changes in fair value (1): |  |  |
Changes in assumptions | (12,217 | ) |  | 19,800 |
Realization of cash flows and other changes | (930 | ) |  | (8,075 | )
Ending balance | $ | 101,948 |  |  | $ | 96,938 |
(1) | Changes in fair value are recognized in Servicing and origination expense in the unaudited Consolidated Statements of Operations.
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, 2014 given hypothetical instantaneous parallel shifts in the yield curve:
| Adverse change in fair value
| 10% |  | 20%
Weighted average prepayment speeds | $ | (8,245 | ) |  | $ | (16,137 | )
Discount rate (Option-adjusted spread) | $ | (4,100 | ) |  | $ | (7,905 | )
The sensitivity analysis measures the potential impact on fair values based on hypothetical changes (increases and decreases) in interest rates. Portfolio of Assets Serviced The following table presents the composition of our primary servicing and subservicing portfolios by type of property serviced as measured by UPB. The servicing portfolio represents loans for which we own the MSRs while subservicing represents all other loans. The UPB of assets serviced for others are not included on our unaudited Consolidated Balance Sheets.
| Residential |  | Commercial |  | Total
UPB at September 30, 2014 |  |  |  |  |  |  |  |
Servicing (1) | $ | 360,919,248 |  |  | $ | — |  |  | $ | 360,919,248 |
Subservicing | 50,360,366 |  |  | 216,111 |  |  | 50,576,477 |
| $ | 411,279,614 |  |  | $ | 216,111 |  |  | $ | 411,495,725 |
UPB at December 31, 2013 |  |  |  |  |  |  |  |
Servicing (1) | $ | 397,546,635 |  |  | $ | — |  |  | $ | 397,546,635 |
Subservicing | 67,104,697 |  |  | 400,502 |  |  | 67,505,199 |
| $ | 464,651,332 |  |  | $ | 400,502 |  |  | $ | 465,051,834 |
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 |
(1) | Includes primary servicing UPB of $160.8 billion, $175.1 billion and $177.1 billion at September 30, 2014, December 31, 2013 and September 30, 2013, respectively, for which the Rights to MSRs have been sold to HLSS.
Residential assets serviced includes foreclosed real estate. Residential assets serviced also includes small-balance commercial assets with a UPB of $2.4 billion, $2.6 billion and $2.5 billion at September 30, 2014, December 31, 2013 and September 30, 2013, respectively, that are managed using the REALServicing® platform. Commercial assets consist of large-balance foreclosed real estate. A significant portion of our non-Agency servicing portfolio servicing agreements contain provisions whereby we could be terminated as servicer without compensation upon the failure of the serviced loans to meet certain portfolio delinquency or cumulative loss thresholds or in the event we fail to maintain required servicer ratings, among other provisions. As a result of the economic downturn of recent years, the portfolio delinquency and/or cumulative loss threshold provisions have been breached by many private-label securitizations in our non-Agency servicing portfolio. Terminations as servicer as a result of a breach of any of these provisions have been minimal. In the event we were terminated as servicer and the Rights to MSRs were sold to HLSS, we would be obligated to compensate HLSS. Servicing Revenue The following table presents the components of servicing and subservicing fees for the three and nine months ended September 30:
| Three Months |  | Nine Months
| 2014 |  | 2013 |  | 2014 |  | 2013
Loan servicing and subservicing fees: |  |  |  |  |  |  |
Servicing | $ | 331,794 |  |  | $ | 335,884 |  |  | $ | 1,039,033 |  |  | $ | 887,500 |
Subservicing | 30,926 |  |  | 35,286 |  |  | 95,509 |  |  | 115,437 |
| 362,720 |  |  | 371,170 |  |  | 1,134,542 |  |  | 1,002,937 |
Home Affordable Modification Program (HAMP) fees | 37,644 |  |  | 40,213 |  |  | 111,000 |  |  | 118,412 |
Late charges | 27,634 |  |  | 30,445 |  |  | 97,002 |  |  | 85,930 |
Loan collection fees | 8,655 |  |  | 8,387 |  |  | 25,573 |  |  | 22,524 |
Custodial accounts (float earnings) | 1,831 |  |  | 743 |  |  | 5,235 |  |  | 4,533 |
Other | 27,480 |  |  | 32,309 |  |  | 74,744 |  |  | 99,056 |
| $ | 465,964 |  |  | $ | 483,267 |  |  | $ | 1,448,096 |  |  | $ | 1,333,392 |
Float balances (balances in custodial accounts, which represent collections of principal and interest that we receive from borrowers, are held in escrow by an unaffiliated bank and are excluded from our balance sheet) amounted to $3.7 billion and $3.5 billion at September 30, 2014 and September 30, 2013, respectively.

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- Definition The entire disclosure for a transferor's continuing involvement in financial assets that it has transferred in a securitization or asset-backed financing arrangement, the nature of any restrictions on assets reported by an entity in its statement of financial position that relate to a transferred financial asset (including the carrying amounts of such assets), how servicing assets and servicing liabilities are reported, and (for securitization or asset-backed financing arrangements accounted for as sales) when a transferor has continuing involvement with the transferred financial assets and transfers of financial assets accounted for as secured borrowings, how the transfer of financial assets affects an entity's financial position, financial performance, and cash flows. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122625-111746 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=13989330&loc=d3e107207-111719 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=13989330&loc=d3e107314-111719 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122596-111746 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 50 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7882072&loc=d3e122739-111746 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7519067&loc=SL6226446-111709 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 860 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7519067&loc=SL6226443-111709 + Details
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