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Sales of Advances and MSRs | 6 Months Ended
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Jun. 30, 2015
Transfers and Servicing [Abstract] |
Sales of Advances and MSRs | Note 4 — Sales of Advances and MSRs In order to efficiently finance our assets, streamline our operations and generate liquidity, we sell MSRs, Rights to MSRs and servicing advances to market participants. We may retain the right to subservice loans when we sell MSRs. In connection with sales of Rights to MSRs, we retain legal ownership of the MSRs and continue to service the related mortgage loans until such time as all necessary consents to a transfer of the MSRs are received. The following table provides a summary of MSRs and advances sold during the six months ended June 30, 2015:
| MSRs (1) |  | Advances and Match Funded Advances
Carrying value of assets sold | $ | 528,190 |  |  | $ | 149,298 |
Gain (loss) on sale | 56,712 |  |  | — |
Plus: Accrued expenses included in gain (loss) on sale | 23,256 |  |  | — |
Sales price | 608,158 |  |  | 149,298 |
Less: |  |  |
Amount due from purchaser at June 30 | 135,414 |  |  | 20,477 |
Amount paid to purchasers for estimated representation and warranty obligations, compensatory fees for foreclosures that may ultimately exceed investor timelines and related indemnification obligations | 83,806 |  |  | — |
Total net cash received | $ | 388,938 |  |  | $ | 128,821 |
(1) | There were no MSR sales during the six months ended June 30, 2014. MSR sales in 2015 include the following:
• | On March 2, 2015, we signed a letter of intent with JPMorgan Chase & Co. for the sale of MSRs on a portfolio consisting of approximately 250,000 performing Agency loans owned by Fannie Mae with a total UPB of approximately $42.0 billion. On May 13, 2015, we signed a definitive agreement having obtained all necessary approvals. This transaction closed on June 1, 2015. In connection with this transaction, on April 17, 2015, we entered into a letter agreement with Fannie Mae pursuant to which we designated a portion of the expected proceeds as prepayments to secure against certain future obligations. These future obligations include repurchases, indemnifications and various fees. The total cash pre-payments are $15.4 million, including $3.2 million paid on April 27, 2015 with the remainder paid on June 1, 2015. Another $37.5 million of escrowed collateral was set aside on June 1, 2015 to secure potential future obligations not covered by the prepaid amount.
• | On March 18, 2015, OLS and Green Tree Loan Servicing, a subsidiary of Walter Investment Management Corp. (collectively Walter), signed an agreement in principle for the sale of residential MSRs on a portfolio consisting of approximately 54,000 largely performing loans owned by Freddie Mac with a total UPB of approximately $9.2 billion. We executed a definitive agreement on April 29, 2015 and initial funding occurred on April 30, 2015.
• | On March 24, 2015, we announced that OLS and Nationstar Mortgage LLC, an indirectly held, wholly owned subsidiary of Nationstar Mortgage Holdings Inc. (collectively, “Nationstar”), had agreed in principle to the sale of residential MSRs on a portfolio consisting of approximately 140,000 loans owned by Freddie Mac and Fannie Mae with a total UPB of approximately $24.9 billion. We closed on the sale of a portion of these MSRs, with a total UPB of approximately $2.7 billion, on April 30, 2015.
• | On March 31, 2015, OLS closed on a sale agreement with Nationstar for the sale of residential MSRs on a portfolio consisting of 76,000 performing loans owned by Freddie Mac with a UPB of $9.1 billion.
• | On May 1, 2015, OLS closed on a sale agreement with Seterus, Inc. for the sale of residential MSRs on a portfolio consisting of 17,000 primarily nonperforming loans owned by Fannie Mae with a UPB of $3.1 billion.
In 2012 and 2013, we sold rights to receive servicing fees, excluding ancillary income, with respect to certain non-Agency MSRs (Rights to MSRs) and the related servicing advances to HLSS (together with the sale of the related servicing advances, the NRZ/HLSS Transactions). Pursuant to our agreements, NRZ has assumed the obligation to fund new servicing advances with respect to the Rights to MSRs. However, because we remain the servicer on the loans for which the Rights to MSRs have been sold, in the event NRZ were to fail to fulfill its advance funding obligations, as the servicer under our servicing agreements, we would be contractually obligated to fund such advances. At June 30, 2015, NRZ had outstanding advances of approximately $5.6 billion in connection with the Rights to MSRs. The servicing fees payable under the servicing agreements underlying the Rights to MSRs are apportioned between NRZ and us as provided in our agreements with NRZ. NRZ retains a fee based on the UPB of the loans serviced, and OLS receives certain fees, including a performance fee based on servicing fees actually paid less an amount calculated based on the amount of servicing advances and cost of financing those advances. After the earlier of April 30, 2020 or eight years after the closing date of the sale of each tranche of Rights to MSRs to NRZ, the apportionment of these fees with respect to such tranche is subject to re-negotiation. As it relates to the NRZ/HLSS Transactions, if and when such transfer of legal ownership occurs, OLS will subservice the loans pursuant to a subservicing agreement, as amended, with NRZ. Beginning April 7, 2017, NRZ has a general right to direct us to transfer servicing of the servicing agreements underlying the Rights to MSRs that we have previously sold to NRZ provided that the transfer is subject to our continued right to be paid the servicing fees and other amounts payable under our agreements. An exception to the requirement that the transfer is subject to our continued right to payment under the transferred servicing agreement exists in circumstances where a termination event (as defined in our agreements with NRZ) occurs. In these circumstances, NRZ may direct us to use commercially reasonable efforts to transfer servicing under the affected servicing agreement and, following the transfer, we would no longer be entitled to receive future servicing fee revenue with respect to the transferred servicing agreement. Regarding NRZ’s rights upon a termination event resulting from an uncured servicer rating downgrade, NRZ has agreed to a standstill until April 7, 2017 unless they determine in good faith that a trustee intends to terminate servicing under an affected servicing agreement. In these circumstances, NRZ may direct us to use commercially reasonable efforts to transfer servicing under the affected servicing agreement and, following the transfer, we would no longer be entitled to receive future servicing fee revenue. All required third party consents would need to be obtained in connection with any servicing transfer. To the extent servicing agreements underlying Rights to MSRs are terminated as a result of a termination event, NRZ is entitled to payment of an amount equal to a percentage of NRZ’s purchase price for the related Rights to MSRs (Liquidating Damages). We paid NRZ $2.2 million in Liquidated Damages through June 30, 2015 in connection with the termination of four servicing agreements underlying the Rights to MSRs. The NRZ/HLSS Transactions are accounted for as financings. If and when transfer of legal ownership of the underlying MSRs occurs upon receipt of third-party consents, we would derecognize the related MSRs. Upon derecognition, any resulting gain or loss is deferred and amortized over the expected life of the related subservicing agreement. Until derecognition, we continue to recognize the full amount of servicing revenue and amortization of the MSRs. The sales of the advances in connection with MSR sales, including the HLSS Transactions, meet the requirements for sale accounting, and the advances are derecognized from our consolidated financial statements at the servicing transfer date, or, in the case of advances sold in connection with the sale of Rights to MSRs at time of the sale. In 2014, Ocwen sold advances related to certain FHA-insured mortgage loans to subsidiaries of NRZ. These advance sales did not qualify for sales treatment and were accounted for as financings.

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- Definition The entire disclosure for sales of assets and liabilities directly associated with those assets that will be transferred in the transaction. This may include a description of an asset sale (or series of individually immaterial assets sales) completed during the period, including background, timing, and assets and liabilities sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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