Note 11 – Borrowings

Match Funded Liabilities

Match funded liabilities are comprised of the following at the dates indicated:

Borrowing Type

Interest Rate

Maturity (1)

Amortization Date (1)

Available Borrowing Capacity (2)

June 30, 2015

December 31, 2014

Ocwen Freddie Servicer Advance Receivables Trust Series 2012-ADV1 (4)

1ML (3) + 175 bps

Jun. 2017

Jun. 2015

—

373,080

Ocwen Servicer Advance Funding (SBC) Note (5)

1ML + 300 bps

Dec. 2015

Dec. 2014

—

494



Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Available Borrowing Capacity (2)	June 30, 2015	December 31, 2014
Advance Receivables Backed Notes, Series 2013-VF2, Class A	Cost of Funds + 191 bps (6)	Oct. 2045	Oct. 2015	124,969	439,031	519,634
Advance Receivables Backed Notes, Series 2013-VF2, Class B	Cost of Funds + 343 bps (7)	Oct. 2045	Oct. 2015	8,154	27,846	32,919
Advance Receivables Backed Notes - Series 2014-VF3, Class A	1ML + 175 bps (8)	Oct. 2045	Oct. 2015	133,123	466,877	552,553
Advance Receivables Backed Notes - Series 2014-VF4	1ML + 175 bps (9)	Oct. 2045	Oct. 2015	133,123	466,877	552,553
Total Ocwen Master Advance Receivables Trust (OMART)				399,369	1,400,631	1,657,659
Advance Receivables Backed Notes, Series 2014-VF1, Class A	Cost of Funds + 275 bps	Dec. 2045	Dec. 2015	39,514	25,947	21,192
Advance Receivables Backed Notes, Series 2014-VF1, Class B	Cost of Funds + 325 bps	Dec. 2045	Dec. 2015	—	16,907	13,598
Advance Receivables Backed Notes, Series 2014-VF1, Class C	Cost of Funds + 375 bps	Dec. 2045	Dec. 2015	—	12,732	10,224
Advance Receivables Backed Notes, Series 2014-VF1, Class D	Cost of Funds + 470 bps	Dec. 2045	Dec. 2015	—	17,400	14,000
Total Ocwen Servicer Advance Receivables Trust III (OSARTIII) (10)				39,514	72,986	59,014



Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Available Borrowing Capacity (2)		June 30, 2015			December 31, 2014
Advance Receivables Backed Notes, Series 2015-VF1, Class A	1ML + 212.5 bps	Jun. 2046	Jun. 2016	182,495		33,918			—
Advance Receivables Backed Notes, Series 2015-VF1, Class B	1ML + 300 bps	Jun. 2046	Jun. 2016	—		3,883			—
Advance Receivables Backed Notes, Series 2015-VF1, Class C	1ML + 350 bps	Jun. 2046	Jun. 2016	—		1,968			—
Advance Receivables Backed Notes, Series 2015-VF1, Class D	1ML + 425 bps	Jun. 2046	Jun. 2016	—		2,736			—
Advance Receivables Backed Notes, Series 2015-T1, Class A	2.062%	Nov. 2045	Nov. 2015	—		57,100			—
Advance Receivables Backed Notes, Series 2015-T1, Class B	2.557%	Nov. 2045	Nov. 2015	—		5,400			—
Advance Receivables Backed Notes, Series 2015-T1, Class C	3.051%	Nov. 2045	Nov. 2015	—		1,900			—
Advance Receivables Backed Notes, Series 2015-T1, Class D	3.790%	Nov. 2045	Nov. 2015	—		5,600			—
Advance Receivables Backed Notes, Series 2015-T2, Class A	2.014%	Sep. 2045	Sep. 2015	—		127,200			—
Advance Receivables Backed Notes, Series 2015-T2, Class B	2.509%	Sep. 2045	Sep. 2015	—		12,600			—
Advance Receivables Backed Notes, Series 2015-T2, Class C	3.003%	Sep. 2045	Sep. 2015	—		3,600			—
Advance Receivables Backed Notes, Series 2015-T2, Class D	3.743%	Sep. 2045	Sep. 2015	—		11,600			—
Total Ocwen Freddie Advance Funding Facility (OFAF) (11)				182,495		267,505			—

				$	621,378	$	1,741,122		$	2,090,247

Weighted average interest rate						2.52		%	1.97		%

(1)

The amortization date of our advance financing facilities is the date on which the revolving period ends under each advance financing facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In each of our advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed.


(2)	Borrowing capacity is available to us provided that we have additional eligible collateral to pledge. Collateral may only be pledged to one facility. At June 30, 2015, $169.6 million of the available borrowing capacity could be used based on the amount of eligible collateral that had been pledged


(3)	1-Month LIBOR (1ML) was 0.19% and 0.17% at June 30, 2015 and December 31, 2014, respectively.


(4)	We repaid this facility in full in June 2015 from the proceeds of the OFAF facility.


(5)	We voluntarily terminated this facility on January 15, 2015.


(6)	The interest margin on this note is scheduled to increase to 215 bps on August 15, 2015 and to 239 bps on September 15, 2015.


(7)	The interest margin on this note is scheduled to increase to 386 bps on August 15, 2015 and to 429 bps on September 15, 2015.


(8)	The interest margin on this note is scheduled to increase to 200 bps on July 15, 2015, 225 bps on August 15, 2015 and to 250 bps on September 15, 2015.

(9)

The interest margin on this note was scheduled to increase to 200 bps on July 15, 2015, 225 bps on August 15, 2015 and to 250 bps on September 15, 2015. Effective July 1, 2015, the Series 2014-VF4 note was replaced by four notes - VF4 Class A with a maximum borrowing capacity of $515,076 and a margin of 154 bps; Class B with a maximum borrowing capacity of $20,744 and a margin of 200 bps; Class C with a maximum borrowing capacity of $24,614 and a margin of 275 bps; and Class D with a maximum borrowing capacity of $39,566 and a margin of 375 bps. However, the weighted average margin on the Series 2014-VF4 notes is limited to 175 bps.


(10)	Effective April 23, 2015, the maximum borrowing under this facility decreases by $6.3 million per month until it is reduced to $75.0 million.

(11)

We entered into this facility on June 10, 2015. Under the terms of the agreement, we must continue to borrow the full amount of the Series 2015-T1 and Series 2015-T2 term notes until the amortization date. If there is insufficient collateral to support the level of borrowing, the excess cash proceeds are not distributed to Ocwen but are held by the trustee, and interest expense continues to be based on the full amount of the term notes.

Pursuant to our agreements with NRZ, NRZ had assumed the obligation to fund new servicing advances with respect to the Rights to MSRs. We are dependent upon NRZ for financing of the servicing advance obligations for MSRs where we are the named servicer. NRZ currently uses advance financing facilities in order to fund a substantial portion of the servicing advances that they are contractually obligated to make pursuant to our agreements with them. As of June 30, 2015, we were the named servicer on Rights to MSRs sold to NRZ pertaining to approximately $151.2 billion in UPB and the associated outstanding servicing advances as of such date were approximately $5.6 billion. Should NRZ’s advance financing facilities fail to perform as envisaged or should NRZ otherwise be unable to meet its advance financing obligations, our liquidity, financial condition and business could be materially and adversely affected. As the named servicer, we are contractually required under our servicing agreements to make the relevant servicing advances even if NRZ does not perform its contractual obligations to fund those advances.

Although we were not an obligor or guarantor under NRZ’s advance financing facilities, we are a party to certain of the facility documents as the named servicer of the underlying loans on which advances are being financed. A purported owner of notes issued by one of NRZ’s advance financing facilities within recent months asserted in letters written to the indenture trustee that events of default have occurred under the indenture governing those notes based on alleged failures by us to comply with applicable laws and regulations and the terms of the servicing agreement to which the applicable servicing advances relate. While we have vigorously defended ourselves against these allegations, we have consented to an arrangement between NRZ and the indenture trustee for those notes that provides for a standstill for the indenture trustee to investigate the allegations of default during which the indenture trustee will not initiate a court proceeding. If an event of default were to be declared under this or any other advance financing facility used by NRZ, NRZ may not be able to perform under their agreements with us. As a result, our liquidity, financial condition and business could be materially and adversely affected. In addition, it is possible that NRZ might seek to take actions against us alleging that we bear responsibility for such outcomes, or alleging that we have breached representations and warranties made in connection with our sale of advances to NRZ, any of which could also materially and adversely affect us.

NRZ has amended the supplements pertaining to their variable funding notes under these advance financing facilities to extend the revolving periods and increase the aggregate commitments thereunder and to clarify, among other things, that the variable noteholders will not consider a violation of law or of relevant servicing agreements to constitute an event of default with respect to those notes unless they result in a material adverse effect on the collectability, timing of collection or value of the advance receivables. The amendments also provide that the variable noteholders will not consider the allegations made by the purported owner of the notes to constitute a violation of funding conditions and have agreed to continue to fund draws on the facility including, if necessary, to refinance the outstanding term notes under the facility. In addition, if the outstanding term notes are refinanced the variable noteholders have agreed that they shall not consider the allegations made by the purported owner of the notes to constitute an event of default.

Financing Liabilities

Financing liabilities are comprised of the following at the dates indicated:



Borrowings	Collateral	Interest Rate	Maturity	June 30, 2015		December 31, 2014
Servicing:
Financing liability – MSRs pledged	MSRs	(1)	(1)	$	581,219	$	614,441
Secured Notes, Ocwen Asset Servicing Income Series, Series 2014-1 (2)	MSRs	(2)	Feb. 2028	103,422		111,459
Financing Liability – Advances Pledged (3)	Advances on loans	(3)	(3)	71,031		88,489
				755,672		814,389

Lending:
HMBS-related borrowings (4)	Loans held for investment (LHFI)	1ML + 246 bps	(4)	1,987,998		1,444,252

				$	2,743,670	$	2,258,641


(1)	This financing liability arose in connection with the NRZ/HLSS Transactions and has no contractual maturity. The balance of the liability is adjusted each reporting period to its fair value based on the present value of the estimated future cash flows underlying the related MSRs.

(2)

OASIS noteholders are entitled to receive a monthly payment amount equal to the sum of: (a) the designated servicing fee amount (21 basis points of the UPB of the reference pool of Freddie Mac mortgages); (b) any termination payment amounts; (c) any excess refinance amounts; and (d) the note redemption amounts, each as defined in the indenture supplement for the notes. The notes have a final stated maturity of February 2028. We accounted for this transaction as a financing. Monthly amortization of the liability is estimated using the proportion of monthly projected service fees on the underlying MSRs as a percentage of lifetime projected fees, adjusted for the term of the security.


(3)	Certain sales of advances in 2014 did not qualify for sales accounting treatment and were accounted for as a financing.


(4)	Represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed HMBS. The beneficial interests have no maturity dates, and the borrowings mature as the related loans are repaid.

Other Secured Borrowings

Other secured borrowings are comprised of the following at the dates indicated:



Borrowings	Collateral	Interest Rate	Maturity	Available Borrowing Capacity		June 30, 2015		December 31, 2014
Servicing:
SSTL (1)	(1)	1-Month Euro-dollar rate + 375 bps with a Eurodollar floor of 125 bps (1)	Feb. 2018	$	—	$	936,135	$	1,277,250
Repurchase agreement (2)	Loans held for sale (LHFS)	1ML + 200 - 345 bps	Jul. 2015	7,132		42,868		32,018
				7,132		979,003		1,309,268



Borrowings	Collateral	Interest Rate	Maturity	Available Borrowing Capacity		June 30, 2015			December 31, 2014
Lending:
Master repurchase agreement (3)	LHFS	1ML + 175 bps	Jul. 2015	—		172,270			208,010
Participation agreement (4)	LHFS	N/A	Apr. 2016	—		14,401			41,646
Participation agreement (5)	LHFS	N/A	Apr. 2016	—		69,175			196
Master repurchase agreement (6)	LHFS	1ML + 175 - 275 bps	Jul. 2015	—		—			102,073
Master repurchase agreement (7)	LHFI	1ML + 275bps	Jul. 2015	3,900		33,600			52,678
Mortgage warehouse agreement (8)	LHFI	1ML + 275 bps; floor of 350 bps	Jul. 2015	—		25,320			23,851
				3,900		314,766			428,454

				11,032		1,293,769			1,737,722
Discount (1)				—		(3,338		)	(4,031		)
				$	11,032	$	1,290,431		$	1,733,691

Weighted average interest rate						4.37		%	4.33		%


(1)	On March 2, 2015, we entered into an amendment to the SSTL facility agreement. Among other things, the amendment:

•

eliminates the dollar cap on the general asset sale basket and requires Ocwen to use 75% of the net cash proceeds from permitted asset sales under such general asset basket to prepay the loans under the SSTL and, subject to certain conditions, permits Ocwen to use the remaining 25% of such net cash proceeds to reinvest in assets used in the business of OLS and its subsidiaries within 120 days of receipt thereof (subject to an extension of up to 90 days if a binding agreement is entered into within such 120 days); and


•	increases the quarterly covenant levels of the corporate leverage ratio to 3.5-to-1 for the fiscal quarter ended March 31, 2015 and thereafter.


(2)	Under this repurchase agreement, the lender provides financing on a committed basis for $50.0 million and, at the discretion of the lender, on an uncommitted basis for an additional $50.0 million.


(3)	Under this repurchase agreement, the lender provides financing on a committed basis for $150.0 million and, at the discretion of the lender, on an uncommitted basis for an additional $150.0 million. The maturity of this facility has been extended to August 28, 2015.

(4)

Under this participation agreement, the lender provides financing for $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. The transaction does not qualify for sale accounting treatment and is accounted for as a secured borrowing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement. On April 16, 2015, the maximum borrowing capacity was increased to $100.0 million.

(5)

Under this participation agreement, the lender provides financing for $150.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. The transaction does not qualify for sale accounting treatment and is accounted for as a secured borrowing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement.


(6)	On April 16, 2015, this facility was voluntarily terminated.


(7)	On April 16, 2015, the maximum borrowing capacity under this agreement was reduced to $37.5 million.


(8)	Borrowing capacity of $60.0 million under this facility is available at the discretion of the lender. On July 22, 2015, the maturity of this facility was extended to August 26, 2015.

Senior Unsecured Notes

On May 12, 2014, Ocwen completed the issuance and sale of $350.0 million of its 6.625% Senior Notes due 2019 (the Senior Unsecured Notes) in a private offering. The Senior Unsecured Notes are general senior unsecured obligations of Ocwen and will mature on May 15, 2019. Interest is payable semi-annually on May 15^th and November 15^th. The Senior Unsecured Notes are not guaranteed by any of Ocwen’s subsidiaries.

Ocwen entered into a Registration Rights Agreement under which it agreed for the benefit of the initial purchasers of the Senior Unsecured Notes to use commercially reasonable efforts to file a registration statement and to have the registration statement become effective on or prior to 270 days after the closing of the offering. Because the exchange offer was not completed on or before 270 days after the closing of the offering, additional interest accrues on the principal amount of the notes at a rate of 0.25% per annum (which rate will be increased by an additional 0.25% per annum for each subsequent 90-day period that such additional interest continues to accrue to a maximum of 1.0% per annum) until the exchange offer is completed or the shelf registration statement, if required, is declared effective.

In connection with our issuance of the Senior Unsecured Notes, we incurred certain costs that we capitalized and are amortizing over the period from the date of issuance to May 15, 2019. The unamortized balance of these issuance costs was $5.2 million at June 30, 2015.

Covenants

Under the terms of our debt agreements, we are subject to various qualitative and quantitative covenants. Collectively, these covenants include:


•	Financial covenants;


•	Covenants to operate in material compliance with applicable laws;


•	Restrictions on our ability to engage in various activities, including but not limited to incurring additional debt, paying dividends, repurchasing or redeeming capital stock, transferring assets or making loans, investments or acquisitions;


•	Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying certain debt agreements; and


•	Requirements to provide audited financial statements within specified timeframes, including a requirement under our SSTL that Ocwen’s financial statements and the related audit report be unqualified as to going concern.

Financial covenants in our debt agreements require that we maintain, among other things:


•	a specified interest coverage ratio, which is defined under our SSTL as the ratio of four quarter adjusted EBITDA to four quarter interest expense (each as defined therein);


•	a specified corporate leverage ratio, which is defined under our SSTL as consolidated corporate debt to four quarter adjusted EBITDA (each as defined therein);


•	a specified consolidated total debt to consolidated tangible net worth ratio;


•	a specified loan to collateral value ratio, as defined under our SSTL; and


•	specified levels of consolidated tangible net worth, liquidity and at the OLS level, net operating income.

As of June 30, 2015, the most restrictive consolidated tangible net worth requirement was $630.0 million plus 65% of quarterly net income, without adjustment for quarterly net losses, beginning with the three months ended December 31, 2012. The required consolidated tangible net worth in connection with this agreement was $985.7 million at June 30, 2015.

As a result of the covenants to which we are subject, we may be limited in the manner in which we conduct our business and may be limited in our ability to engage in favorable business activities or raise additional capital to finance future operations or satisfy future liquidity needs. In addition, breaches or events that may result in a default under our debt agreements include, among other things, noncompliance with our covenants, nonpayment of principal or interest, material misrepresentations, the occurrence of a material adverse change, insolvency, bankruptcy, certain material judgments and changes of control. Covenants and default provisions of this type are commonly found in debt agreements such as ours. Certain of these covenants and default provisions are open to subjective interpretation and, if our interpretation were contested by a lender, a court may ultimately be required to determine compliance or lack thereof. In addition, our debt agreements generally include cross default provisions such that a default under one agreement could trigger defaults under other agreements. If we fail to comply with our debt agreements and are unable to avoid, remedy or secure a waiver of any resulting default, we may be subject to adverse action by our lenders, including termination of further funding, acceleration of outstanding obligations, enforcement of liens against the assets securing or otherwise supporting our obligations and other legal remedies. Our lenders can waive their contractual rights in the event of a default.

We believe that we are in compliance with all of the qualitative and quantitative covenants in our debt agreements as of the date of these financial statements.