Employee Compensation and Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

These awards had the following characteristics in common:



Type of Award	Percent of Options Awarded	Vesting Period
2008 - 2014 Awards:
Options:
Service Condition:
Time-based	25%	Ratably over four years (¼ on each of the four anniversaries of the grant date)
Market Condition:
Market performance-based	50	Over three years beginning with ¼ vesting on the date that the stock price has at least doubled over the exercise price and the compounded annual gain over the exercise price is at least 20% and then ratably over three years (¼ on the next three anniversaries of the achievement of the market condition)
Extraordinary market performance-based	25	Over three years beginning with ¼ vesting on the date that the stock price has at least tripled over the exercise price and the compounded annual gain over the exercise price is at least 25% and then ratably over three years (¼ on the next three anniversaries of the achievement of the market condition)
Total award	100%

2015 Awards:
Options:
Service Condition:
Time-based	35%	Ratably over four years (1/4 vesting on each of the four anniversaries of the grant date.)
Restricted Stock Units:
Service Condition:
Time-based	16	Over four years with 1/3 vesting on each of the 2^nd, 3^rd and 4^th anniversaries of the grant date.
Market Condition:
Time-based vesting schedule and Market performance-based vesting date	49	Vest over four years with 1/4 vesting on each of the four anniversaries of the grant date. However, none are considered vested until the first trading day (if any) on or before the 4^th anniversary of the award date on which the average stock price equals or exceeds the price set in the individual award agreement, at which time all units that have met their time-based vesting schedule vest immediately with the remainder vesting in accordance with their time-based schedule.
Total Award	100%

Schedule of Stock Option Activity

Stock option activity for the years ended December 31:



	2015				2014				2013
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Outstanding at beginning of year	6,828,861		$	9.99	8,182,611		$	10.62	8,938,179		$	9.93
Granted (1)(2)	968,041		$	17.48	330,000		$	34.48	50,000		$	51.70
Exercised (3)(4)	(145,677	)	$	5.24	(683,750	)	$	8.30	(790,568	)	$	5.35
Forfeited/Canceled (1) (2)	(500,000	)	$	24.38	(1,000,000	)	$	24.38	(15,000	)	$	15.27
Outstanding at end of year (5)(6)	7,151,225		$	10.10	6,828,861		$	9.99	8,182,611		$	10.62

Exercisable at end of year (5)(6)(7)	6,187,559		$	8.25	5,750,739		$	6.84	5,733,864		$	6.53

(1)

Stock options granted in 2012 include 2,000,000 options granted to Ocwen’s former Executive Chairman, William C. Erbey at an exercise price of $24.38 equal to the closing price of the stock on the day of the Committee’s approval. On April 22, 2014, Mr. Erbey surrendered 1,000,000 of these options. We recognized the remaining $5.7 million of previously unrecognized compensation expense associated with these options as of the date of surrender.


(2)	Upon Mr. Erbey’s resignation as an officer and director of Ocwen on January 16, 2015, 500,000 of his unvested options would have been forfeited immediately. However, Ocwen agreed to modify the awards to allow them to vest. This had an effect equivalent to the canceling of the original awards and the granting of new awards effective on the date of resignation.


(3)	The total intrinsic value of stock options exercised, which is defined as the amount by which the market value of the stock on the date of exercise exceeds the exercise price, was $0.3 million, $13.7 million and $35.3 million for 2015, 2014 and 2013, respectively.

(4)

In connection with the exercise of stock options during 2015, 2014 and 2013, employees delivered 56,013, 249,696 and 138,553 shares, respectively, of common stock to Ocwen as payment for the exercise price and the income tax withholdings on the compensation. As a result, a total of 89,664, 434,054 and 652,015 net shares of stock were issued in 2015, 2014 and 2013, respectively, related to the exercise of stock options.


(5)	Excluding 340,000 market-based options that have not met their performance criteria, the net aggregate intrinsic value of stock options outstanding and stock options exercisable at December 31, 2015 was $0 and $0, respectively. A total of 4,722,814 market-based options were outstanding at December 31, 2015, of which 4,377,814 were exercisable.


(6)	At December 31, 2015, the weighted average remaining contractual term of options outstanding and options exercisable was 3.93 years and 3.22 years, respectively.


(7)	The total fair value of the stock options that vested and became exercisable during 2015, 2014 and 2013, based on grant-date fair value, was $2.0 million, $2.6 million and $4.7 million, respectively.

Schedule of Assumptions used to Value Stock Option Awards Granted

The following assumptions were used to value awards granted during the years ended December 31:



	2015			2014		2013
	Black-Scholes	Binomial	Monte Carlo	Black-Scholes	Binomial	Black-Scholes	Binomial
Risk-free interest rate	1.60% – 2.08%	0.20% - 2.74%	1.23%	1.98% – 2.60%	0% - 3.05%	2.32%	0.24% - 3.56%
Expected stock price volatility (1)	45%	51% - 108%	65%	42%	41% - 42%	44%	33% - 44%
Expected dividend yield	—%	—%	—%	—%	—%	—%	—%
Expected life (in years) (2)	5.50	5.41 - 5.46	(3)	6.50	4.35 - 5.64	6.50	4.50 - 5.75
Contractual life (in years)	—	10	—	—	10	—	10
Fair value	$3.36 - $4.62	$5.41 - $5.46	$7.99	$11.93 - $17.01	$8.99 - $13.82	$24.32	$18.04 - $21.38


(1)	We estimate volatility based on the historical volatility of Ocwen’s common stock over the most recent period that corresponds with the estimated expected life of the option.

(2)

For the options valued using the Black-Scholes model we determined the expected life based on historical experience with similar awards, giving consideration to the contractual term, exercise patterns and post vesting forfeitures. The expected term of the options valued using the lattice (binomial) model is derived from the output of the model. The lattice (binomial) model incorporates exercise assumptions based on analysis of historical data. For all options, the expected life represents the period of time that options granted were expected to be outstanding at the date of the award.

(3)

The restricted stock units that contain both a service condition and a market-based condition are valued using the Monte Carlo simulation. The expected term is derived from the output of the simulation and represents the expected time to meet the market-based vesting condition. For equity awards with both service and market conditions, the requisite service period is the longer of the derived or explicit service period. In this case, the explicit service condition (vesting period) is the requisite service period, and the graded vesting method is used for expense recognition.

Schedule of Equity-based Compensation Expense Related to Stock Options and Stock Awards and Related Excess Tax Benefit

The following table sets forth equity-based compensation related to stock options and stock awards and the related excess tax benefit for the years ended December 31:



	2015		2014		2013
Equity-based compensation expense:
Stock option awards	$	3,978	$	9,983	$	5,388
Stock awards	3,313		746		260
Excess tax benefit related to share-based awards	6,824		6,374		21,244