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Sales of Advances and MSRs | 3 Months Ended
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Mar. 31, 2016
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. During the three months ended March 31, 2016 and 2015, we sold MSRs relating to loans with a UPB of $34.5 million (non-Agency) and $9.1 billion (Agency), respectively. The following table provides a summary of the MSRs and advances sold during the three months ended March 31:
| 2016 |  | 2015
| MSRs |  | Advances and Match Funded Advances |  | MSRs |  | Advances and Match Funded Advances
Sales price of assets sold and adjustments: |  |  |  |  |  |  |
Accounted for as a sale | $ | 1,162 |  |  | $ | 261 |  |  | $ | 97,530 |  |  | $ | 1,765 |
Amount due from purchaser at March 31 (1) | — |  |  | — |  |  | (48,065 | ) |  | — |
Amounts received from purchaser for items outstanding at the end of the previous year | 14,143 |  |  | 40,742 |  |  | — |  |  | — |
Total net cash received | $ | 15,305 |  |  | $ | 41,003 |  |  | $ | 49,465 |  |  | $ | 1,765 |
(1) | There were no amounts due from purchaser at March 31, 2016 related to assets sold during the three months ended March 31, 2016. The total amount due at March 31, 2016 on sales of MSRs and advances, which consists only of amounts due on sales completed in 2015, is $39.7 million.
In 2012 and 2013, we sold Rights to MSRs and the related servicing advances to Home Loan Servicing Solutions, Ltd. (HLSS). On April 6, 2015, HLSS closed on the sale of substantially all of its assets to NRZ. References to NRZ in these unaudited consolidated financial statements include HLSS for periods prior to April 6, 2015 because, following HLSS’ sale of substantially all of its assets on April 6, 2015, NRZ, through its subsidiaries, is the owner of the Rights to MSRs and has assumed all rights and obligations under the associated agreements. We refer to the sale of Rights to MSRs and the related servicing advances as the NRZ/HLSS Transactions. Pursuant to our agreements with NRZ, NRZ has assumed the obligation to fund new servicing advances with respect to the Rights to MSRs. We continue to service the loans for which the Rights to MSRs have been sold to NRZ. Accordingly, in the event NRZ were unable to fulfill its advance funding obligations, as the servicer under our servicing agreements with the residential mortgage backed securitization trusts, we would be contractually obligated to fund such advances under those servicing agreements. At March 31, 2016, NRZ had outstanding advances of approximately $4.9 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. Beginning April 7, 2017, we are obligated to transfer legal ownership of the MSRs to NRZ if and when NRZ obtains all required third-party consents and licenses. If and when such transfer of legal ownership occurs, OLS will subservice the loans pursuant to a subservicing agreement, as amended, with NRZ. NRZ has agreed not to direct our replacement as servicer before April 6, 2017 except under certain limited circumstances. Beginning April 7, 2017, under the Master Servicing Rights Purchase Agreement and Sale Supplements with NRZ, if a termination event related to a servicer rating downgrade exists with respect to any servicing agreement, NRZ will have the right to direct the transfer of servicing with respect to any affected servicing agreement to a replacement servicer that obtains all required third-party consents and licenses. As of March 31, 2016, a termination event relating to a servicer rating downgrade exists because our servicer rating from S&P is below “Average.” If our servicer rating from S&P is not upgraded to “Average” or better prior to April 7, 2017, NRZ will have the right to direct the transfer of any affected servicing agreements to a successor servicer that obtains all required third-party consents and licenses. Following any such transfer of an affected servicing agreement, we would no longer be entitled to receive future servicing fee revenue with respect to the transferred servicing agreement. 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 an amortized percentage of NRZ’s purchase price for the related Rights to MSRs. We paid NRZ $2.2 million during the three months ended March 31, 2015 in connection with the termination of four servicing agreements underlying the Rights to MSRs. Our agreements with NRZ provide that, if S&P downgrades our servicer rating to below “Average” (which it has), we will compensate NRZ for certain increased costs associated with its servicing advance financing facilities, including increased costs of funding, to the extent such costs are the direct result of such downgrade. Any such compensation will continue for a maximum of 12 months and will not exceed $3.0 million for any calendar month or $36.0 million in the aggregate. In such circumstances, NRZ must use commercially reasonable efforts to assist us in curing any potential cost increases by obtaining amendments to the relevant financing agreements. We incurred $6.2 million during the three months ended March 31, 2016 in connection with this agreement, and will continue to incur costs through June 2016. Actual future payments in connection with this agreement will vary based on NRZ's outstanding borrowings and movements in applicable floating interest rates. 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 advances in connection with MSR sales, including the NRZ/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 the 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 (Financing liability - Advances pledged).

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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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