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)

March 31, 2016

December 31, 2015

Advance Receivables Backed Notes - Series 2014-VF3,
Class A

1-Month LIBOR (1ML)(3) + 235 bps (4)

Sep. 2046

Sep. 2016

47,741

113,944

132,651

Advance Receivables Backed Notes - Series 2014-VF3,
Class B

1ML + 300 bps (4)

Sep. 2046

Sep. 2016

2,172

5,452

6,330

Advance Receivables Backed Notes - Series 2014-VF3,
Class C

1ML + 425 bps (4)

Sep. 2046

Sep. 2016

2,426

6,009

6,977



Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Available Borrowing Capacity (2)	March 31, 2016	December 31, 2015
Advance Receivables Backed Notes - Series 2014-VF3, Class D	1ML + 575 bps (4)	Sep. 2046	Sep. 2016	6,404	15,852	18,427
Advance Receivables Backed Notes - Series 2014-VF4, Class A	1ML + 235 bps (4)	Sep. 2046	Sep. 2016	47,741	113,944	132,651
Advance Receivables Backed Notes - Series 2014-VF4, Class B	1ML + 300 bps (4)	Sep. 2046	Sep. 2016	2,172	5,452	6,330
Advance Receivables Backed Notes - Series 2014-VF4, Class C	1ML + 425 bps (4)	Sep. 2046	Sep. 2016	2,426	6,009	6,977
Advance Receivables Backed Notes - Series 2014-VF4, Class D	1ML + 575 bps (4)	Sep. 2046	Sep. 2016	6,404	15,852	18,427
Advance Receivables Backed Notes - Series 2015-VF5, Class A	1ML + 235 bps (4)	Sep. 2046	Sep. 2016	47,742	113,943	132,652
Advance Receivables Backed Notes - Series 2015-VF5, Class B	1ML + 300 bps (4)	Sep. 2046	Sep. 2016	2,172	5,452	6,330
Advance Receivables Backed Notes - Series 2015-VF5, Class C	1ML + 425 bps (4)	Sep. 2046	Sep. 2016	2,426	6,009	6,977
Advance Receivables Backed Notes - Series 2015-VF5, Class D	1ML + 575 bps (4)	Sep. 2046	Sep. 2016	6,404	15,852	18,427
Advance Receivables Backed Notes - Series 2015-T1, Class A (5)	2.5365%	Sep. 2046	Sep. 2016	—	244,809	244,809
Advance Receivables Backed Notes - Series 2015-T1, Class B (5)	3.0307%	Sep. 2046	Sep. 2016	—	10,930	10,930
Advance Receivables Backed Notes - Series 2015-T1, Class C (5)	3.5240%	Sep. 2046	Sep. 2016	—	12,011	12,011
Advance Receivables Backed Notes - Series 2015-T1, Class D (5)	4.1000%	Sep. 2046	Sep. 2016	—	32,250	32,250
Advance Receivables Backed Notes - Series 2015-T2, Class A (5)	2.5320%	Nov. 2046	Nov. 2016	—	161,973	161,973
Advance Receivables Backed Notes - Series 2015-T2, Class B (5)	3.3720%	Nov. 2046	Nov. 2016	—	7,098	7,098
Advance Receivables Backed Notes - Series 2015-T2, Class C (5)	3.7660%	Nov. 2046	Nov. 2016	—	8,113	8,113
Advance Receivables Backed Notes - Series 2015-T2, Class D (5)	4.2580%	Nov. 2046	Nov. 2016	—	22,816	22,816
Advance Receivables Backed Notes - Series 2015-T3, Class A (5)	3.2110%	Nov. 2047	Nov. 2017	—	310,195	310,195



Borrowing Type	Interest Rate	Maturity (1)	Amortization Date (1)	Available Borrowing Capacity (2)		March 31, 2016			December 31, 2015
Advance Receivables Backed Notes - Series 2015-T3, Class B (5)	3.7040%	Nov. 2047	Nov. 2017	—		17,695			17,695
Advance Receivables Backed Notes - Series 2015-T3, Class C (5)	4.1960%	Nov. 2047	Nov. 2017	—		19,262			19,262
Advance Receivables Backed Notes - Series 2015-T3, Class D (5)	4.6870%	Nov. 2047	Nov. 2017	—		52,848			52,848
Total Ocwen Master Advance Receivables Trust (OMART)				176,230		1,323,770			1,393,156
Advance Receivables Backed Notes, Series 2014-VF1, Class A	Cost of Funds + 270 bps	Dec. 2046	Dec. 2016	—		58,221			31,343
Advance Receivables Backed Notes, Series 2014-VF1, Class B	Cost of Funds + 425 bps	Dec. 2046	Dec. 2016	—		6,044			4,157
Advance Receivables Backed Notes, Series 2014-VF1, Class C	Cost of Funds + 470 bps	Dec. 2046	Dec. 2016	—		6,783			4,564
Advance Receivables Backed Notes, Series 2014-VF1, Class D	Cost of Funds + 520 bps	Dec. 2046	Dec. 2016	—		18,952			11,351
Total Ocwen Servicer Advance Receivables Trust III (OSART III) (6)				—		90,000			51,415
Advance Receivables Backed Notes, Series 2015-VF1, Class A	1ML + 212.5 bps	Jun. 2046	Jun. 2016	29,242		100,323			112,882
Advance Receivables Backed Notes, Series 2015-VF1, Class B	1ML + 300 bps	Jun. 2046	Jun. 2016	3,087		10,637			12,268
Advance Receivables Backed Notes, Series 2015-VF1, Class C	1ML + 350 bps	Jun. 2046	Jun. 2016	1,906		5,134			5,951
Advance Receivables Backed Notes, Series 2015-VF1, Class D	1ML + 425 bps	Jun. 2046	Jun. 2016	2,439		7,232			8,377
Total Ocwen Freddie Advance Funding Facility (OFAF) (7)				36,674		123,326			139,478

				$	212,904	$	1,537,096		$	1,584,049

Weighted average interest rate						3.17		%	3.15		%

(1)

The amortization date of our facilities is the date on which the revolving period ends under each advance 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 all 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 March 31, 2016, none of the available borrowing capacity could be used based on the amount of eligible collateral that had been pledged.


(3)	1-Month LIBOR was 0.44% and 0.43% at March 31, 2016 and December 31, 2015, respectively.


(4)	There is a ceiling of 75 bps for 1 ML in determining the interest rate for these variable rate notes.


(5)	Under the terms of the agreement, we must continue to borrow the full amount of the Series 2015-T1, T2 and T3 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.


(6)	On March 31, 2016, the maximum borrowing under the OSART III facility was increased to $90.0 million.


(7)	On March 31, 2016, the combined borrowing capacity of the Series 2015-VF1 Notes was increased to $160.0 million.

Pursuant to our agreements with NRZ, NRZ has 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 Rights to MSRs where we are the 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 March 31, 2016, we were the servicer on Rights to MSRs sold to NRZ pertaining to approximately $132.7 billion in UPB and the associated outstanding servicing advances as of such date were approximately $4.9 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 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.

In addition, although we are not an obligor or guarantor under NRZ’s advance financing facilities, we are a party to certain of the facility documents as the servicer of the underlying loans on which advances are being financed. As the servicer, we make certain representations, warranties and covenants, including representations and warranties in connection with our sale of advances to NRZ.

Financing Liabilities

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



Borrowings	Collateral	Interest Rate	Maturity	March 31, 2016		December 31, 2015
Servicing:
Financing liability – MSRs pledged	MSRs	(1)	(1)	$	523,503	$	541,704
Secured Notes, Ocwen Asset Servicing Income Series, Series 2014-1 (2)	MSRs	(2)	Feb. 2028	93,217		96,546
Financing liability – Advances pledged (3)	Advances on loans	(3)	(3)	54,826		59,643
				671,546		697,893

Lending:
HMBS-related borrowings (4)	Loans held for investment	1ML + 248 bps	(4)	2,648,100		2,391,362

				$	3,319,646	$	3,089,255


(1)	This financing liability arose in connection with the NRZ/HLSS Transactions and has no contractual maturity or repayment schedule. 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		March 31, 2016			December 31, 2015
Servicing:
SSTL (1)	(1)	1-Month Euro-dollar rate + 425 bps with a Eurodollar floor of 125 bps (1)	Feb. 2018	$	—	$	379,895		$	398,454
Repurchase agreement (2)	Loans held for sale (LHFS)	1ML + 200 - 345 bps	Sep. 2016	15,549		34,451			42,973
				15,549		414,346			441,427

Lending:
Master repurchase agreement (3)	LHFS	1ML + 200 bps	Aug. 2016	70,238		129,762			156,226
Participation agreement (4)	LHFS	N/A	Apr. 2016 (4)	—		28,824			49,897
Participation agreement (5)	LHFS	N/A	Apr. 2016 (5)	—		115,107			73,049
Mortgage warehouse agreement (6)	LHFS (reverse mortgages)	1ML + 275 bps; floor of 350 bps	May 2016	—		—			63,175
Master repurchase agreement (7)	LHFS (reverse mortgages)	1ML + 275 bps; 1ML floor of 25 bps	Jan. 2017	48,742		51,258			—
				118,980		324,951			342,347

				134,529		739,297			783,774
Unamortized debt issuance costs - SSTL				—		(19,321		)	(20,012		)
Discount - SSTL				—		(1,146		)	(1,351		)
				$	134,529	$	718,830		$	762,411

Weighted average interest rate						4.46		%	4.38		%

(1)

The borrowings are secured by a first priority security interest in substantially all of the assets of Ocwen. Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate (the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1-Month LIBOR)), plus a margin of 3.25% and subject to a base rate floor of 2.25% or (b) the one month Eurodollar rate, plus a margin of 4.25% and subject to a one month Eurodollar floor of 1.25%. To date we have elected option (b) to determine the interest rate.

We entered into Amendment No. 5 to Senior Secured Term Loan Facility Agreement (the Amendment) effective as of March 28, 2016. The Amendment, among other things:


•	permanently removes the consolidated total debt to consolidated tangible net worth ratio, corporate leverage ratio and interest coverage ratio financial covenants;


•	maintains the loan-to-value ratio covenant at its current 40% level throughout the remaining term of the SSTL;


•	limits the repurchase of Ocwen’s common stock or options to an amount not to exceed the sum of (i) $20 million plus (ii) an amount equal to (x) $20 million times (y) the aggregate amount of prepayments on the SSTL made after March 28, 2016 divided by $50 million;


•	limits the repurchase of Ocwen’s 6.625% Senior Notes (the Senior Unsecured Notes) due 2019 to an amount not to exceed the sum of (i) $30 million plus (ii) an amount equal to (x) $30 million times (y) the aggregate amount of prepayments on the SSTL made after March 28, 2016 divided by $50 million;


•	requires that we make a prepayment on the SSTL in an amount equal to $6.3 million (for a total of $19.0 million) on each of May 31, 2016, July 29, 2016 and September 30, 2016; and


•	provides for a fee payable to the consenting lenders equal to 1.0% of the aggregate amount of such consenting lenders’ SSTL loans outstanding.


(2)	The maximum borrowing under this facility is limited to the lesser of $100.0 million or $550.0 million less the lender’s current lending to Ocwen under advance funding facilities. Fifty percent of the maximum borrowing is available on a committed basis and fifty percent is available at the discretion of the lender.


(3)	Under this repurchase agreement, the lender provides financing on a committed basis for $200.0 million.

(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 11, 2016, we negotiated an extension of this agreement to May 15, 2016 and reduced the maximum borrowing to $75.0 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. On April 11, 2016, we negotiated an extension of this agreement to May 15, 2016 and increased the maximum borrowing to $175.0 million.


(6)	Borrowing capacity of $100.0 million under this facility is available at the discretion of the lender.


(7)	We entered into this agreement on January 5, 2016. The lender provides financing on a committed basis for $100.0 million.

Senior Unsecured Notes

On May 12, 2014, Ocwen completed the issuance and sale of $350.0 million of its 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.

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 balances of Senior Unsecured Notes as reported on our Unaudited Consolidated Balance Sheets are net of unamortized debt issuance costs of $4.2 million and $4.5 million at March 31, 2016 and December 31, 2015, respectively.

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


•	specified levels of tangible net worth and liquidity at the consolidated and OLS levels.

As a result of the Amendment of our SSTL in March 2016, the interest coverage ratio, corporate leverage ratio and consolidated total debt to consolidated tangible net worth financial covenants have been removed.

As of March 31, 2016, the most restrictive consolidated tangible net worth requirements were for a minimum of $1.1 billion at OLS under our match funded debt agreements and a repurchase agreement (Servicing) and $600.0 million at Ocwen under a master repurchase agreement (Lending).

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.