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Sales of Advances and MSRs | 9 Months Ended
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Sep. 30, 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. The following table provides a summary of the MSRs and advances sold during the nine months ended September 30:
| 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) | $ | 28,126 |  |  | $ | 30,370 |  |  | $ | 780,410 |  |  | $ | 321,164 |
Amount due from purchaser at September 30 (2) | — |  |  | (2,128 | ) |  | (98,545 | ) |  | (35,226 | )
Amounts paid to purchaser for estimated representation and warranty obligations, compensatory fees and related indemnification obligations | (1,320 | ) |  | — |  |  | (83,806 | ) |  | — |
Amounts received from purchaser for items outstanding at the end of the previous year | 18,448 |  |  | 46,740 |  |  | — |  |  | — |
Total net cash received | $ | 45,254 |  |  | $ | 74,982 |  |  | $ | 598,059 |  |  | $ | 285,938 |
(1) | During the nine months ended September 30, 2016 and 2015, we sold MSRs relating to loans with a UPB of $3.6 billion (Agency and non-Agency) and $86.4 billion (Agency), respectively.
(2) | At September 30, 2016, the total amount due from sales of MSRs and advances, which is reported in Receivables, net, is $31.6 million and consists principally of amounts related to sales completed in 2015.
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. As of September 30, 2016, these Rights to MSRs relate to approximately $123.2 billion in UPB of our non-Agency MSRs. 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 September 30, 2016, NRZ had outstanding advances of approximately $4.3 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. The apportionment of these fees with respect to each tranche of Rights to MSRs sold to NRZ is subject to negotiations required to be commenced by NRZ no later than six months prior to the servicing fee reset date. The servicing fee reset date is 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, unless there is an uncured “termination event” with respect to an affected servicing agreement due to a servicer rating downgrade of OLS’ S&P or Moody’s Investors Service, Inc. (Moody’s), residential primary servicer rating for subprime loans to “Below Average” (or lower) or “SQ4” (or lower), respectively, on the sixth anniversary of the closing date of the particular tranche, in which case such six year anniversary shall be the fee reset date. If the parties are not able to agree on servicing fees prior to the fee reset date, NRZ is required to continue paying under the existing fee structure and the agreements between the parties will continue in effect with respect to each underlying servicing agreement unless and until NRZ directs the transfer of servicing under such servicing agreement to a third-party servicer with respect to which all required third-party consents and licenses have been obtained. 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 and the subservicing agreement will have a subservicing fee reset date comparable to the servicing fee reset date described above. NRZ has agreed not to direct our replacement as servicer before April 6, 2017 except under certain limited circumstances. Beginning April 7, 2017, NRZ will have a general right to direct us to transfer servicing of the servicing agreements underlying the Rights to MSRs to a third party that can obtain all required third-party consents provided that the transfer is subject to our continued right to be paid the servicing fees and other amounts payable under our agreements. Under our agreements with NRZ, NRZ has the right to direct the transfer of any affected servicing agreement to a successor servicer if certain specified termination events occur. One of those termination events requires us to maintain certain minimum residential primary servicer ratings. Following a “standstill” period that extends through April 6, 2017, if a termination event related to a servicer rating has occurred and 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. 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 nine months ended September 30, 2015 in connection with the termination of four servicing agreements underlying the Rights to MSRs due to servicer rating downgrades. Under our agreements with NRZ, if S&P downgraded our servicer rating to below “Average” (which it did in 2015), we agreed to compensate NRZ for certain increased costs associated with its servicing advance financing facilities. This compensation requirement continued for a period of 12 months (through June 2016). We incurred $10.5 million in 2016 and $8.5 million during the nine months ended September 30, 2015 in connection with this compensation requirement. 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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