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Business Segment Reporting
 9 Months Ended
Sep. 30, 2016
Segment Reporting [Abstract]  
Business Segment Reporting
Note 16 – Business Segment Reporting
Our business segments reflect the internal reporting that we use to evaluate operating performance of services and to assess the allocation of our resources. A brief description of our current business segments is as follows:
Servicing. This segment is primarily comprised of our core residential servicing business. We provide residential and commercial mortgage loan servicing, special servicing and asset management services. We earn fees for providing these services to owners of the mortgage loans and foreclosed real estate. In most cases, we provide these services either because we purchased the MSRs from the owner of the mortgage, retained the MSRs on the sale of residential mortgage loans or because we entered into a subservicing or special servicing agreement with the entity that owns the MSR. Our residential servicing portfolio includes conventional, government-insured and non-Agency loans. Non-Agency loans include subprime loans, which represent residential loans that generally did not qualify under GSE guidelines or have subsequently become delinquent.
Lending. The Lending segment is focused on originating and purchasing conventional and government-insured residential forward and reverse mortgage loans mainly through our correspondent lending arrangements, broker relationships and directly with mortgage customers. The loans are typically sold shortly after origination into a liquid market on a servicing retained basis.
Corporate Items and Other. Corporate Items and Other includes revenues and expenses that are not directly related to other reportable segments, business activities that are individually insignificant, interest income on short-term investments of cash, interest expense on corporate debt and certain corporate expenses. New business activities that are currently insignificant include providing short-term inventory-secured floor plan loans to independent used car dealerships through our ACS venture. In addition, Ocwen recently formed a wholly-owned captive reinsurance entity, CR Limited (CRL) and signed a quota share re-insurance agreement with a third-party insurer related to coverage on foreclosed real estate properties owned or serviced by Ocwen.
We allocate interest income and expense to each business segment for funds raised or for funding of investments made, including interest earned on cash balances and short-term investments and interest incurred on corporate debt. We also allocate expenses generated by corporate support services to each business segment.
Financial information for our segments is as follows:
 
Servicing
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Results of Operations
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2016
Revenue (1)
$
319,080

 
$
30,696

 
$
9,672

 
$
—

 
$
359,448

 
 
 
 
 
 
 
 
 
 
Expenses (1) (2)
204,434

 
27,735

 
39,509

 
—

 
271,678

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
59

 
3,990

 
1,109

 
—

 
5,158

Interest expense
(101,138
)
 
(3,684
)
 
(6,139
)
 
—

 
(110,961
)
Gain on sale of mortgage servicing rights, net
5,661

 
—

 
—

 
—

 
5,661

Other (1)
13,943

 
322

 
471

 
—

 
14,736

Other income (expense), net
(81,475
)
 
628

 
(4,559
)
 
—

 
(85,406
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
33,171

 
$
3,589

 
$
(34,396
)
 
$
—

 
$
2,364

 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2015
Revenue (1)
$
374,936

 
$
29,662

 
$
348

 
$
—

 
$
404,946

 
 
 
 
 
 
 
 
 
 
Expenses (1) (2)
318,439

 
23,126

 
46,161

 
—

 
387,726

 


 


 


 


 


Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
1,175

 
3,883

 
635

 
—

 
5,693

Interest expense
(109,357
)
 
(2,256
)
 
(6,700
)
 
—

 
(118,313
)
Gain on sale of mortgage servicing rights, net
41,246

 
—

 
—

 
—

 
41,246

Other (1)
(2,303
)
 
425

 
114

 
—

 
(1,764
)
Other income (expense), net
(69,239
)
 
2,052

 
(5,951
)
 
—

 
(73,138
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
(12,742
)
 
$
8,588

 
$
(51,764
)
 
$
—

 
$
(55,918
)
 
 
 
 
 
 
 
 
 
 
 
Servicing
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Nine months ended September 30, 2016
Revenue (1)
$
951,727

 
$
89,255

 
$
22,277

 
$
—

 
$
1,063,259

 
 
 
 
 
 
 
 
 
 
Expenses (1) (2)
741,706

 
78,091

 
165,556

 
—

 
985,353

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
(102
)
 
11,805

 
2,785

 
—

 
14,488

Interest expense
(278,808
)
 
(10,829
)
 
(18,446
)
 
—

 
(308,083
)
Gain on sale of mortgage servicing rights, net
7,689

 
—

 
—

 
—

 
7,689

Other (1)
11,406

 
982

 
(547
)
 
—

 
11,841

Other income (expense), net
(259,815
)
 
1,958

 
(16,208
)
 
—

 
(274,065
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
(49,794
)
 
$
13,122

 
$
(159,487
)
 
$
—

 
$
(196,159
)
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2015
Revenue (1)
$
1,269,269

 
$
106,721

 
$
2,709

 
$
(58
)
 
$
1,378,641

 
 
 
 
 
 
 
 
 
 
Expenses (1) (2)
940,764

 
73,497

 
104,133

 
(58
)
 
1,118,336

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
3,232

 
11,025

 
2,049

 
—

 
16,306

Interest expense
(336,088
)
 
(7,058
)
 
(19,460
)
 
—

 
(362,606
)
Gain on sale of mortgage servicing rights, net
97,958

 
—

 
—

 
—

 
97,958

Other (1)
(15,049
)
 
1,826

 
671

 
—

 
(12,552
)
Other income (expense), net
(249,947
)
 
5,793

 
(16,740
)
 
—

 
(260,894
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
78,558

 
$
39,017

 
$
(118,164
)
 
$
—

 
$
(589
)
 
 
 
 
 
 
 
 
 
 
 
Servicing
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Total Assets
 

 
 

 
 

 
 

 
 

September 30, 2016
$
3,455,598

 
$
3,662,316

 
$
467,536

 
$
—

 
$
7,585,450

 
 
 
 
 
 
 
 
 
 
December 31, 2015
$
4,089,064

 
$
2,811,154

 
$
480,090

 
$
—

 
$
7,380,308

 
 
 
 
 
 
 
 
 
 
September 30, 2015
$
4,653,917

 
$
2,571,893

 
$
753,167

 
$
—

 
$
7,978,977


(1)
Inter-segment billings for services rendered to other segments are recorded as revenues, as contra-expense or as other income, depending on the type of service that is rendered.
(2)
Depreciation and amortization expense are as follows:
 
Servicing
 
Lending
 
Corporate Items and Other
 
Business Segments Consolidated
For the three months ended September 30, 2016
Depreciation expense
$
2,730

 
$
48

 
$
3,651

 
$
6,429

Amortization of mortgage servicing rights
(2,634
)
 
76

 
—

 
(2,558
)
Amortization of debt discount
240

 
—

 
—

 
240

Amortization of debt issuance costs
3,645

 
—

 
332

 
3,977

 
 
 
 
 
 
 
 
For the three months ended September 30, 2015
Depreciation expense
$
694

 
$
96

 
$
4,256

 
$
5,046

Amortization of mortgage servicing rights
18,023

 
85

 
—

 
18,108

Amortization of debt discount
329

 
—

 
—

 
329

Amortization of debt issuance costs
2,981

 
—

 
344

 
3,325

 
 
 
 
 
 
 
 
For the nine months ended September 30, 2016
Depreciation expense
$
5,068

 
$
184

 
$
13,025

 
$
18,277

Amortization of mortgage servicing rights
18,360

 
235

 
—

 
18,595

Amortization of debt discount
623

 
—

 
—

 
623

Amortization of debt issuance costs
9,466

 
—

 
1,009

 
10,475

 
 
 
 
 
 
 
 
For the nine months ended September 30, 2015
Depreciation expense
$
1,736

 
$
292

 
$
11,439

 
$
13,467

Amortization of mortgage servicing rights
87,926

 
262

 
—

 
88,188

Amortization of debt discount
1,022

 
—

 
—

 
1,022

Amortization of debt issuance costs
9,336

 
—

 
1,049

 
10,385