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Employee Compensation and Benefit Plans | 12 Months Ended
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Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Employee Compensation and Benefit Plans | Note 21 — Employee Compensation and Benefit Plans We maintain a defined contribution plan to provide post-retirement benefits to our eligible employees. We also maintain additional compensation plans for certain employees. We designed these plans to facilitate a pay-for-performance culture, further align the interests of our officers and key employees with the interests of our shareholders and assist in attracting and retaining employees vital to our long-term success. These plans are summarized below. Retirement Plan We maintain defined contribution plans for employees in the U.S (401(k) plan) and India (Provident Fund). Generally, for the 401(k) plan, we match 50% of each employee’s contributions, limited to 2% of the employee’s compensation. For the Provident Fund, b oth th e e mpl oyee and th e employer are required to make minimum con tributi ons to th e fund at a predetermined rat e (currently 12%) applied to a portion of the employee's sala r y. Employers are not required to make contributions beyond this minimum. Our contributions to these plans were $5.0 million, $5.4 million and $5.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. Annual Incentive Plan The Ocwen Financial Corporation Amended 1998 Annual Incentive Plan and the 2007 Equity Incentive Plan (the 2007 Equity Plan) are our primary incentive compensation plans for executives and other eligible employees. Under the terms of these plans, participants can earn cash and equity-based awards as determined by the Compensation Committee of the Board of Directors (the Committee). The awards are based on objective and subjective performance criteria established by the Committee. The Committee may at its discretion adjust performance measurements to reflect significant unforeseen events. We recognized $25.5 million, $30.2 million and $13.5 million of compensation expense during 2016, 2015 and 2014, respectively, related to annual incentive compensation awarded in cash. The 2007 Equity Plan authorizes the grant of stock options, restricted stock or other equity-based awards to employees. At December 31, 2016, there were 5,097,874 shares of common stock remaining available for future issuance under the 2007 Equity Plan. Beginning in 2008, Ocwen granted equity-based awards to certain members of senior management that included stock options, a portion of which included only a service condition and a portion of which included only a market condition. Beginning in 2015, Ocwen began granting equity awards to certain members of senior management that included stock options with only a service condition, stock units with only a service condition and stock units with both a service condition and a market condition. These awards had the following characteristics in common:
Type of Award |  | Percent of Total Equity Award |  | Vesting Period
2008 - 2014 Awards: |  |  |  |
Options: |  |  |  |
Service Condition: |  |  |  |
Time-based |  | 25 | % |  | Ratably over four years (25% on each of the four anniversaries of the grant date)
Market Condition: |  |  |  |  |
Market performance-based |  | 50 |  |  | Over three years beginning with 25% 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 (25% on each of the next three anniversaries of the achievement of the market condition)
Extraordinary market performance-based |  | 25 |  |  | Over three years beginning with 25% 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 (25% on each of the next three anniversaries of the achievement of the market condition)
Total award |  | 100 | % |  |
Type of Award |  | Percent of Total Equity Award |  | Vesting Period
2015 Awards: |  |  |  |
Options: |  |  |  |
Service Condition: |  |  |  |
Time-based |  | 35 | % |  | Ratably over four years (25% vesting on each of the first four anniversaries of the grant date.)
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 25% 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 | % |  |
2016 Awards: |  |  |  |
Stock Units: |  |  |  |
Service Condition: |  |  |  |
Time-based |  | 47 | % |  | Over four years with 25% vesting on each of the first four anniversaries of the grant date.
Market Condition: |  |  |  |
Time-based vesting schedule and Market performance-based vesting date |  | 53 |  |  | Vest over four years with 25% 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 | % |  |
The contractual term of all options granted is ten years from the grant date, except where employment terminates by reason of death, disability or retirement, in which case, the agreement may provide for an earlier termination of the options. The terms of the market-based options do not include a retirement provision. Stock units have a four-year term. If the market conditions are not met by the fourth anniversary of the award of stock units, those units terminate on that date. Stock option activity for the years ended December 31 was as follows:
| 2016 |  | 2015 |  | 2014
| 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 | 7,151,225 |  |  | $ | 10.10 |  |  | 6,828,861 |  |  | $ | 9.99 |  |  | 8,182,611 |  |  | $ | 10.62 |
Granted (1)(2) | — |  |  | $ | — |  |  | 968,041 |  |  | $ | 17.48 |  |  | 330,000 |  |  | $ | 34.48 |
Exercised (3)(4) | (69,805 | ) |  | $ | 5.81 |  |  | (145,677 | ) |  | $ | 5.24 |  |  | (683,750 | ) |  | $ | 8.30 |
Forfeited/Canceled (1)(5) | (154,786 | ) |  | $ | 21.80 |  |  | (500,000 | ) |  | $ | 24.38 |  |  | (1,000,000 | ) |  | $ | 24.38 |
Outstanding at end of year (6)(7) | 6,926,634 |  |  | $ | 9.88 |  |  | 7,151,225 |  |  | $ | 10.10 |  |  | 6,828,861 |  |  | $ | 9.99 |
Exercisable at end of year (6)(7)(8) | 6,344,958 |  |  | $ | 8.71 |  |  | 6,187,559 |  |  | $ | 8.25 |  |  | 5,750,739 |  |  | $ | 6.84 |
(1) | 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.
(2) | The weighted average grant date fair value of stock options granted was $3.28 and $12.94 during 2015 and 2014, respectively.
(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 $0.1 million, $0.3 million and $13.7 million for 2016, 2015 and 2014, respectively.
(4) | In connection with the exercise of stock options during 2015 and 2014, employees delivered 56,013 and 249,696 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 and 434,054 net shares of stock were issued in 2015 and 2014, respectively, related to the exercise of stock options.
(5) | Stock options granted in 2012 included 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.
(6) | Excluding 280,000 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, 2016 was $0 and $0, respectively. A total of 4,662,814 market-based options were outstanding at December 31, 2016, of which 4,382,814 were exercisable.
(7) | At December 31, 2016, the weighted average remaining contractual term of options outstanding and options exercisable was 2.86 years and 2.42 years, respectively.
(8) | The total fair value of the stock options that vested and became exercisable during 2016, 2015 and 2014, based on grant-date fair value, was $1.1 million, $2.0 million and $2.6 million, respectively.
Stock unit activity for the years ended December 31 was as follows:
| 2016 |  | 2015 |  | 2014
| Number of Stock Units |  | Weighted Average Grant Date Fair Value |  | Number of Stock Units |  | Weighted Average Grant Date Fair Value |  | Number of Stock Units |  | Weighted Average Grant Date Fair Value
Unvested at beginning of year | 835,730 |  |  | $ | 10.00 |  |  | 79,612 |  |  | $ | 32.23 |  |  | 28,235 |  |  | $ | 25.23 |
Granted (1)(2) | 2,184,100 |  |  | $ | 2.19 |  |  | 790,397 |  |  | $ | 8.53 |  |  | 63,500 |  |  | $ | 34.34 |
Vested (3)(4) | (26,666 | ) |  | $ | 32.56 |  |  | (34,279 | ) |  | $ | 27.92 |  |  | (12,123 | ) |  | $ | 26.98 |
Forfeited/Canceled | (241,110 | ) |  | $ | 6.17 |  |  | — |  |  | $ | — |  |  | — |  |  | $ | — |
Unvested at end of year (5)(6) | 2,752,054 |  |  | $ | 3.91 |  |  | 835,730 |  |  | $ | 10.00 |  |  | 79,612 |  |  | $ | 32.23 |
(1) | Stock units granted in 2015 included 584,438 stock units with a market condition for vesting based on an average common stock trading price of $16.26. As of December 31, 2016, these awards had not yet met the market condition.
(2) | Stock units granted in 2016 included 1,156,500 stock units with a market condition for vesting based on an average common stock trading price of $4.78. The market condition for these awards was met on November 30, 2016.
(3) | The total intrinsic value of stock units vested, which is defined as the market value of the stock on the date of vesting, was $0.1 million, $0.3 million and $0.3 million for 2016, 2015 and 2014, respectively.
(4) | The total fair value of the stock units that vested during 2016, 2015 and 2014, based on grant-date fair value, was $0.9 million, $1.0 million and $0.3 million, respectively.
(5) | Excluding the 502,446 market-based stock awards that have not met their performance criteria, the net aggregate intrinsic value of stock awards outstanding at December 31, 2016 was $12.1 million.
(6) | At December 31, 2016, the weighted average remaining contractual term of share units outstanding was 2.60 years.
Compensation expense related to equity-based awards is measured based on the grant-date fair value of the awards using an appropriate valuation model based on the vesting conditions of the awards. The fair value of the time-based option awards was determined using the Black-Scholes options pricing model, while a lattice (binomial) model was used to determine the fair value of the market-based option awards. Lattice (binomial) models incorporate ranges of assumptions for inputs. Stock unit awards with only a service condition are valued at their intrinsic value, which is the market value of the stock on the date of the award. The fair value of Stock unit awards with both a service condition and a market-based vesting condition is based on the output of a Monte Carlo simulation. The following assumptions were used to value awards granted during the years ended December 31:
| 2016 |  | 2015 |  | 2014
| Monte Carlo |  | Black-Scholes |  | Binomial |  | Monte Carlo |  | Black-Scholes |  | Binomial
Risk-free interest rate | 1.12% |  | 1.60% – 2.08% |  | 0.20% - 2.74% |  | 1.23% |  | 1.98% – 2.60% |  | 0% - 3.05%
Expected stock price volatility (1) | 77% |  | 45% |  | 51% - 108% |  | 65% |  | 42% |  | 41% - 42%
Expected dividend yield | —% |  | —% |  | —% |  | —% |  | —% |  | —%
Expected life (in years) (2) | (3) |  | 5.50 |  | 5.41 - 5.46 |  | (3) |  | 6.50 |  | 4.35 - 5.64
Contractual life (in years) | — |  | — |  | 10 |  | — |  | — |  | 10
Fair value | $2.00 |  | $3.36 - $4.62 |  | $5.41 - $5.46 |  | $7.99 |  | $11.93 - $17.01 |  | $8.99 - $13.82
(1) | We generally 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. For stock awards valued using a Monte Carlo simulation, volatility is computed as a blend of historical volatility and implied volatility based on traded options on Ocwen’s common stock.
(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 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.
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:
| 2016 |  | 2015 |  | 2014
Equity-based compensation expense: |  |  |  |  |
Stock option awards | $ | 1,644 |  |  | $ | 3,978 |  |  | $ | 9,983 |
Stock awards | 3,537 |  |  | 3,313 |  |  | 746 |
Excess tax benefit related to share-based awards | 686 |  |  | 6,824 |  |  | 6,374 |
As of December 31, 2016, unrecognized compensation costs related to non-vested stock options amounted to $2.4 million, which will be recognized over a weighted-average remaining requisite service period of 1.87 years. Unrecognized compensation costs related to non-vested stock units as of December 31, 2016 amounted to $5.1 million, which will be recognized over a weighted-average remaining life of 1.91 years.

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References No definition available. + Details
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