Mortgage Servicing (Tables)

12 Months Ended

Dec. 31, 2016

Summary of Activity in Carrying Value of Amortization Method Servicing Assets

The following table summarizes changes in the net carrying value of servicing assets that we account for using the amortization method for the years ended December 31.



	2016			2015			2014
Beginning balance	$	377,379		$	1,820,091		$	1,953,352
Fair value election - transfer to MSRs carried at fair value (1)	—			(787,142		)	—
Additions recognized in connection with business acquisitions (2) (3)	—			—			20,378
Additions recognized in connection with asset acquisitions	17,356			12,356			35,326
Additions recognized on the sale of mortgage loans	37,231			34,961			63,310
Sales	(24,452		)	(586,352		)	(137		)
Servicing transfers and adjustments	—			—			(1,763		)
	407,514			493,914			2,070,466
Increase in impairment valuation allowance (4)	(10,813		)	(17,341		)	—
Amortization	(32,979		)	(99,194		)	(250,375		)
Ending balance	$	363,722		$	377,379		$	1,820,091

Estimated fair value at end of year	$	467,911		$	461,555		$	2,237,703

(1)

Effective January 1, 2015, we elected fair value accounting for a newly-created class of non-Agency MSRs, which were previously accounted for using the amortization method, based on a different strategy for managing the risks of the underlying portfolio compared to our other MSR classes. This irrevocable election applies to all subsequently acquired or originated servicing assets and liabilities that have characteristics consistent with this class. We recorded a cumulative-effect adjustment of $52.0 million (before deferred income taxes of $9.2 million) to retained earnings as of January 1, 2015 to reflect the excess of the fair value of these MSRs over their carrying amount. At December 31, 2014, the UPB of the loans related to the non-Agency MSRs for which the fair value election was made was $195.3 billion.

(2)

As of the February 15, 2013 acquisition date, the purchase of certain MSRs from Residential Capital, LLC (ResCap) was not complete pending the receipt of certain consents and court approvals. Subsequent to the acquisition, we obtained the required consents and approvals for a portion of these MSRs and, in 2014, paid an additional purchase price of $54.2 million, which included $11.4 million to acquire the MSRs and $39.2 million to acquire the related advances. We recorded a contingent asset effective as of the ResCap acquisition date.


(3)	On January 31, 2014, we increased our ownership in Ocwen Structured Investments, LLC (OSI) from 26.00% to 87.35%. The acquired net assets were $20.0 million and consisted primarily of MSRs ($9.0 million), mortgage-backed securities ($7.7 million) and cash ($3.2 million).


(4)	Impairment of MSRs is recognized in Servicing and origination expense in the consolidated statements of operations.

Schedule of Estimated Amortization Expense for MSRs

The estimated amortization expense for MSRs, calculated based on assumptions used at December 31, 2016, is projected as follows over the next five years:



2017	$	45,960
2018	37,158
2019	35,264
2020	35,832
2021	33,134

Summary of Activity Related to Fair Value Servicing Assets

The following table summarizes changes in the fair value of servicing assets that we account for at fair value on a recurring basis for the years ended December 31:



	2016									2015									2014
	Agency			Non-Agency			Total			Agency			Non-Agency			Total			Agency
Beginning balance	$	15,071		$	746,119		$	761,190		$	93,901		$	—		$	93,901		$	116,029
Fair value election - transfer from MSRs carried at amortized cost	—			—			—			—			787,142			787,142			—
Cumulative effect of fair value election	—			—			—			—			52,015			52,015			—
Sales	(3		)	(145		)	(148		)	(70,930		)	(1,344		)	(72,274		)	—
Additions recognized on the sale of residential mortgage loans	—			—			—			—			1,007			1,007			—
Servicing transfers and adjustments	—			(1,548		)	(1,548		)	—			(2,428		)	(2,428		)	—
Changes in fair value (1):																—
Changes in valuation inputs or other assumptions	305			—			305			(639		)	10,684			10,045			(15,028		)
Realization of expected future cash flows and other changes	(2,016		)	(78,527		)	(80,543		)	(7,261		)	(100,957		)	(108,218		)	(7,100		)
Ending balance	$	13,357		$	665,899		$	679,256		$	15,071		$	746,119		$	761,190		$	93,901


(1)	Changes in fair value are recognized in Servicing and origination expense in the consolidated statements of operations.

Summary of Estimated Change in the Value of MSRs Carried at Fair Value

The following table summarizes the estimated change in the value of the MSRs that we carry at fair value as of December 31, 2016 given hypothetical shifts in lifetime prepayments and yield assumptions:



	Adverse change in fair value
	10%			20%
Weighted average prepayment speeds	$	(64,604	)	$	(131,414	)
Discount rate (option-adjusted spread)	$	(19,043	)	$	(34,224	)

Schedule of Composition of Primary Servicing and Subservicing Portfolios by Type of Property Serviced as Measured by UPB

The following table presents the composition of our primary servicing and subservicing portfolios by type of property serviced as measured by UPB. The servicing portfolio represents loans for which we own the servicing rights while subservicing represents all other loans. The UPB of assets serviced for others are not included on our consolidated balance sheets.



	Residential		Commercial		Total
UPB at December 31, 2016
Servicing	$	86,049,298	$	—	$	86,049,298
Subservicing	4,330,084		92,933		4,423,017
NRZ (1)	118,712,748		—		118,712,748
	$	209,092,130	$	92,933	$	209,185,063
UPB at December 31, 2015
Servicing	$	100,058,745	$	—	$	100,058,745
Subservicing	13,764,558		105,268		13,869,826
NRZ (1)	137,142,809		—		137,142,809
	$	250,966,112	$	105,268	$	251,071,380
UPB at December 31, 2014
Servicing	$	208,135,523	$	—	$	208,135,523
Subservicing	29,806,924		149,737		29,956,661
NRZ (1)	160,785,280		—		160,785,280
	$	398,727,727	$	149,737	$	398,877,464


(1)	UPB of loans serviced for which the Rights to MSRs have been sold to NRZ.

Summary of Geographic Distributions of UPB and Count of Residential Loans and Real Estate Serviced

At December 31, 2016, the geographic distribution of the UPB and count of residential loans and real estate we serviced was as follows:



	Amount		Count
California	$	48,094,471	191,031
New York	18,741,164		79,197
Florida	17,282,020		126,949
New Jersey	10,254,163		49,857
Texas	9,522,228		109,763
Other	105,198,084		836,969
	$	209,092,130	1,393,766

Schedule of Components of Servicing and Subservicing Fees

The following table presents the components of servicing and subservicing fees for the years ended December 31:



	2016		2015		2014
Loan servicing and subservicing fees:
Servicing	$	293,210	$	453,445	$	627,678
Subservicing	21,427		58,384		128,797
NRZ	633,545		694,833		736,122
	948,182		1,206,662		1,492,597
Home Affordable Modification Program (HAMP) fees	110,367		135,036		141,121
Late charges	66,709		82,690		121,618
Loan collection fees	27,213		31,763		33,983
Custodial accounts (float earnings)	8,969		15,870		6,693
Other	25,180		59,776		98,163
	$	1,186,620	$	1,531,797	$	1,894,175