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Business Segment Reporting
 9 Months Ended
Sep. 30, 2017
Segment Reporting [Abstract]  
Business Segment Reporting
Note 18 – 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. While our expense allocation methodology for the current period is consistent with that used in prior periods presented, during the first quarter of 2017, we moved certain functions which had been associated with corporate cost centers to our Lending and Servicing segments because these functions align more closely with those segments. As applicable, the results of operations for the three and nine months ended September 30, 2016 have been recast to conform to the current period presentation. As a result of these changes, income before income taxes for the Lending segment for the three and nine months ended September 30, 2016 decreased by $2.3 million and $7.4 million, respectively, while income before income taxes for the Servicing segment increased by the same amounts for the same periods.
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 originates and purchases conventional and government-insured residential forward and reverse mortgage loans mainly through correspondent lending arrangements, broker relationships (wholesale) and directly with mortgage customers (retail). The loans are typically sold shortly after origination into a liquid market on a servicing retained (securitization) or servicing released (sale to a third party) basis. In the second quarter of 2017, we closed our correspondent forward lending channel due to low margins and began selling all of our wholesale forward lending channel originations on a servicing released basis to reduce capital consumption. In the third quarter of 2017, we entered into an agreement to sell certain of our wholesale forward lending assets, and, upon closing of that transaction, we intend to exit the wholesale forward lending business. We continue to acquire loans through the retail forward lending channel as well as through all three channels of reverse mortgage lending.
Corporate Items and Other. Corporate Items and Other includes revenues and expenses of ACS and CR Limited (CRL), our wholly-owned captive reinsurance subsidiary, and our other business activities that are individually insignificant, revenues and expenses that are not directly related to other reportable segments, interest income on short-term investments of cash, interest expense on corporate debt and certain corporate expenses. Our cash balances are included in Corporate Items and Other. ACS provides short-term inventory-secured loans to independent used car dealers to finance their inventory.
We allocate a portion of interest income to each business segment, including interest earned on cash balances and short-term investments. We also allocate expenses incurred 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, 2017
Revenue
$
246,545

 
$
31,935

 
$
6,162

 
$
—

 
$
284,642

 
 
 
 
 
 
 
 
 
 
Expenses
218,565

 
38,412

 
16,502

 
—

 
273,479

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
144

 
2,857

 
1,098

 
—

 
4,099

Interest expense
(28,568
)
 
(4,504
)
 
(14,209
)
 
—

 
(47,281
)
Gain on sale of mortgage servicing rights, net
6,543

 
—

 
—

 
—

 
6,543

Other
(418
)
 
555

 
(1,214
)
 
—

 
(1,077
)
Other expense, net
(22,299
)
 
(1,092
)
 
(14,325
)
 
—

 
(37,716
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
5,681

 
$
(7,569
)
 
$
(24,665
)
 
$
—

 
$
(26,553
)
 
 
 
 
 
 
 
 
 
 
 
Servicing
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Three months ended September 30, 2016
Revenue
$
319,080

 
$
30,696

 
$
9,672

 
$
—

 
$
359,448

 
 
 
 
 
 
 
 
 
 
Expenses
202,156

 
30,013

 
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
13,943

 
322

 
471

 
—

 
14,736

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

 
(4,559
)
 
—

 
(85,406
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
35,449

 
$
1,311

 
$
(34,396
)
 
$
—

 
$
2,364

 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2017
Revenue
$
802,347

 
$
95,457

 
$
20,002

 
$
—

 
$
917,806

 
 
 
 
 
 
 
 
 
 
Expenses
637,406

 
100,628

 
92,308

 
—

 
830,342

 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
Interest income
406

 
8,612

 
3,083

 
—

 
12,101

Interest expense
(159,822
)
 
(11,171
)
 
(41,478
)
 
—

 
(212,471
)
Gain on sale of mortgage servicing rights, net
7,863

 
—

 
—

 
—

 
7,863

Other
4,642

 
658

 
1,084

 
—

 
6,384

Other expense, net
(146,911
)
 
(1,901
)
 
(37,311
)
 
—

 
(186,123
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
18,030

 
$
(7,072
)
 
$
(109,617
)
 
$
—

 
$
(98,659
)
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2016
Revenue
$
951,727

 
$
89,255

 
$
22,277

 
$
—

 
$
1,063,259

 
 
 
 
 
 
 
 
 
 
Expenses
734,326

 
85,471

 
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
11,406

 
982

 
(547
)
 
—

 
11,841

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

 
(16,208
)
 
—

 
(274,065
)
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
$
(42,414
)
 
$
5,742

 
$
(159,487
)
 
$
—

 
$
(196,159
)
 
 
 
 
 
 
 
 
 
 
 
Servicing
 
Lending
 
Corporate Items and Other
 
Corporate Eliminations
 
Business Segments Consolidated
Total Assets
 

 
 

 
 

 
 

 
 

September 30, 2017
$
2,905,817

 
$
4,679,641

 
$
512,147

 
$
—

 
$
8,097,605

 
 
 
 
 
 
 
 
 
 
December 31, 2016
$
3,312,371

 
$
3,863,862

 
$
479,430

 
$
—

 
$
7,655,663

 
 
 
 
 
 
 
 
 
 
September 30, 2016
$
3,455,613

 
$
3,662,339

 
$
467,498

 
$
—

 
$
7,585,450


 
Servicing
 
Lending
 
Corporate Items and Other
 
Business Segments Consolidated
Depreciation and Amortization Expense
 
 
 
 
 
 
 
Three months ended September 30, 2017
Depreciation expense
$
1,525

 
$
57

 
$
5,408

 
$
6,990

Amortization of mortgage servicing rights
13,081

 
67

 
—

 
13,148

Amortization of debt discount
—

 
—

 
258

 
258

Amortization of debt issuance costs
—

 
—

 
644

 
644

 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
Nine months ended September 30, 2017
Depreciation expense
$
4,393

 
$
162

 
$
15,875

 
$
20,430

Amortization of mortgage servicing rights
38,351

 
209

 
—

 
38,560

Amortization of debt discount
—

 
—

 
797

 
797

Amortization of debt issuance costs
—

 
—

 
1,979

 
1,979

 
 
 
 
 
 
 
 
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