Note 12 — Borrowings



Match Funded Liabilities					December 31, 2017				December 31, 2016
Borrowing Type	Maturity (1)	Amorti-zation Date (1)	Available Borrowing Capacity (2)		Weighted Average Interest Rate (3)		Balance		Weighted Average Interest Rate (3)		Balance
Advance Financing Facilities
Advance Receivables Backed Notes, Series 2014-VF3	Aug. 2047	Aug. 2017	$	—	—	%	$	—	3.12	%	$	74,394
Advance Receivables Backed Notes, Series 2014-VF4 (4)	Aug. 2048	Aug. 2018	37,905		4.29		67,095		3.12		74,394
Advance Receivables Backed Notes - Series 2015-VF5 (4)	Aug. 2048	Aug. 2018	37,905		4.29		67,095		3.12		74,394
Advance Receivables Backed Notes - Series 2015-T3 (5)	Nov. 2047	Nov. 2017	—		—		—		3.48		400,000
Advance Receivables Backed Notes - Series 2016-T1 (5)	Aug. 2048	Aug. 2018	—		2.77		265,000		2.77		265,000
Advance Receivables Backed Notes - Series 2016-T2 (5)	Aug. 2049	Aug. 2019	—		2.99		235,000		2.99		235,000
Advance Receivables Backed Notes - Series 2017-T1 (5)	Sep. 2048	Sep. 2018	—		2.64		250,000		—		—
Total Ocwen Master Advance Receivables Trust (OMART)			75,810		3.02		884,190		3.14		1,123,182

Total Ocwen Servicer Advance Receivables Trust III (OSART III) - Advance Receivables Backed Notes, Series 2014-VF1 (6)	Dec. 2048	Dec. 2018	21,232		4.63		33,768		4.63		63,093

Ocwen Freddie Advance Funding (OFAF) - Advance Receivables Backed Notes, Series 2015-VF1 (7)	Jun. 2048	Jun. 2018	53,922		4.52		56,078		3.54		94,722
Total Servicing Advance Financing Facilities			150,964		3.16	%	974,036		3.21	%	1,280,997

Automotive Capital Asset Receivables Trust (ACART) - Loan Series 2017-1 (8)	Feb. 2021	Feb. 2019	25,418		6.77	%	24,582		—	%	—

			$	176,382	3.25	%	$	998,618	3.21	%	$	1,280,997

(1)

The amortization date of our facilities is the date on which the revolving period ends under each advance facility note and repayment of the outstanding balance must begin if the note is not renewed or extended. The maturity date is the date on which all outstanding balances must be repaid. In all of our advance facilities, there are multiple notes outstanding. For each note, after the amortization date, all collections that represent the repayment of advances pledged to the facility must be applied to reduce the balance of the note outstanding, and any new advances are ineligible to be financed.


(2)	Borrowing capacity is available to us provided that we have eligible collateral to pledge. Collateral may only be pledged to one facility. At December 31, 2017, $12.4 million of the available borrowing capacity of our advance financing notes could be used based on the amount of eligible collateral that had been pledged.


(3)	1ML was 1.56% and 0.77% at December 31, 2017 and 2016, respectively.


(4)	Effective January 1, 2018, the borrowing capacity of the Series 2014-VF4 and the Series 2014-VF5 variable rate notes were each reduced from $105.0 million to $70.0 million. There is a ceiling of 125 basis points (bps) for 1ML in determining the interest rate for these variable rate notes. Rates on the individual notes are based on 1ML plus a margin of 235 to 635 bps.

(5)

Under the terms of the agreement, we must continue to borrow the full amount of the Series 2016-T1 and Series 2016-T2 fixed-rate term notes until the amortization date. If there is insufficient eligible collateral to support the level of borrowing, the excess cash proceeds in an amount necessary to make up the deficit are not distributed to Ocwen but are held by the trustee, and interest expense continues to be based on the full amount of the outstanding notes. The Series 2016-T1, Series 2016-T2 and Series 2017-T1 term notes have a total combined borrowing capacity of $750.0 million. Rates on the individual classes of notes range from 2.4989% to 4.4456%.


(6)	The maximum borrowing capacity under this facility is $55.0 million. There is a ceiling of 300 bps for 1ML in determining the interest rate for these variable rate notes. Rates on the individual notes are based on the lender’s cost of funds plus a margin of 235 to 475 bps.


(7)	The combined borrowing capacity of the notes is $110.0 million with interest computed based on the lender’s cost of funds plus a margin of 250 to 500 bps. There is a ceiling of 300 bps for 1ML in determining the interest rate for these variable rate notes.


(8)	The committed borrowing capacity for the Loan Series 2017-1 Notes is $50.0 million at December 31, 2017. Rates on the Loan Series 2017-1 Notes are based on cost of funds plus a margin of 500 bps. On January 23, 2018, we voluntarily terminated the Loan Series 2017-1 Notes.

Pursuant to the Existing Rights to MSRs Agreements, NRZ assumed the obligation to fund new servicing advances with respect to the MSRs underlying the Rights to MSRs. We are dependent upon NRZ for funding the servicing advance obligations for Rights to MSRs where we are the servicer. NRZ currently uses advance financing facilities in order to fund a substantial portion of the servicing advances that they are contractually obligated to purchase pursuant to our agreements with them. As of December 31, 2017, we were the servicer on Rights to MSRs sold to NRZ pertaining to approximately $101.8 billion in UPB and the associated outstanding servicing advances as of such date were approximately $3.2 billion. Should NRZ’s advance financing facilities fail to perform as envisaged or should NRZ otherwise be unable to meet its advance funding obligations, our liquidity, financial condition and business could be materially and adversely affected. As the servicer, we are contractually required under our servicing agreements to make the relevant servicing advances even if NRZ does not perform its contractual obligations to fund those advances. See Note 8 — Rights to MSRs for additional information.

In addition, although we are not an obligor or guarantor under NRZ’s advance financing facilities, we are a party to certain of the facility documents as the servicer of the underlying loans on which advances are being financed. As the servicer, we make certain representations, warranties and covenants, including representations and warranties in connection with advances subsequently sold to, or reimbursed by, NRZ.



Financing Liabilities				Balance at December 31,
Borrowing Type	Collateral	Interest Rate	Maturity	2017		2016
HMBS-Related Borrowings, at fair value (1)	Loans held for investment	1ML + 260 bps	(1)	4,601,556		3,433,781

Other Financing Liabilities
MSRs pledged, at fair value
Existing Rights to MSRs Agreements	MSRs	(2)	(2)	499,042		477,707
2017 Agreements	MSRs	(3)	(3)	9,249		—
				508,291		477,707
Secured Notes, Ocwen Asset Servicing Income Series, Series 2014-1 (4)	MSRs	(4)	Feb. 2028	72,575		81,131
Advances pledged (5)	Advances on loans	(5)	(5)	12,652		20,193
				593,518		579,031

				$	5,195,074	$	4,012,812


(1)	Represents amounts due to the holders of beneficial interests in Ginnie Mae guaranteed HMBS. The beneficial interests have no maturity dates, and the borrowings mature as the related loans are repaid.


(2)	This financing liability has no contractual maturity or repayment schedule. The balance of the liability is adjusted each reporting period to its fair value based on the present value of the estimated future cash flows underlying the related MSRs.

(3)

This financing liability arose in connection with lump sum payments received upon transfer of legal title of the MSRs related to the Rights to MSRs transactions to NRZ. We received lump sum payments of $54.6 million as compensation for foregoing certain payments under the Existing Rights to MSRs Agreements. This liability has no contractual maturity or repayment schedule. The balance of the liability is adjusted each reporting period to its fair value based on the present value of the estimated future cash flows.

(4)

OASIS noteholders are entitled to receive a monthly payment equal to the sum of: (a) 21 basis points of the UPB of the reference pool of Freddie Mac mortgages; (b) any termination payment amounts; (c) any excess refinance amounts; and (d) the note redemption amounts, each as defined in the indenture supplement for the notes. Monthly amortization of the liability is estimated using the proportion of monthly projected service fees on the underlying MSRs as a percentage of lifetime projected fees, adjusted for the term of the notes.


(5)	Certain sales of advances did not qualify for sales accounting treatment and were accounted for as a financing. This financing liability has no contractual maturity or interest rate.



Other Secured Borrowings						Balance at December 31,
Borrowing Type	Collateral	Interest Rate	Termination / Maturity	Available Borrowing Capacity (1)		2017			2016
SSTL (2)	(2)	1-Month Euro-dollar rate + 500 bps with a Eurodollar floor of 100 bps (2)	Dec. 2020	$	—	$	298,251		$	335,000

Mortgage loan warehouse facilities
Repurchase agreement (3)	Loans held for sale (LHFS)	1ML + 200 - 345 bps	Aug. 2018	79,279		8,221			12,370
Master repurchase agreements	LHFS	1ML + 200 bps; 1ML floor of 0.0%	Aug. 2017	—		—			173,543
Participation agreements (4)	LHFS	N/A	Apr. 2018 (4)	—		161,433			92,739
Mortgage warehouse agreement (5)	LHFS (reverse mortgages)	1ML + 275 bps; interest rate floor of 350 bps	Oct. 2018	—		32,042			26,254
Master repurchase agreement	LHFS (reverse mortgages)	1ML + 275 bps; 1ML floor of 25 bps	Aug. 2017	—		—			50,123
Master repurchase agreement (6)	LHFS (forward and reverse mortgages)	1ML + 225 bps forward; 1ML + 275 bps reverse	Dec.2018	95,914		54,086			—
Master repurchase agreement (7)	LHFS (reverse mortgages)	Prime + 0.0% (4.0% floor)	Dec.2018	50,000		—			—
				225,193		255,782			355,029

				$	225,193	554,033			690,029
Unamortized debt issuance costs - SSTL						(5,423		)	(7,612		)
Discount - SSTL						(2,760		)	(3,874		)
						$	545,850		$	678,543

Weighted average interest rate						5.22		%	4.56		%


(1)	Available borrowing capacity for our mortgage loan warehouse facilities does not consider the amount of the facility that the lender has extended on an uncommitted basis. Of the borrowing capacity extended on a committed basis, $21.8 million could be used at December 31, 2017 based on the amount of eligible collateral that had been pledged.


(2)	Under the terms of the Amended and Restated Senior Secured Term Loan Facility Agreement with a borrowing capacity of $335.0 million, we may request increases to the loan amount of up to $100.0 million, with additional increases subject to certain limitations. We are required to make quarterly payments of $4.2 million on the SSTL, the first of which was paid on March 31, 2017.

The borrowings under the SSTL are secured by a first priority security interest in substantially all of the assets of Ocwen, OLS and the other guarantors thereunder, excluding among other things, 35% of the capital stock of foreign subsidiaries, securitization assets and equity interests of securitization entities, assets securing permitted funding indebtedness and non-recourse indebtedness, REO assets, servicing agreements where an acknowledgment from the GSE has not been obtained, as well as other customary carve-outs.

Borrowings bear interest, at the election of Ocwen, at a rate per annum equal to either (a) the base rate (the greatest of (i) the prime rate in effect on such day, (ii) the federal funds rate in effect on such day plus 0.50% and (iii) the one-month Eurodollar rate (1ML)), plus a margin of 4.00% and subject to a base rate floor of 2.00% or (b) the one-month Eurodollar rate, plus a margin of 5.00% and subject to a one-month Eurodollar floor of 1.00%. To date we have elected option (b) to determine the interest rate.

(3)

$87.5 million of the maximum borrowing amount of $137.5 million is available on a committed basis and the remainder is available at the discretion of the lender. We primarily use this facility to fund the repurchase of certain loans from Ginnie Mae guaranteed securitizations in connection with loan modifications and loan resolution activity as part of our contractual obligations as the servicer of the loans.

(4)

Under these participation agreements, the lender provides financing for a total of $250.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. The transaction does not qualify for sale accounting treatment and is accounted for as a secured borrowing. The lender earns the stated interest rate of the underlying mortgage loans while the loans are financed under the participation agreement.


(5)	Under this participation agreement, the lender provides financing for $100.0 million at the discretion of the lender. The participation agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. The transaction does not qualify for sale accounting treatment and is accounted for as a secured borrowing.


(6)	Under this agreement, the lender provides financing on a committed basis for up to $150.0 million. The agreement allows the lender to acquire a 100% beneficial interest in the underlying mortgage loans. The transaction does not qualify for sale accounting treatment and is accounted for as a secured borrowing.


(7)	Under this agreement, the lender provides financing for up to $50.0 million at the discretion of the lender.



Senior Notes			Balance at December 31,
	Interest Rate	Maturity	2017			2016
Senior unsecured notes (1)	6.625%	May 2019	$	3,122		$	3,122
Senior secured notes (2)	8.375%	Nov. 2022	346,878			346,878
			350,000			350,000
Unamortized debt issuance costs			(2,662		)	(3,211		)
			$	347,338		$	346,789

(1)

Ocwen may redeem all or a part of the remaining 6.625% Senior Unsecured Notes due May 15, 2019 (Senior Unsecured Notes), upon not less than 30 nor more than 60 days’ notice, at a redemption price (expressed as percentages of principal amount) of 103.313% and 100.000% during the twelve-month periods beginning on May 15, 2017 and 2018 (and thereafter), respectively, plus accrued and unpaid interest and additional interest, if any.

(2)

In 2016, OLS completed a debt-for-debt exchange offer whereby OLS issued $346.9 million aggregate principal amount of 8.375% Senior Secured Second Lien Notes that mature November 15, 2022 (Senior Secured Notes) in exchange for $346.9 million aggregate principal amount (or 99.1%) of Ocwen’s Senior Unsecured Notes. Interest is payable semiannually on each May 15 and November 15, and commenced on May 15, 2017. The Senior Secured Notes are guaranteed by Ocwen and OMS, Homeward Residential Holdings, Inc., Homeward and ACS (the Guarantors). The Senior Secured Notes are secured by second priority liens on the assets and properties of OLS and the Guarantors that secure the first priority obligations under the SSTL, excluding certain MSRs.

At any time, OLS may redeem all or a part of the Senior Secured Notes, upon not less than 30 nor more than 60 days’ notice at a specified redemption price, plus accrued and unpaid interest to the date of redemption. Prior to November 15, 2018, the Senior Secured Notes may be redeemed at a redemption price equal to 100.0% of the principal amount of the Senior Secured Notes redeemed, plus the applicable make whole premium (as defined in the Indenture). On or after November 15, 2018, OLS may redeem all or a part of the Senior Secured Notes at the redemption prices (expressed as percentages of principal amount) specified in the Indenture. The redemption prices during the twelve-month periods beginning on November 15^th of each year are as follows:



Year		Redemption Price
2018		106.281%
2019		104.188%
2020		102.094%
2021 and thereafter		100.000%

At any time, on or prior to November 15, 2018, OLS may, at its option, use the net cash proceeds of one or more equity offerings (as defined in the Indenture) to redeem up to 35.0% of the principal amount of all Senior Secured Notes issued at a redemption price equal to 108.375% of the principal amount of the Senior Secured Notes redeemed plus accrued and unpaid interest to the date of redemption, provided that: (i) at least 65.0% of the principal amount of all Senior Secured Notes issued under the Indenture (including any additional Senior Secured Notes) remains outstanding immediately after any such redemption; and (ii) OLS makes such redemption not more than 120 days after the consummation of any such Equity Offering.

Upon a change of control (as defined in the Indenture), OLS is required to make an offer to the holders of the Senior Secured Notes to repurchase all or a portion of each holder’s Senior Secured Notes at a purchase price equal to 101.0% of the principal amount of the Senior Secured Notes purchased plus accrued and unpaid interest to the date of purchase.

The Indenture contains certain covenants, including, but not limited to, limitations and restrictions on Ocwen’s ability and the ability of its restricted subsidiaries (including OLS) to (i) incur additional debt or issue preferred stock; (ii) pay dividends or make distributions on or purchase equity interests of Ocwen (iii) repurchase or redeem subordinated debt prior to maturity; (iv) make investments or other restricted payments; (v) create liens on assets to secure debt of OLS or any Guarantor; (vi) sell or transfer assets; (vii) enter into transactions with affiliates; and (viii) enter into mergers, consolidations, or sales of all or substantially all of the assets of Ocwen and its restricted subsidiaries, taken as a whole. As of the date of the Indenture, all of Ocwen’s subsidiaries are restricted subsidiaries. The restrictive covenants set forth in the Indenture are subject to important exceptions and qualifications. Many of the restrictive covenants will be suspended if (i) the Senior Secured Notes achieve an investment grade rating from both Moody’s and S&P and (ii) no default or event of default has occurred and is continuing under the Indenture. Covenants that are suspended as a result of achieving these ratings will again apply if one or both of Moody’s and S&P withdraws its investment grade rating or downgrades the rating assigned to the Senior Secured Notes below an investment grade rating.

See Note 26 — Subsequent Events for more information on certain additional debt we will assume in connection with our pending acquisition of PHH Corporation.

Credit Ratings

Credit ratings are intended to be an indicator of the creditworthiness of a particular company, security or obligation. At December 31, 2017, S&P affirmed our long-term corporate rating of “B-”, Moody’s downgraded our long-term corporate rating to “Caal” and Fitch placed our ratings on Negative. At December 31, 2017, the Kroll ratings were withdrawn at the request of Ocwen. It is possible that additional actions by credit rating agencies could have a material adverse impact on our liquidity and funding position, including materially changing the terms on which we may be able to borrow money.

Covenants

Under the terms of our debt agreements, we are subject to various qualitative and quantitative covenants. Collectively, these covenants include:


•	Financial covenants;


•	Covenants to operate in material compliance with applicable laws;

•

Restrictions on our ability to engage in various activities, including but not limited to incurring additional debt, paying dividends or making distributions on or purchasing equity interests of Ocwen, repurchasing or redeeming capital stock or junior capital, repurchasing or redeeming subordinated debt prior to maturity, issuing preferred stock, selling or transferring assets or making loans or investments or acquisitions or other restricted payments, entering into mergers or consolidations or sales of all or substantially all of the assets of Ocwen and its subsidiaries, creating liens on assets to secure debt of OLS or any Guarantor, enter into transactions with an affiliate;


•	Monitoring and reporting of various specified transactions or events, including specific reporting on defined events affecting collateral underlying certain debt agreements; and


•	Requirements to provide audited financial statements within specified timeframes, including a requirement under our SSTL that Ocwen’s financial statements and the related audit report be unqualified as to going concern.

Many of the restrictive covenants arising from the indenture for the Senior Secured Notes will be suspended if the Senior Secured Notes achieve an investment-grade rating from both Moody’s and S&P and if no default or event of default has occurred and is continuing.

Financial covenants in our debt agreements require that we maintain, among other things:


•	a 40% loan to collateral value ratio, as defined under our SSTL, as of the last date of any fiscal quarter; and


•	specified levels of tangible net worth and liquidity at the OLS level.

As of December 31, 2017, the most restrictive consolidated tangible net worth requirements contained in our debt agreements were for a minimum of $1.1 billion in consolidated tangible net worth, as defined, at OLS under our match funded debt and certain of our repurchase agreements, and $450.0 million at Ocwen under our automotive dealer loan financing facility. In January 2018, we terminated the automotive dealer loan financing facility.

As a result of the covenants to which we are subject, we may be limited in the manner in which we conduct our business and may be limited in our ability to engage in favorable business activities or raise additional capital to finance future operations or satisfy future liquidity needs. In addition, breaches or events that may result in a default under our debt agreements include, among other things, nonpayment of principal or interest, noncompliance with our covenants, breach of representations, the occurrence of a material adverse change, insolvency, bankruptcy, certain material judgments and changes of control.

Covenants and default provisions of this type are commonly found in debt agreements such as ours. Certain of these covenants and default provisions are open to subjective interpretation and, if our interpretation was contested by a lender, a court may ultimately be required to determine compliance or lack thereof. In addition, our debt agreements generally include cross default provisions such that a default under one agreement could trigger defaults under other agreements. If we fail to comply with our debt agreements and are unable to avoid, remedy or secure a waiver of any resulting default, we may be subject to adverse action by our lenders, including termination of further funding, acceleration of outstanding obligations, enforcement of liens against the assets securing or otherwise supporting our obligations and other legal remedies. Our lenders can waive their contractual rights in the event of a default.

We believe that we are in compliance with all of the qualitative and quantitative covenants in our debt agreements as of the date of these financial statements.

Maturities of Borrowings and Management’s Plans to Address Maturing Borrowings

Certain of our borrowings mature within one year of the date of issuance of these financial statements. Based on management’s evaluation, we expect to renew, replace or extend all such borrowings to the extent necessary to finance our business on or prior to their respective maturities consistent with our historical experience.



	Expected Maturity Date (1) (2) (3)
	2018		2019		2020		2021		2022		There- after		Total Balance		Fair Value
Match funded liabilities	$	739,036	$	259,582	$	—	$	—	$	—	$	—	$	998,618	$	992,698
Other secured borrowings	272,532		16,750		264,751		—		—		—		554,033		555,523
Senior notes	—		3,122		—		—		346,878		—		350,000		358,422
	$	1,011,568	$	279,454	$	264,751	$	—	$	346,878	$	—	$	1,902,651	$	1,906,643


(1)	Amounts are exclusive of any related discount or unamortized debt issuance costs.


(2)	For match funded liabilities, the Expected Maturity Date is the date on which the revolving period ends for each advance financing facility note and repayment of the outstanding balance must begin if the note is not renewed or extended.


(3)	Excludes financing liabilities recognized in connection with asset sales transactions accounted for as financings, including $499.0 million recorded in connection with sales of Rights to MSRs and $4.6 billion recorded in connection with the securitizations of HMBS. These financing liabilities have no contractual maturity and are amortized over the life of the underlying assets.